Knight Frank's Gloomy Forecast For 2013

Issuing a house price forecast today is a double-edged gamble - will it get lost in the tsunami of US election coverage or will it, as Knight Frank hopes, help set the agenda a day ahead of the company’s rival issuing its predictions?

Certainly Knight Frank gives plenty of food for thought. It forecasts:

- mainstream UK house prices to drop 2% in 2013;

- no change next year for Prime Central London.

The regions (and full credit that the agency recognises there are regions outside south east England) will perform as follows:

- East Anglia down 0.7% in 2013;

- East Midlands down 1%;

- London down 0.6%;

- North East England down 2.3%;

- North West down 2.6%;

- Scotland down 3.2%;

- South East England down 1.1%;

- South West down 2.2%;

- Wales down 3.8%;

- West Midlands down 2.1%;

- Yorkshire down 1.8%.

Once the impact of inflation is stripped out, average UK house prices are unlikely to hit 2007 levels again in real terms until 2031, Knight Frank predicts.

GrĂ¡inne Gilmore, head of UK residential research, says: “Five years after the start of the financial crisis, the housing sector in the UK still does not bear the hallmarks of a fully functioning market. Transaction levels have roughly halved since the last market peak in 2007 and are 35% below the 20-year average as first-time buyers and those further up the housing ladder struggle with tighter mortgage lending rules.”

Knight Frank - once the cheerleader for sellers - has issued a strikingly gloomy forecast which may well dominate editorial comment in the days ahead.

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