According to Cluttons, prices of prime London real estate properties are set to increase by up to 3% this year, but it is predicting the rest of the country could see housing price falls of around the same amount.
Cluttons is expecting growth rates for prime real estate property in London to remain well above the national average, as housing prices grew by around 9% last year and have continued to increase this year. This is largely due to a lack of supply as more homeowners are choosing to take a longer term view. There has also been an increase in the number of Greek and Italian home buyers seeking the security provided by London property. The lack of supply is pushing housing prices up by as much as 10% over the asking prices, and is even affecting properties in the secondary market. Until recently these properties had languished on the market for long periods of time, but are now achieving prices of up to 5% more than the asking price.
In spite of the optimistic outlook for London property, Cluttons residential property forecasts for the first quarter of 2012 paints a mixed picture for the rest of the country. Recent economic news has been more optimistic due to an increase in retail sales and business output, while the government balance of payments surplus currently has a four-year high. These factors have helped improve business and consumer confidence, and inflation is also falling. GDP is expected to increase by 0.7% this year, with much of the growth expected to be seen during the latter half, but the economy is still fragile due to continuing difficulties in Europe.
In recent years the UK housing market has been protected by a lack of supply, in spite of weak demand and low consumer confidence. It’s also been helped by historically low base mortgage rates which have remained at 0.5% for three years. However unemployment is predicted to reach 9.4% this year, and could have the knock-on effect of suppressing overall housing sales and increasing the number of distress sales.
This is one of the factors on which Cluttons is basing its predictions of price falls during this year. From next year onwards, it is predicting annual growth rates of 2% until 2016, but does point out there will be significant regional variations, with larger price gains expected to be seen in the south-east.