The Housing Market: Future Property Prices

Predictions for the UK housing market are always difficult to calculate, dependant as they are on multiple economic factors such as consumer confidence, jobs and the age old problem of supply and demand.

Figures released in September 2009 by Nationwide put property prices in the UK housing market at similar levels to what they were a year before in September, 2008. House prices rose by 0.9% in September, 2009, the fifth consecutive monthly increase. Read More: Property Price Latest: House Price Latest.

But what does this mean for the housing market?

A High supply of rental property raises questions about durability of price recovery. We asked housing market experts for their advice on property prices and the market outlook into future property prices.

The Housing Market: Future Property Prices

Martin Gahbauer, Nationwide’s Chief Economist:
"One reason to remain cautious about the outlook for house prices is that turnover in the market is still well below normal levels.  The housing turnover rate - measuring the percentage of the private sector housing stock changing hands on an annualised basis - fell to only 3% at the end of 2008.

"Although it has since recovered to nearly 4%, there is still quite some way to go before turnover reaches the pre-downturn level of between 7% and 8%.  Lead indicators, such as mortgage approvals for house purchase, suggest that turnover should continue edging higher over the next few months, but at the current rate of increase it would take another 18 months for it to reach pre-downturn levels.”

NAEA chief executive Peter Bolton King:
"Further evidence that the housing market is recovering should be welcomed and these figures back up what NAEA members are telling us. However recovery is a fragile process and not guaranteed.

"Househunters need access to mortgages from the major lenders. The Government’s flawed stamp duty policy also needs re-examining, otherwise these positive signs risk being short-lived."

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Property Price Latest & the Housing Market 2009 – Royal Institute of Chartered Surveyors (RICS)

Brigid O’Leary, RICS senior economist:
"Just as house prices fell very quickly at the start of the downturn, the recent turnaround has been surprisingly strong. The quarterly change (an indicator of the underlying recent trend) now stands at 3.8%, the highest since August 2004. Significantly, the regional breakdown shows that house prices actually rose in all regions, by an average of 3.7%, between Q2 and Q3 of this year.

"However, the recent trend in increasing house prices has been supported by very low levels of stock on the market. An increase in property for sale would improve transaction levels but could also put some renewed downward pressure on house prices. As restricted levels of activity won’t ease entirely over the next couple of months some upward price pressure will remain. This means house prices are still expensive compared to average earnings, and with lower loan-to-value ratios now more the norm in mortgage lending, first time buyers may struggle to produce an adequate deposit.

"Looking ahead, high, and still rising, unemployment plus any future increases in mortgage interest rates will weigh on the outlook for house prices over the next 12 to 18 months."

Property Price Latest & the Housing Market 2009 – Smartlandlord.co.uk

Keshav Thukaram, MD of buy-to-let landlord website Smartlandlord.co.uk:
"For the time being, any ’rises’ are indications that the market is bottoming out - not that prices are going to shoot back up.  So we should treat these numbers with caution.  There are other indications the market is stabilising though - increased buyer inquiries, rise in confidence, higher mortgage approvals - and if this is the bottom of the market, investors should be looking to buy property while it is cheap to maximise future yields. 

"A lot of professional landlords had been waiting for the downturn for a long time.  They’re cash rich and many of them started investment in property in the last downturn.  We are still a long way off recovery though - we still haven’t felt the pinch from higher unemployment for instance - so speculative buy-to-let investors and reluctant landlords that bought at the peak of the housing bubble, have little hope of recovering losses on the value of their property."

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