Savills Research | The Residential Property Focus May 2009
Welcome
Housing begins to look good value
With the worst of the falls now over, the UK residential market is offering recovery
potential as well as the prospect of long-term income, observes Yolande Barnes.
S
avills Research department is now housing market but we now believe that
20 years old. Searching through conditions are looking more favourable for
Inside this edition
our archives, past research recovery than at any time since the market
publications have provided an turned down.” Having said this, we are in
interesting perspective on the current no way anticipating a rapid bounce-back
04 Long term
downturn. It appears that we have just seen in values and this edition of the Residential
Investment
the turn of a 17 or 18 year cycle. Property Focus contains revised forecasts
The housing market currently
This credit crunch is distinctly different pushing out the timing of future house price
offers opportunities for investors
from the housing crisis of the early 1990s growth in the face of deepening recession.
in that price falls have been rapid and Significantly though, we have not
06 Mainstream market
universal, due to the withdrawal of credit changed our projections of the depth of Increased applicant activity
rather than the extreme affordability house price falls since our prediction of illustrates a shift in sentiment
problems of 1989. Nevertheless, this -25% peak to trough in April last year, and
edition of the Residential Property Focus we believe that the residential market has
08 Market dynamics
has distinct resonance with what we said seen the worst of the falls.
The five key factors of local
in 1992.
market recovery identified
In late 1991, the markets were falling The wider impact
significantly and there was no sign of The falls already seen mean that housing
10 Prime markets
respite. By spring 1992 though, our tone is now looking like good value, particularly
Opportunity for investors
was less gloomy than it had been the year given current interest rates. This has
is knocking in prime markets
before but there were still few signs of important implications for investors:
life in the market. We wrote: “It is unlikely yields have now moved out to levels that
that there will be spectacular growth in look very attractive against gilts, and the
13 Leasehold property
[mainstream] house prices in the next two poor performance of equities and other
Is the time right to act on
years or so.” 17 years on, we are telling a investment sectors makes property look
enfranchisement
very similar story but with an eye on the relatively attractive again.
situation that might pertain by the end of Significantly, our 1992 forecasts were
14 Summary
this year. relatively bullish for the prime markets,
At the time of going to press, we were particularly in London and the South East.
beginning to experience the first signs of These markets showed a pronounced
change in the UK residential market. Most bounce-back in the second half of 1992
importantly, the rate of price falls is slowing, and 1993. Once again, we believe that it
especially in prime markets. Quarterly falls will be the rarer properties, bought by cash-
in central London, according to our prime rich purchasers and overseas investors that
market indices, are half the level they will lead the recovery.
were last year and, occasionally this year, Against this backdrop, we have looked
building society monthly figures in in this issue at local and sector ‘hotspots’.
the mainstream, mortgaged market have What do the significant prices falls mean
been positive. for recovery in both the UK mainstream and
Over the course of this first quarter of prime markets? Who is in a position to take
2009, the previously downbeat mood in advantage of vastly improved affordability?
the housing market seems to have shifted What factors will drive the regional
towards a cautious air of optimism. Our variations in the recovery process? n
agents report the number of buyer inquiries
are significantly up and beginning to Yolande Barnes is a Director of Savills
translate into transactions. It may be that residential research. She joined Savills
the very rapid adjustment of house prices in 1989 to pioneer the, then new, field of
has shortened the period of house price residential research. Since 2003, Yolande
falls experienced, compared to the last has also taken on another new research
cycle, suggesting the bottom of the market, discipline known as Place Making, looking
certainly in the prime sector, is now in sight. into mixed use and land issues.
So we can perhaps now repeat verbatim
Yolande Barnes
something that we wrote in December
Director
1992: “It is rather unfashionable at present
020 7409 8899
to be optimistic regarding the future of the
ybarnes@savills.com
savills 03
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16