Savills Research | The Residential Property Focus May 2009
Market dynamics
What drives local markets?
The housing market’s rate of recovery from the current downturn
will differ on a regional basis. Jim Ward identifies the five key factors.
T
he so-called ‘curse of averages’
Possessions claims issued as percentage
means that the relative 1
Number of repossessions
While less of an influence nationally,
of total dwellings Q408
performance of localised through the downturn and early parts of
residential property markets the recovery, localised supply will be
generally becomes lost among market- heavily influenced by rates of repossession.
0.142 to 0.375%
wide statements and national statistics. The distribution of repossession claims
0.115 to 0.142%
As the withdrawal of mortgage finance across England and Wales (which are 0.092 to 0.115%
has been the single biggest factor closely linked to sub-prime lending, buy-
0.069 to 0.092%
contributing to the current downturn, to-let lending and unemployment levels)
0.029 to 0.069%
average prices have fallen significantly is shown in the map. This clearly shows
across all regions, with job losses in the the high repossession levels in the
finance and construction sectors leading metropolitan areas of northern England,
to slightly higher price falls, so far, in South Wales and (to lesser degree) the
London and the southern regions. Midlands. These are in contrast to areas
As the recession spreads to other such as the South West, South
sectors, the other regions will catch up. East and the East of England.
This all masks the fact that, at a more local Not all of these repossessions
level, individual locations will have fared will find their way into the
differently to a much greater degree than sales market, as many will be
the regional and national figures suggest. retained or sold as part of a
The nature of the downturn hides the rental investment portfolio.
different prospects of recovery of both Nevertheless, they are likely
regional and local markets. to be a drag on the pace of
When recovery comes we expect to market recovery.
see a pronounced North/South divide
based on a assessment of the mechanics
of supply and demand. London and
the South East are forecast to show the
strongest recovery in the early part of
the next growth period. Such regional
variations are expected to be fuelled by
the following five key drivers.
Regional
Table 1
Forecasts 2008 2009 2010 2011 2012 2013 2014 Total five
Forecasts
(as at April 2009) (Actual) year growth*
UK -14.7% -11.0% 1.0% 1.0% 9.0% 10.0% 8.0% 32%
Table 1: Savills annual
London -15.1% -14.0% 1.0% 3.0% 12.0% 10.0% 9.0% 40%
forecasts for house
price growth
South East -15.4% -10.0% 2.0% 5.0% 14.0% 10.0% 8.0% 45%
South West -14.9% -10.0% 2.0% 3.0% 9.0% 10.0% 10.0% 39%
Table 2: Regional East -16.6% -11.0% 1.0% 3.0% 8.0% 12.0% 12.0% 41%
price falls from peak
E Midlands -14.2% -12.0% 1.0% 1.0% 8.0% 12.0% 12.0% 38%
to trough including
W Midlands -14.0% -12.0% -1.0% 1.0% 6.0% 10.0% 12.0% 31%
Q109 falls, current total
falls from peak and
North East -11.0% -13.0% -1.0% 0.0% 1.0% 6.0% 8.0% 14%
projected falls from North West -14.4% -12.0% -1.0% 0.0% 1.0% 6.0% 8.0% 14%
peak to trough
Yorks & Humber -13.6% -12.0% -1.0% 1.0% 2.0% 6.0% 10.0% 19%
Wales -12.1% -16.0% -1.0% 1.0% 6.0% 6.0% 8.0% 21%
* If bought at the end
of 2009
Scotland -8.1% -12.0% 1.0% 2.0% 8.0% 12.0% 10.0% 37%
Source: Savills
PCL -18.3% -14.0% 2.0% 10.0% 16.0% 10.0% 5.0% 50%
08 savills
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