Savills Research | The Residential Property Focus May 2009
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Economic recovery more robust, especially where more
The projected pattern of economic controllable house schemes (rather than 5
Equity
Layered on top of all of the above is
recovery is another linked factor. It is flats) are less likely to swamp local markets. the role of equity. This will be crucial given
expected to start like the mid 1990s, with that deposit affordability is likely to be
the more highly skilled workforces who more important than mortgage affordability
are better placed to adapt to the new 4
Population growth vs
future development in the future. High equity is considered
economic opportunities that emerge post The relative imbalance between rates of an attribute of the markets of southern
recession. Accordingly, employment and house building and the growth in household England but is also a feature of Scotland
income growth is expected to return more numbers underpins a likely, continued, which has, to date, seen much lower falls
quickly in southern England. This will longer term issue of housing shortage in in house prices given both a combination
stimulate housing demand earlier in the London and the South East. This is likely of less aggressive medium term house
cycle than elsewhere. to be exacerbated during the recession price growth and lower than average levels
because of a dramatic downturn in house of mortgage debt. n
3
Committed supply building, even if rates of household
The nature and level of committed, formation and in-migration wanes. Jim Ward is Director of Savills Residential
new supply is key in the short term and will Research with 19 years experience.
have a noticeable impact on the severity of
the downturn at a local level. Over the past
Deposit affordability is
Jim specialises in market consultancy
projects for developers, investors, lenders
18 months new build housing has been
likely to be more important
and government organisations. These
perceived as something of a dirty word, an projects tend to focus on market capacity
overly simplistic view based on the issues
than mortgage affordability
and potential on a local level.
facing urban high density flat schemes,
in the future
particularly those in regenerating markets.
Where there are high levels of such
development (for example in parts of East In some sub-markets the supply and
London) the impact on values has been demand balance is more exposed to
significant. Prices have typically fallen cyclical factors. For example, in the East
by over 35% and sales are often reliant of England, Cambridge has high underlying
on investor demand which is likely to scarcity based on a diverse employment
be pricing off income yields of over 7%. base plus demand from students. As
Regional city centres have seen similar such, it is better placed to withstand the
price falls but proved more robust recently downturn and see a relatively swift recovery
in terms of rental growth. However, unsold than, say, Peterborough or Luton, where
stock remains an issue and continues the supply and demand balance was more
to hang over some of these markets. marginal even before the downturn. These
Consequently, their recovery is likely to lag are markets where investment linked to
behind that of the preferred city suburbs. long term, large-scale regeneration is most
Locations with a more diverse and likely to be successful, if structured to
smaller-scale new build stock have proved capture long-term value uplift.
Table 2
New forecasts Q1 2009 Current Projected total Projected
Scotland: Values
(as at April 2009) From Peak peak to trough further falls
currently -14.1% off
UK -4.5% -18.7% -24.2% -6.8%
peak with growth
forecast to start in 2010
London -5.9% -20.1% -27% -8.6%
South East -4.5% -19.5% -24.2% -5.2%
The North:
South West -3.1% -18.1% -23.9% -7.1%
Values to start
recovering
East -5.9% -21.7% -24.6% -5.4% in 2012 with
E Midlands -4.8% -19.3% -25.4% -7.5%
growth of 1%
W Midlands -4.0% -17.5% -25.2% -9.3%
North East -4.7% -16.0% -24.1% -9.6%
North West -4.1% -17.9% -25.5% -9.2%
Yorks & Humber -4.7% -18.5% -25.6% -8.6%
South West:
South East:
Recorded
Along with prime
Wales -8.9% -20.0% -26.9% -8.7%
smallest regional
central London,
falls of -3.1%
this region is
Scotland -5.7% -14.1% -20.0% -6.6%
during Q109
forecast to show
PCL -4.2% -23.3% -31.1% -10.2%
the strongest
recovery early on
savills 09
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