comment
House prices:
the long range forecast
Weak, sunny spells, some regional heat waves during a
two-year freeze, with warm periods by the end of the decade.
T
his year, very few property 80 per cent, but recent years have seen 100
researchers, lenders, portals or per cent – or more - mortgages on offer
agents have dared put their heads to practically anyone. Buyers then used
above the parapet and offer long credit cards to purchase furnishings –
range forecasts. Those who have, add a list especially the 42-inch TV.
of caveats and one big protective phrase – The glory days are gone, hijacked by the
“We live in unparalleled times”. reckless and the greedy. Traditional values
Who could blame them? The range of need to return – saving a deposit, cutting
issues affecting the housing market is huge. down on cars, holidays and the free
Worldwide recession, deep wounds from spending café/pub/Michelin restaurant
reckless lending, fear of borrowing, fear culture that we have been persuaded is
of lending, fear of commitment, pension the only way to live. If you say that to the
black holes, unemployment, poor average twenty-something they will roar
education, people living longer, high with laughter. Even if they did cut down,
immigration and an increasingly how could they possibly save enough for
widespread benefit culture. Put it all a deposit? Impossible. Well is it?
together, add a General Election and In 1974 we (husband and I) bought our
it’s not pretty. first home for £11,500. Getting a mortgage
Liam Bailey, Head of Residential wasn’t easy, but we secured a 90 per cent
Research at Knight Frank says, “Expect mortgage through our local council.
the market to weaken but don’t expect Payments were 25 per cent of our monthly
Armageddon,” but he believes that in spite income at £60 (the average for a couple
of all the negatives, “Our central forecast
‘Demand will be
then). The price of the flat was nearly four
is that house price growth will slip in 2010, times our annual income, the deposit,
with prices at the end of the year between
sustained by stock
37 per cent of our annual income, the
two and four per cent lower than today. mortgage 25 per cent of our monthly
Over the longer term, the weak recovery
shortages, but price
income. It wasn’t easy.
will continue to hold growth back, but
growth will be
Rolling on the years, John Payne has a
we still expect house prices to be around similar (spacious, well fitted) maisonette
19 per cent higher at the end of 2014 than constrained by more in the same road under offer at £195,000.
they are today.” With a 10 per cent deposit of £19,500, a
Savills go further into timelord mode
limited access to
mortgage of £175,500 would cost £1100
with their prediction that growth will be
mortgage finance.’
per month. The average joint salary for a
strong in hotspots from 2011 and by 2019 London couple is around £50,000, so the
house prices will beat inflation by 40 per flat represents just under four times their
cent. “Demand will be sustained by stock annual income, the deposit 39 per cent
shortages, but price growth will be will clearly set the next ten years apart from of their annual income, the mortgage
constrained by more limited access to the pre-credit crunch Noughties which saw payment 24 per cent of their income.
mortgage finance. We forecast 40 per cent very high inflation-adjusted growth in Pretty similar sums to 36 years earlier.
inflation-adjusted growth in the comparison to the historic norm”, says It is, admittedly, difficult to get a 90 per
mainstream market over the next ten Lucian Cook, Director of Savills Research. cent mortgage, so the solution is simple,
years, much more in line with the longterm The most frequent reason given for the let’s go back to saving a deposit,
average. This follows inflation-adjusted woes of the housing market is restricted constructive government help with
changes of +71 per cent in the Noughties, lending; key, say the commentators, mortgages (not shared ownership) and
a fall of -14 per cent in the 1990s, +43 per because first time buyers cannot secure sensible lending.
cent and +49 per cent growth in the 1980s high LTV mortgages. Mortgages used What do you think?
and 1970s respectively. We expect to see to help you buy a home, with purchasers
an ongoing pattern of much more sober borrowing about 60 per cent. That went
Any views on this? Comment at:
lending in the next decade, a factor that out of fashion and LTV ratios increased to
www.propertydrum.com/articles/forecast
20 FEBRUARY 2010 PRoPeRtYdrum
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