Morning:
6°c
The average price of a house in London will drop by £20,000 by the end of the year, a leading estate agent warned today.
Savills said the slump at the top end of the market will be even greater with a £1 million home forecast to lose £100,000 in value. The firm said the housing market was at “tipping point” and a double-dip was inevitable following a “sucker's rally”.
But it said there will be no repeat of 2008 when prices sank by 15 per cent in London and the UK as a whole.
Experts believe record low interest rates — which one agent describes as “Viagra for the property market” — a shortage of supply, and strong demand from overseas will prevent another crash.
The prediction comes as the Royal Institution of Chartered Surveyors reveals demand from buyers is drying up just as more properties come onto the market — further fuelling fears of a drop in home values.
The proportion of estate agents in London who said prices rose in the last three months has dropped from 86 per cent last October to 26 per cent last month. A total of 61 per cent of agents in the capital questioned last month said prices had remained stable in the preceding quarter, while 13 per cent said they fell.
Savills director Yolande Barnes said: “We believe the housing market is at tipping point and faces the prospect of a short-term price fall followed by a period of low or zero growth.
“This second slip will be relatively mild and short-lived if the economy continues to recover as predicted — slowly but surely. It will not be a repeat of 2008 as some doom merchants have suggested.
“The medium to long-term prospects for house prices are looking increasingly assured. Our mantra remains that residential investment should be for the longer term and in quality property.”
Average house prices in London rose by 5.1 per cent in the first six months of the year to £290,000.
Savills — in a report titled “the dead cat stops bouncing this year” — reckons they will end the year at around £270,000, remain flat next year and not start rising again until 2012.
In the prime London market, where houses cost more than £1 million, prices have risen by as much as seven per cent since the start of the year. The report forecast 10 per cent falls in the final six months of this year before a slight recovery next year.
David Adams, head of residential sales at Chesterton Humberts, said: “London is still seen as a second home capital for the rest of the world. It is seen as a great place for foreign investors.”
Estate agent Knight Frank said house prices in central London are 23.4 per cent higher than they were at the bottom of the market in March last year.
It believes prices will fall by 3.2 per cent during the final five months of the year — knocking £32,000 off the value of a £1 million home.
'I needed quick sale'
Marina Brown, 41, struggled to sell her four-bedroom semi in Borehamwood for three and a half months this year.
The mother of two had three buyers interested but they all pulled out. When she switched from a local agent to Winkworth in June she had a firm offer within 10 days and exchanged last Friday for £335,000, less than five per cent below the asking price of £350,000.
She blames the local company's “laid-back, unthinking” approach for the earlier failure to sell. She said: “In the current market, when buyers are really jumpy, you need an agent who's hands-on. A quick sale was really important to me as I'm moving in with my partner.”
Sri Carmichael
Reader views (12)
This seems to me to be very lazy journalism.
I have just read the full Savills report. Whilst at a national level it predicts large price falls, on a London level it predicts a fall of 1.5%, then zero growth then a rise of 7% in 2012.
Therefore this article is increadably misleading and doommongering.
- Michael, London, 12/08/2010 16:57
Report abuse
No sympathy for the buy to let piggies
- DC, Ealing, 12/08/2010 12:02
Report abuse
How does an ordinary person grow wealth today.
In London even if you make 100k a year once you pay taxes and the mortgage etc you will never save enough to be wealthy .
So people turn to buying assets ,confident that the people they sell to will pay them more than they paid.
Housing and the Stock market is not investing .
Its a game of hope.
That a rising tide will lift all ships.
We are now entering a period of deflation.
Nothing will stop it.
The Bank of England can buy there own debt till the cows come home.
It wont make an ounce of difference.
Look at Japan
Get used to the new normal,not ever rising asset price to bail you out of your debts.Live sensibly and enjoy the house you are in.
And never believe a word of what people like Ken Livingstone say.
All he will bring is more and more tax so his wife and her friends can have there six figure salaried jobs back.
- James, Sydney, 11/08/2010 12:48
Report abuse
A few thousand pounds either way is no concern to anyone who has one house used for the purpose for which it was built .. i.e just living in it. If you have to sell it for a lower price, the next one you buy should be lower too. Only those that buy for investment purposes have a problem.
- Paul, London, 11/08/2010 08:09
Report abuse
In other words, London house prices will stabilise to a fair and sensible level, thus disappointing the hordes of profligate ownwers looking to grab a few grand via relesed equity for their fifth holiday of the year (or a new motor)?
- Ted, Orkney, 11/08/2010 07:27
Report abuse
There will be another round of banking bonus's to re-inflate the London property market..... so dream on !!!!!
- Charlie, London, 10/08/2010 22:30
Report abuse
Correction had to happen. The biggest problem was not the bankers, not the government, not estate agents, but pure and simple greed. They of course contributed massively however, they didn't force anyone to go out and keep on buying properties and become a multi-millionaires.
I know of several people who did buy and now are struggling to find tenants, and some of them have become reluctant sellers, others have had them repossessed. I also happen to know people who've timed it to perfection and how they are laughing.
Famous quote from the late Sir James Goldsmith: "When you see a bandwagon, it's too late."
Well many people did see a bandwagon, and decided to join in, even though the opportunity had gone. It seemed too easy, and now they've found out.
- The Real Issue, London, 10/08/2010 19:15
Report abuse
At rentdirectuk.co.uk we believe the fall could be more than £20k as we believe a lot of buy to let landlords are looking to exit the buy to let market as they now fear that with an imminenet increase in interest rates coupled with their inabilty to remortgage as most obtained sub prime mortgages. A flood of property is bound to hit the market in the next couple of months depressing house prices further
- rentdirectuk.co.uk, London, 10/08/2010 16:50
Report abuse
Or, looking at it another way, first-time buyers will benefit from lower prices, so injecting new lift into a stagnant property market.
- Arfur Towcrate, Staffycher, 10/08/2010 16:05
Report abuse
Only a £20,000 fall?
House prices have to fall at least until an average house in a given area can be bought by a couple on average wages for that area. 3 x average joint income in a nondescript part of London is what? £150K?
Another way to work it out is that it's only worth buying when the mortgage interest plus property maintenance expenses are less than the cost of renting a similar property. Again, that shows houses are too expensive.
House prices pretty much halved during the last recession (early 1990s). I can't think of any reason why they won't do the same again over the next few years.
- Nigel, London, 10/08/2010 15:42
Report abuse
Chrissy B, Landern innit,
Should have gone to SpecSavers
- Grim Reaper, Hell,
Yes I was wondering about that, Grim........LOL.
- mickinlondon., london, 10/08/2010 14:57
Report abuse
Chrissy B, Landern innit,
Should have gone to SpecSavers
- Grim Reaper, Hell, 10/08/2010 13:33
Report abuse
