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London will escape falling house prices next year while the rest of the country faces a setback in the values of most properties.
According to estate agency Knight Frank, house prices will end this year 2% higher than they were at the beginning of the year led by the recovery in London and the South-East. But the agency predicts that throughout next year prices will fall 3% nationally — the classic “W”-shaped recession — although London will continue to grow with prices rising by 3% next year and by 9% in 2011. Five years out, by 2014, London prices will be 38% higher than today while the national gain will be just 19%.
Knight Frank's head of residential research Liam Bailey said: “We believe that the future improvement in market conditions will continue to be led from London and southern England, particularly from the higher price brackets. Strong demand from UK and international buyers will ensure that the central London property market in particular will continue to outperform in 2010.
“The key reasons for our confidence with regard to this market are: uniquely in the UK — London will benefit from the global economic recovery, which is likely to considerably outpace that seen in the UK; sterling is set to remain relatively weak into the medium-term, encouraging international demand; the economic prospects in central London are brightening more rapidly than elsewhere in the UK.”
Bailey pointed out that prices have fluctuated in London more dramatically than in the rest of the country with a two-year rise of 60% in the two years to March 2008 followed by a fall of 24% over the next 12 months.
His comments coincide with a report from the Royal Institution of Chartered Surveyors which says that a lack of supply continues to underpin the house-price recovery. It said the net balance of surveyors reporting house-price rises rather than falls reached a positive reading of 22 in September, the highest figure since May 2007.
The closely watched sales-to-stock ratio — a measure of market slack and a lead indicator of future prices — edged upwards a little further. It has now risen for nine consecutive months and stands at 29, its highest level since December 2007.
“A lack of supply is still underpinning the rise in house prices,” the institute's spokesman Ian Perry said. “Despite the problems first-time buyers are continuing to encounter in securing finance, the level of inquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term,” he added.
Knight Frank's Bailey said that nationally next year would see weakness but “not Armageddon”. He said: “It would be wrong to expect a continuation of the current rapid recovery in the housing market — the economy is not in a position to permit this in the short-term. Similarly, it would be wrong to expect carnage.”
Reader views (39)
The ratio of house prices to average earnings, has fallen from a peak of 6.2 to 5, it is still 35% above the long run average of 3.7.
The share of disposable income taken by mortgage payments has dropped below the long run average of 37% to 35%. But this is likely to rise over the next two years as wage growth will be flat, and taxes will rise. UK house prices will fall.
- Business Owner, London
I'm no economist, but surely its simple supply and demand? London had a housing shortage before the recession, with the total stall of the building industry this will be worst than ever.
Someone on £30k gets out bid on a property by someone on £35k, in the same way he could afford more than someone on £25k. Worth is subjective, and it seems location > sq footage.
Self cert mortgages should not make a come back, for freelancer and the self employed they should have independent audits based on the tax system to rate their borrowing power.
- Tim Burton, Subiton, UK
Mass stupidity is alive and well. HOLD THE FRONT PAGE! ESTATE AGENT SAYS HOUSE PRICES WILL RISE! Even though they are already massively over-valued compared to wages. Even though we are in a recession caused by the FACT THAT PEOPLE ARE NO LONGER BORROWING TO SPEND. The boom of the last 10 years was caused by a HUGE BOOM in debt. How does the estate agent quoted think that people are going to be able to carry on borrowing to create the next boom? Where is the next boom coming from? How are wages going to go up to provide the income to borrow against.
And, the biggest stupidity of all. Unless you are selling up and getting out of the UK market forever (you're emigrating or retiring abroad) - all that high house prices mean that you borrow a LOT MORE to move up the ladder. But that's okay because your time to sell up will come one day eh? In the meantime you spend the best years of your life with massive debts around your neck.
Sheer, dumb stupidity.
- Mike Wilson, Winchester, UK
Yes, but what he forgets to add, is that we will be carting wheelbarrows of �100 notes to buy a loaf of bread, whilst Europeans purchase holiday homes for 10 Euros!!
- Planning4acrash, London
Give it to me!! I bought a london flat 3 months ago and all I have to say is get in there before its too late... love it already 5% better off!
- Johnny, London
Liz is London – what do you mean “All those who have scoffed at this are clearly the types who have been waiting to cash in on other people's hard work.”
I work incredibly hard for a national charity. I earn a normal salary, which is below the national average, I put in long hours, and most of them are unpaid because I give up my own time in the evenings to give talks to local support groups and to support charitable causes. I work really hard for the money I earn, yet I can’t get close to owning my own home. I just want prices to come down a bit, so I at least have a fighting chance. I do certainly not want to cash in on other peoples hard work as you state. In fact it’s the reverse, people like you are cashing in on people like me. I have been prudent and have been saving for a deposit, I have a pension and I have some savings in the bank. However the tax on my earnings and savings is be used to bail out people like you who decided to over borrow and take out huge whopping mortgages. You are only in the position you are because of people like me – I wonder how you will re-mortgage if savers that are being screwed decide to withdraw their money from the bank!
- Leebo, Portsmouth
Of course house prices in London will go up by 40%. for those few that go up for sale. With the recession deepening fewer people will move like they once did. And the self employed who want to move can no longer tell fibs on a "self certification certificate" to Northern Rock or others, however as London is the magnet for immegrant workers every day at least 10 house-fulls arrive and they have to be housed, and paid for by social services, this is where the growth will be, if (a london council ) can pay one person £133,000 a year, and provide a £1.5 MILLION pension pot for a few years work there is loads of money available for either renting houses, or complete hotels, this sort of funding for social housing is "unlimited" as the government is unable to say STOP.
- Nosmo King, Lake District (Finally)
What drivel.
Usual garbish spouted by vested interest parties that want people to BUY BUY BUY now, before 'you miss the boat'.
Who will be around to pay these mystery prices?
- Bob, London
An american president once said "you don't own a house it ends up owning you". Who cares anyway? I'm obsessed with bluew music and jazz. Everyone should have an obsession and the UK's is property.
- Fred, London
According to an estate agent.
Laughable.
This downturn hasn't even got started yet, and isn't allowed to, being supported by massive fiscal stimuli. When the economy eventually goes it's own way, property prices will be over a cliff, and count yourself lucky if you still have a job.
- Np, Cornwall, UK
Prices will be driven up by increased unemployment..spending cuts..increased taxs and wage freezes. Selling over priced houses to each other will not lead us to economic recovery
- David B, eatbourne
Funny how the nouveaux riche of the older generation espouse the "I'm alright Jack" attitude if they were lucky enough to not only join the roulette table at the right time, but to cash their chips in too.
Less amusing is how these self-righteous smugs are so downright unsympathetic to the plight of the younger generation.
In short, the United Kingdom is eating its young. Those who regard this view as one as "doom-mongers" only fail to recognise the foul seed they sow for their children. This includes our fetid ruling powers.
- James In London, London, UK
I somehow think that with the curent dislike of the UK and the crisis of the UK governmetn this will turn out to be another crisis. Who would want to buy any real estate with all the Nu Labor mismanagement here? OK the pound sterling is low but that might have something to do with the bad government.
- Georgie, Islington, London
Ever increasing property prices caused this mess.
Why do so many want to do it again?
- The Bends, london
Oh, Liz, you are foolish.
You were just lucky and bought at the bottom of the curve. Your 'valuation' is just that - a valuation by an estate agent wanting you on their books.
Now go and see how much a very small upgrade in house/area will cost you. A sensible market means people can afford to upgrade. I bet you can't. Your house is only worth money if you can release it and have somewhere else to live.
- Peter, London
I can't wait till the average house price is a million pounds. How will anyone afford this? - where is wage inflation, and what about all those people who are finding that they are unemployed.
- Simon, Yorkshire, UK
We're barely over the near collapse of the financial system (largely thanks to high house prices) and here we are again with predictions of house price booms already.
The housing market has already divided the UK into haves and have nots, which is probably Labours biggest domestic failure. The BoE should stop this madness and hike rates.
- Simon, London
I'm afraid you're in for a nasty surprise Liz, it's never equity, until you've paid for it.
- Baz Bazzan, London UK
Actually Leon it was Knight Frank not King Sturge and they operate nationally (and internationally).
- J, London
How can they make a prediction like that?
Do they really think that people are stupid to believe it?
OK let me make a prediction:
By 2014, Knight Frank Estate Agency will have their staff reduced by half because the houses sales have dropped drastically.
- Pedro, London, England
- Liz, London,UK
All those who have scoffed at this are clearly the types who have been waiting to cash in on other people's hard work. I rejoice in the fact that my home, bought in 1996 for £175,000, was sold at £601,000 in 2007, and has recently been valued at £590,000 - not much of a drop from peak here!
Yes Liz and unless your are planning on leaving the country or cashing in your statement is fairly meaningless as the same is happening to other properties too. Also, I don't know if you have heard but it is considered quite vulgar to brag about your propoerty value let alone publish it on a website.
- David, London
What if your house cost £601.000 in 1996, Liz?
Would you have bought it?
And could you have afforded to buy it then?
High prices are good for sellers; but not so good for buyers?
Lets see who has that kind of money, over the next twenty years of tax increases.
Interest rates will not stay low for long either; because savers will not save; this also will hammer buyers over the next ten years, when money gets even scarcer etc.
- Mickinlondon, london
All those who have scoffed at this are clearly the types who have been waiting to cash in on other people's hard work. I rejoice in the fact that my home, bought in 1996 for £175,000, was sold at £601,000 in 2007, and has recently been valued at £590,000 - not much of a drop from peak here!
Houses in good areas will stay desirable - and why not? I have put a huge amount of work into my house, quite apart from paying an often-whopping mortgage, have never had any benefits or whatever, and have no pension. House equity is all I have, like many others. Bring on those price increases!
- Liz, London,UK
Quote: Michael De Ferrari, London. Will this because the £ will be worth half a Euro?
No Michael; because the pound will be worth half a rupee.
- Mickinlondon, london
As Mandy R-D said, "Well they would say that wouldn't they?"
- Aylyn, 03189 Orihuela Costa
I pass estate agent shops every day of the working week and a fug of despondency eminates from them. Seems to me they are using the Labour trick of tell a massive lie for long enough and people will start to believe it, but alas we have become wise and cynical to this propaganda.
- David, London
Jar bottle, bottle jar, Ha! Ha! Ha! If they are bought at all, it will be by people coming into the country.
- Baz Bazzan, London UK
Will this because the £ will be worth half a Euro?
- Michael De Ferrari, London
It's believing the estate agents which got us into this mess in the first place.
- St, London
Talking up the market, aka talking one's own book, eh????
It was only yesterday that the Daily Mail informed us about an imminent price reduction of 30% on all London properties?
Down 30% one day and up 40% the next day.....at least it is volatility........
Inflation is currently only subdued due to ever increasing unemployment.
With all the wreckless money printing (ah, "quantitative easing")earlier this year, we will hit hyperinflation next year. This of course will lead to higher interest rates.
We have not seen anything yet.
- Black Prince, London SW3
Self interest and speculation.
- Wen, Oxfordshire
Another property bubble? And everybody cheers.
What the hell is the matter with this country?
- Dave Markham, London, UK
This story is planted by developers and speculators who may be creating their own boom but no ordinary buyer will buy this idea. No ordinary person would consider buying houses on the basis of news stories after the mass failure to predict the banking collapse etc etc
- Val Keller, London UK
Prove it.
- Martin, sheffield
"We believe that the future improvement in market conditions will continue to be led from London and southern England, particularly from the higher price brackets."
How suprising - this is exactly the market segment that King Sturge operates in!
- Leon, Wexham, UK
If current market conditions continue the rise will be much more than this and much quicker
Speculation is again leading the way
Its very dangerous the the UKs shaky prospects
- Peter, Moscow RF
An estate agency predicting house price rises? Well I never. Would this be the 40% sterling inflation rate we can look forward to thanks to Mr Brown's and Mr King's money printing programme?
- Alex, London
Wow - that is the sweetest headline for property news I have read in 2 years!
Lovely news for London homeowners, terrible news for the doom mongers and First time buyers and those who just keep 'putting it off'.
- Mortgage Broker N3, London, England
In your dreams. Where is the driver? Affordability - No, ease of access to credit - no, etc etc
- Dave Davies, Basingstoke, Hants
