Mortgage News
Savills: House prices to fall again
Savills has revised its UK house price forecasts, warning that property prices are on the cusp of further falls after 15 months of “unsustainable” price growth.
Savills said that a repeat of the 2008 crash in house prices will not happen and declines will be mild, with the market facing short-term price falls followed by a period of low or zero growth.
In November 2009, Savills predicted 2010 would see mainstream house prices fall by 6.6%, but has revised this to negative growth of 2.5%. However, its previous prediction for 2011 was growth of 3% and this has been revised down to falls of 1%.
It said falls in sales to stock ratios indicated that the market is now at the point where prices begin to turn downwards.
Yolande Barnes, head of residential research at Savills, said: “Values would now need to fall by more than 10% in the second half of the year for our original forecast to stand.
“A fall of this size over such a short time frame looks unlikely. We continue to expect falls, just six months later than our November forecast. That will mean that they will straddle the last six months of this year and the first half of 2011.”
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Savills said that by the end of 2011, the growth seen in 2009 and the first half of 2010 will have been eroded leaving house prices at the same levels as the end of 2008, 15% off peak values.
House prices will return in the second half of 2012, Savills said, with annual growth of 3% and peak levels being regained in 2014.
Barnes said: “For now, the main risk to our forecast is that it will take longer for the two key triggers needed for sustainable house price growth – namely economic recovery and a substantial improvement in mortgage lending – to occur.”
London and the South East will lead the recovery and be the first to achieve sustained price growth.
Savills 2010 forecast for prime central London remains unchanged at 1.0%, but will remain flat in 2011 with growth thereafter of 7.5% in 2012 and 9.75% in 2013.
Prime regional property is expected to dip by -1.75% this year, remaining flat next year and then enter a delayed period of sustained growth of 5.25% in 2012 and 8.75% in 2013.
Barnes said: “We firmly believe that the UK residential markets have seen the worst of the price falls, though lower turnover is expected to be a longer term feature of the market.
“For investors, our mantra is clear: seek out quality and invest for the mid to longer term and you will have little to fear from the market.”