A casual observer may be forgiven for thinking home owners and estate agents will soon enjoy their merriest Christmas for the past few years.
In recent months prices have gone up, agents have talked of five buyers for every home on sale, developers have run out of flats to sell, and red-top headlines say the boom is back. So is 2009 to be remembered as a year of recovery? Not at all.
There are three reasons why optimistic reviews of the year are misplaced.
Firstly, property professionals routinely tend to talk up the market – about 8,000 estate agency offices and scores of developers have closed since 2007, so they want to survive.
Secondly the agents and developers with PR budgets, and thus the loudest voices, are London-based and handle top end homes in the capital or Home Counties. In these locations, the market has genuinely improved, at least since summer, but that is not representative of the entire country.
Thirdly, buyers in central London in particular – whose actions are often extrapolated to represent the whole nation – are utterly unlike those elsewhere. For example, of 5,500 new London flats sold between January and September, a third went to owner occupiers, a third to UK buy-to-let landlords and the rest to foreign buyers. In Exeter and Inverness, by contrast, under 1 per cent of buyers are from overseas.
So, for a real review of 2009, we need to look at the underlying data.
The UK’s seven leading house price indices come from government departments, mortgage lenders and private property firms, and measure prices at different stages of the cycle – some work on asking prices and others on sale prices, for example.
Most indices show recent rises but only two show typical prices higher now than a year ago, and even then by 2 per cent at most. The rest show falls in 2009 of up to 5.6 per cent from prices 12 months ago, which were well down on the year before. There is also evidence that the spurt in values seen after the summer may have been a temporary phenomenon and not the start of a sustainable recovery.
“Over spring and summer, agents were reporting new buyer registrations growing an average of 7.5 per cent per month but the last three months have seen just 1.1 per cent a month. The pent-up demand that boosted the market is starting to fade in the face of firmer pricing and fewer bargains,” says Richard Donnell of housing consultancy Hometrack. He says the average time between a home going on sale and its owner accepting an offer is now 8.4 weeks – still much longer than the 5.8 weeks of May 2007.
Transaction levels are also low and did not improve during the year. Rightmove, the sales website which advertises the vast majority of homes on the market in the UK, recorded 89,000 “new sellers” registering in the month to mid-November – the same as this time last year but still 30 per cent below long-term averages.
Of course there have been some genuine improvements.
Cash buyers and those with substantial equity in existing homes have been able to secure cheap mortgages and so have picked up bargain-priced homes. This is common in South-east England and especially central London – the latter buoyed by high numbers of foreign buyers taking advantage of favourable exchange rates.
Buy-to-let landlords, who were predicted by doomsters to sell up in large numbers and thus inadvertently flood the market, have held on because of low interest rates. Ironically, they are achieving high yields from first time buyers and other tenants who have to rent, whatever the cost, because they cannot get mortgages of their own.
Housing associations have blossomed, too, with shared ownership purchases booming after years of being the cheap relation of “proper” owner occupation.
But while there is a broad consensus that the bottom of the market has been reached, there is as yet little sign that prices are lifting in a sustainable fashion. What is more, property pundits are almost as one in predicting that things may worsen next year.
If all this, and the miserable British winter weather, make you want to emigrate – don’t bother. It may be warmer in Dubai, Florida or Spain but the housing markets there are even worse.
We’ve got to grin and bear it for another 12 months at least, it seems. Roll on 2011.
The market in 2010: Tough times ahead
There is near unanimity amongst property analysts that the general election will bring a market pause in early 2010.
Then seemingly-inevitable economic carnage - whichever party wins - will set a gloomy tone for the rest of the year. Savills forecasts a drop of 6.6 per cent in 2010 with a one-in-five chance prices may drop even more. “We’re facing events with the potential capacity to discourage purchases” says the firm’s head of research, Lucian Cook. He expects spending cuts, tax rises, higher unemployment and interest rate rises to unsettle buyers and sellers.
The firm predicts northern England and Scotland will fare worst, down as much as 7.5 per cent, with southern England down 4 per cent. Most rival agents agree, although some are unsure if a ‘Cameron bounce’ would lift markets.
Many say it will make no difference while others, like Simon Albertini of estate agency Friend & Falcke, say: “People are assuming a Tory victory at the next election and securing property at today’s price assuming an uplift on a change of government.”
If the Tories win, say goodbye to Home Information Packs and hello to more localised (and possibly slower) planning decisions. If Labour wins, it must down-grade its pre-recession target of two million new homes by 2016 and revitalise HIPs. If the LibDems win or hold the balance of power, they will introduce a mansion tax on homes valued over £2m.
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