It is going to be a market of two halves in 2011 – but with a few exceptions. Most housing market analysts say the trends emerging in recent months will go on to dominate the year ahead. House prices will gently slide by 3 per cent to perhaps 10 per cent in the Midlands, northern England, Wales and Scotland, exacerbated where there are large numbers of public sector jobs highly vulnerable to cutbacks.
Meanwhile homes in central London and the Home Counties, and affluent pockets across Britain, will continue to rise in value by as much as 5 per cent because their buyers are largely unaffected by mortgage lending restrictions, and are undeterred by the VAT rise which will make estate agency, legal and surveying fees more expensive.
Bridging that north-south divide will be the lettings market. It continues to soar in almost every part of the country, fuelled by frustrated first-time buyers unable to afford deposits so driven towards the private rental sector.
Savills, the estate agency, says 2010 has seen "structural change" with most moves involving only wealthy existing owners with substantial equity in homes they sold; there were few moves by poorer owners or first time buyers. "There's a gap between 'equity haves' and 'equity have nots'," says Savills' research head Lucian Cook.
He says many typical homes in northern England, Wales and Scotland will be worth no more in 2015 than before the 2007 recession while homes in the south will see rises. For example, London homes by 2015 will be worth 30 per cent more than in 2007.
A string of other estate agents – usually known for talking up the market – acknowledge that next year will see stagnation except in the better-off parts of the country.
Richard Donnell, director of housing data consultancy Hometrack, says his analysis of prices from 3,000 estate agents shows further price falls are "inevitable". But like a growing number of pundits he suggests it is more sensible to consider market prospects by postcode and local areas, not by national indices.
"Some locations, property types and sectors will do less well than the average while others will buck the trend and do better. It's a much more complicated market," he insists.
Our survey of leading property experts suggest there are 10 places and sectors that may do better than expected. On paper they look good bets – but of course the housing market is riddled with good bets that turned out to be turkeys for ambitious investors who thought they were on to winners.
In other words ... be careful out there.
1. Planned communities
Many new homes on housing estates are "last resort" purchases so developers slash prices to encourage interest, but experts say "master-planned" communities buck the price trend. Fine examples are the Prince of Wales' Poundbury in Dorset and Liberty Trust's Kings Hill in Kent. "In a hard market people consider whether a development provides everything. Early provision of community facilities such as a crèche, doctor's surgery, primary school and convenience store are high on their list," explains Trevor Nicholson of CB Richard Ellis, a property consultancy. He says data shows such schemes outperform lower-quality new-build estates by 20 per cent over a 10-year period.
2. The affluent North
Cheshire has long been regarded as the bling capital of Britain because of its high number of footballers' homes, while Harrogate and Wetherby in Yorkshire is more sedate but even wealthier. Local estate agents say these hotspots will again outstrip the performance of the rest of northern England next year. The same applies to Salford Quays in Manchester, where a long-standing surplus of new homes may finally be mopped up as 1,500 BBC jobs move to the area from spring next year.
3. Self-build homes
A typical self-build plot now costs £125,300 according to Buildstore, Britain's main self-build advice service. That's 10 per cent cheaper than a year ago, but would-be Kevin McClouds should get in quick as demand is likely to grow. Business research firm Datamonitor predicts the self-build mortgage market will expand 20 per cent in 2011 as more self-builders respond to the Coalition Government's new financial and planning incentives for the sector contained in the Localism Bill now going through Parliament.
"The city is a particular micro-market that has already seen prices returning and even exceeding 2007 values and this will continue, especially for quality town houses," predicts Guy Jenkinson of Bidwells. This isn't just estate agents' flannel – the place has relatively few public sector employers outside the university which attracts may high fee-paying overseas students. It also has improving links to London and a burgeoning hi-tech and science research sector. New housing developments in Cambridge have been the only ones outside London to be marketed to overseas investors by Savills this year.
5. Villages under 75 minutes from London
"There are good commuter lines to London within easy reach of rural villages. These include Newbury, a 50-minute commute, Basingstoke at 42 minutes, Winchester at 55, Pewsey and Andover each at 70. They're ideal for those who want to move out to the country and work in the city," says Bobby Hall of The Buying Solution, a relocation company. He identifies the villages most likely to benefit from this demand in 2011 as being Avington, Ovington and Cheriton (close to Winchester); The Candover Valley, Ibworth and Hannington (near Basingstoke); Clanville, Appleshaw and Monxton (Andover); Kintbury, Inkpen and Hamstead (Newbury); and Ramsbury, Manton and the Pewsey Vale (near Pewsey).
6. Market towns
The next two years will see the number of retirees peaking at its highest-ever total according to the Department of Work and Pensions. It says the post-war baby boom explosion peaked in 1946 and 1947 – the 800,000 babies born in those two years will turn 65 soon. Contrary to some property industry suggestions, most retirees who move after finishing work do not buy new homes in retirement villages, but prefer small older properties in already-expensive market towns.
This city outperformed the rest of Scotland in 2010 according to Lloyds TSB – a 15 per cent rise in typical prices compared with a Scottish average staying roughly static – and is tipped by estate agents to do the same next year. Aberdeen is being repositioned as the country's Oil Capital to Energy Capital, as it encourages new technology investment.
8. Buy-to-let landlords
Love them or loathe them, they are sitting pretty. These days there is little by way of capital appreciation to bank on so landlords rely on rental increases – and there are plenty. Website www.findaproperty.com compiles an impressive lettings market index and says rents in London rose 5 per cent in the three months to October, while across the country the supply of homes to let dropped 14 per cent in the same time. "Rental yields are now 4.5 per cent which is a healthy return for landlords," says the website's Nigel Lewis. But the under-supply may not last for long – Barratt Homes says in some regions, 50 per cent of its sales are to would-be landlords cashing in on the likely 2011 rental bonanza.
9. Cities and towns with good transport links
Petrol will hit £1.25 a litre when VAT rises on 4 January so areas with good public transport links (always a plus-point for individual properties) will blossom in 2011. Kent is benefiting, particularly Ashford and Ebbsfleet, from better commuter rail lines to London. Homes in areas like Great Missenden, Princes Risborough, Wendover and Aylesbury will ultimately benefit from the newly-announced HS2 high-speed rail link making them perfect for commuting to London or Birmingham – so long as they are not the homes to be compulsory purchased and demolished during building work.
10. Central London
Prime areas, especially Mayfair, Kensington, Chelsea, Notting Hill and Holland Park, spent 2010 moving to very different forces from those influencing the rest of Britain. About 50 per cent of buyers do not require mortgages, 30 per cent are from overseas and average prices in some postcodes hit seven figures. They remain insulated from the economic and housing market downturns so while the rest of the country sees falls, most forecasters say Central London values will rise. "House prices in the capital will increase by 5 per cent in the next 12 months followed by a rise of 7 per cent in 2012," predicts Peter Rolling of the estate agency Marsh & Parsons.Reuse content