Overview: The future? It's in single figures

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The Independent Online

There is a new, upbeat sentiment about the property market that should embolden all those who have been hiding from uncertainty. Not only is the economy as a whole predicted to be on the road to recovery, but activity in the housing market has suddenly taken a turn for the better. In the prime London market, FPDSavills Residential Research is seeing the first signs of real improvement after two years of mild recession, while Hamptons International predicts a busy three months - "the best opportunity this year to achieve a premium price", is how they put it.

On past experience, that kind of statement has led everyone to add a satisying nought or two to the value of their homes, but this time we should not be so hasty. Activity - the volume of transactions, which is bread and butter to estate agents - is not the same as price rises and has to be set against a pretty miserable six months, particularly in the South-east.

What seems to have happened is that buyers and sellers both believe that they have been through the worst. Prices did not collapse, so bargain hunters cannot afford to hang around much longer, while it has dawned on sellers that realistic pricing is the only way their property is going to shift.

David Adams, central regional director of Hamptons International, believes July was the turning point. "People couldn't put off decisions involving schools or job relocation any longer and, at the same time, sellers believed prices to have settled at 10 to 15 per cent lower than last year." Although he expects to see small increases of one and two per cent, he doesn't see those as marking the start of more meteoric rises - "they will still be a good 8 per cent and 13 per cent lower that 12 months ago". Another key factor, he reckons, is the growing realisation that interest rates have reached their lowest point. Very few of the outstandingly good fixed interest rate offers are still available, which suggests that rate rises are looming. Will this not put a spanner in the works?

Not according to Adams, who reckons it will be regarded as a spur to get moving sooner rather than later, especially among those leaving London who might well be adapting to life on one instead of two incomes. For the first time in a good six months, he is seeing competitive bidding, albeit on properties that have taken price falls into account.

Perhaps the hardest thing is to relate average percentage changes and forecasts to our own neck of the woods and make allowances for the time lag. In Sheffield, for instance, Winkworth, the estate agents, have noted a slowdown over the summer, but prices are still rising at an average of 2.1 per cent. While London was suffering some of its biggest falls in the spring, Sheffield saw some areas grow by as much as 12 per cent.

Richard Donnell, head of Savills Residential Research, points out that while London was in the doldrums, other parts of the country would have seen prices rise by 30 per cent.

Now, though, he believes we are all entering a new era with constraints of affordability and, at the top, smaller pools of equity. "We will all have to adjust to annual growth of 4 or 5 per cent. The future is in single digits."