Carter Jonas 2012 UK Residential Property Forecast
“The Prime Central London residential sales market has continued to strengthen throughout 2011, in sharp contrast to the darkening storm clouds looming over the wider economic arena as well as the rest of the UK’s housing market,” said Richard Hatch, Head of Residential at Carter Jonas.
The clear disconnect between house prices achieved in Prime Central London (PCL) and the rest of the country’s housing market has continued during 2011, and indeed widened in recent months. Prices for top quality property in PCL have risen by 10% during the course of the year and now, in many cases, are above 2007 levels. The demand profile continues to be dominated by international investors, accounting for 68% of purchasers to date in 2011. Middle Eastern and Russian purchasers have proved the most active, with Indian investors more recently entering the market. Despite this buoyant backdrop, it is important to note that the market has increasingly turned towards the buyers’ favour and investors are becoming progressively more selective, seeking to acquire “best in class” properties which should represent a sound investment over the medium to long-term.
In contrast, the country house market has witnessed more challenging conditions during 2011, although limited supply of good quality housing has kept prices stable, providing relative immunity for this sector from sharper falls seen in the wider housing market and continues to be the key driver supporting prices. A North-South divide has emerged throughout the year, with values in the prime southern markets showing increases by as much as 4% in some of the hot spots such as the university cities of Oxford and Cambridge, although the majority of this increase was evident during the early part of the year, followed by a far more subdued period experienced more recently.
In contrast, the northern market fell by 4% over the same time period with a notable reduction in the number of purchasers financially willing and able to progress evident. Values held firm across both central and western regions in the earlier part of the year, but here again, there were signs of weaker demand in Q4 putting downward pressure on prices. Reports of a widening disparity between vendors and purchasers agreeing on a realistic price have also slowed the market in recent months. However, where minor price adjustments have been made, particularly in the northern and central regions, sales have completed proving that demand continues but is becoming ever more price sensitive.
Outlook for 2012
George Osborne’s Autumn Statement this month followed a rather bleak forecast from the British Chambers of Commerce (BCC), who reduced their economic growth forecasts four times during 2011 from 1.7% to a current level of 0.9% and for next year from 2.5% to 0.8%. The disparity between their initial predictions and current forecasts is representative of the continually changing and challenging market conditions of both the domestic economy and, inevitably, the housing market. Supply of residential stock in the regions is projected to increase in Spring 2012, although purchasers will continue to remain extremely price sensitive and selective. This coupled with general caution across the economy will place increasing pressure upon the housing market in the UK, and we expect country house values to drop by 3-4% next year, with vendor expectations adjusting in order to realign with real market value. That said, “best in class” property is expected to hold firm as demand remains strong and supply is extremely limited.
Notably, Prime Central London prices are expected to buck the trend and increase by around 5% over the same period.
“The looming credit crunch in the Eurozone and the vision of failing banks makes prime UK property, especially in London, even more attractive as a ‘gold standard’ asset class. Now that politically the UK is on the edge of the Eurozone, the fear that the Euro crisis could destabilise the Euro will no doubt spur another flurry of high net worth Europeans seeking refuge for global wealth in the UK housing market,” concludes Mr Hatch.
Posted by: Carter Jonas LLP
