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Following a decade of house price rises that has seen property values rise by 213 per cent, according to The Economist, the last few months of 2007 began to level out and even fall in some areas of the country. With the help of a few property analysts, we look at what's in store in 2008.
By Gordon Miller
UK property prices remained robust throughout the first half of 2007, even reaching an annualised year-on-year growth of approximately 10 per cent in mid-summer, but by the end of the year the general consensus is house price inflation has measured five to eight per cent in 2007.
For the second half of the year to have dragged down the first so markedly, it stands to reason that house prices must have fallen or not have increased by as much as earlier in the year. In December, Nationwide Building Society reported UK house prices fell by a seasonally adjusted 0.5 per cent, recording their second consecutive month-on-month fall.
The indications are that the UK housing market went into a gradual decline from around September onwards, which was when the US-led sub-prime mortgage and subsequent credit crunch began to hit international financial markets.
Fionnuala Earley, Nationwide Building Society's chief economist, said: 'Momentum is now fading … [as] a slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity.'
November 2007 is the latest report, published on 3 January 2008. House prices in England and Wales increased by 0.6 per cent in November 2007, an annual change of 8.1 per cent, taking the average house price to £186,009, according to the latest monthly figures from Land Registry
But it's not all doom and gloom. One sector of the market that is likely to benefit from the slowdown is first-time buyers.
David Stubbs, Royal Institute of Chartered Surveyors' (RICS) senior economist, said 'Significantly, the combination of stagnating house prices and lower mortgage rates in 2008 should boost affordability for the first time since 2001.'
In the broader market, several analysts feel that, while 2008 will be a tough year, by spring 2009, a recovery in house prices will be under way. The optimism is based on the underlying British economy being sound, as Neil Young, CEO of Young Group, a property management company, said:
'The UK's economic indicators are still positive: inflation is within 0.1 per cent of target; unemployment is low and falling; the growth forecast for 2008 is more than two per cent; productivity is up and further cuts in the base rate are forecast. People shouldn't be swayed by marketing spin or doom-mongering press reports.'
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