Forecast for house prices in Yorkshire is mixed
Savills has published its five-year forecast for the property market and it reveals a North-south divide. Sharon Dale reports.
IT’S been a depressed five years for the property market thanks to the combined effects of the credit crunch and the recession and Savills latest predictions do little to lift the spirits.
Its five-year forecast reveals a stark North-South divide with prices in Yorkshire lingering next to the bottom of its league table.
While London will see a 21 per cent growth in house prices by 2017, Yorkshire may only manage 5.5 per cent, only marginally better than the North East, which is expected to see a 4.5 per cent increase.
Average house prices should start to look more stable in 2013 but will struggle to show inflationbeating growth for the foreseeable future.
Having fallen by an average –2.0 per cent this year, the firm says that the average UK house price will increase by just 0.5 per cent in 2013 and a further 1.5 per cent in 2014, with growth totalling 11.5 per cent over the next five years. But, Savills add that this headline 11.5 per cent average price rise will equate to falls of around three per cent, after adjustment for inflation.
“Last year we forecast that prices would fall by –2.0 per cent and that inflation rather than price falls would continue to strip out value thereafter,” says Lucian Cook, Savills residential research director. “This year we have seen average values fall in real terms. We now expect the market to show slight nominal growth next year, but remain negative in inflation-adjusted terms until 2016.”
He explains that the mainstream market continues to adjust to weak economic growth and the long-lasting effect of the credit crunch.
“For real, inflation-adjusted house price growth to extend beyond London and the top tiers of the market, we need a sustained and widespread improvement in household incomes fuelled by a stronger economic recovery than we have seen to date,” says Lucian.
Transaction levels are expected to rise gradually to reach almost 1.17 million, up one-third from their average in the years since the credit crunch, but still 28 per cent below the pre-peak norm.
In Yorkshire, there have been price falls of three per cent this year. The forecast is for a stagnant 2013 with no growth, a drop of 0.5 per cent in 2014, a rise of 0.5 per cent in 2015, a 2.5 per cent increase in 2016 and a three per cent rise in 2017.
“There have been wide geographical differences in the performance of the housing market in the past five years, a trend which is mirrored across Yorkshire. The overall legacy of the credit crunch continues to shape the market. So constrained lending conditions, a slow economic recovery and customer sentiment all continue to be key drivers,” says Lucian.
“Whether or not properties are in an equity rich area, where buyers have access to finance, is all important. We expect this ‘location is king’ tendency to continue over the next five years.
“Across Yorkshire, we are forecasting a mainstream growth of 5.5 per cent until 2017, however we would expect those equity rich markets like York, Harrogate and the Leeds suburbs to outperform more mortgage reliant markets such as Hull, Bradford and Doncaster. Likewise, the popular villages such as those in the Howardian Hills, around York, Leeds and closer to Harrogate will also continue to fare better than others in less sought-after locations. There will still be an overall flight to quality, whether it be due to location or property type, which has been witnessed across all regions of the UK in the last few years.”
Ben Pridden at Savills York says prime property has been most affected by a lack of consumer confidence.
“There have been exceptions to this. We have sold three homes over £2m recently and that is a part of the market that has been severely hampered in Yorkshire since 2007.
“Our experience on the ground also mirrors the latest research findings and forecasts. In fact of the seven sales agreed in the last six weeks from the York office, five of them have been either within York city centre or in the desirable areas to the North of York.”
Another significant legacy of the credit crunch is the division between different buyer groups and tiers of the market. The under 35s now control less than four per cent of the housing wealth in the owner-occupied sector, while the over 55s own over twothirds, creating a chasm between the different generations and their ability to trade in a debtconstrained housing market.
Savills estimates that the amount of housing wealth held by the under 35s will fall by 24 per cent over the next five years and the trend to rent will continue.
“Sales volumes in the sub £250,000 price bands will continue to be suppressed by a lack of mortgage activity, and are expected to increase by no more than a third over the next five years,” says Lucian. “This is still just over two-thirds of peak 2007 turnover levels.”
Predicted Price Rises 20122017. UK average: 11.5 per cent; London 21 per cent; South East 19.5 per cent; East of England 17 per cent; Southwest 15.5 per cent; East Midlands 13 per cent; Wales 11.5 per cent; West Midlands 7.5 per cent; Northwest 6 per cent; Scotland 6 per cent; Yorkshire 5.5 per cent; North East 4.5 per cent.
CHANNEL CROSSING: The house is English on the outside but boasts a French-inspired interior. The property is in one of York’s most sought-after locations.
POSITIVE SIGNS: House sales will increase over the next five years