Property experts say even London house prices will tread water over coming year
Britain’s already-depressed housing market will stay firmly in the doldrums in 2013.
That is the unanimous view of estate agents and property consultants. Most say prices will dip up to 4% in northern England, Scotland and Wales, while values will be roughly static in southern England and London. Even prime central London – where prices have risen an average 30% since 2007 thanks to an influx of affluent buyers from overseas – will tread water in the coming year.
Martin Ellis, the Halifax house prince index economist, says: “Conditions are likely to remain as they are. In 2013 prices are again likely to end the year at levels close to where they begin, with the market continuing to lack any genuine direction.”
Gráinne Gilmore of Knight Frank, a high-end estate agency, says: “Transaction levels have roughly halved since 2007 and are 35% below the 20-year average, as first-time buyers and those further up the housing ladder struggle with tighter mortgage lending rules.”
The most worrying aspect for homeowners and those wishing to get on the ladder is the likelihood that the current market torpor will last well beyond next year. Savills, the estate agent, predicts that after a stagnant 2013 prices will begin to edge up – but that even over the following five years average UK values will increase by only 11.5%. After adjusting for inflation, that is a real-terms fall of around 3%.
Meanwhile, the number of new homes built in 2013 is also likely to be low. Housing experts say the UK needs 233,000 new homes annually to meet demand created by the predicted expansion in the number of households formed.
Official figures released last month showed that in the year to October, the number of new homes completed in England rose by 6% to 117,190. But, critically, housing starts – the number of homes which should be completed in 2013 – fell 9% to fewer than 100,000.
New-build homes traditionally carry hefty price premiums but often come with developers’ deals on mortgages: some allow buyers to put down a deposit of 10% or even less. In the wider “pre-owned” housing market, however, lenders are not as generous, with most still requiring 25% deposits or even more.
Hometrack, a housing consultancy, says it expects mortgage lending in 2013 will remain at current levels of £135bn to £140bn. It says the government’s much-vaunted Funding For Lending initiative, a bid by the Bank of England and Treasury to get banks and building societies to lend more to households and businesses, will make no significant difference to mortgage lending.
This combination of restricted mortgages, low transaction volumes, and few homes built – against a grim outlook for the wider economy – means 2013 will see still greater demand for homes to rent.
Data from the 2011 census, recently released, shows the number of people renting in the public and private sectors has risen from 31% to 36% in just 10 years. In parts of London, notably Westminster, the private rented sector accounts for almost 40% of the local housing stock.
A survey by the online estate agent Rightmove shows that almost one in four tenants in the private rented sector already pays at least 50% of take-home pay on rent. This follows average rent rises of 13.6% since 2009, thanks to demand outstripping supply.
The survey warns that a quarter of existing landlords intend to increase rents further next year; one third of those say the rise will be 5% or more. “Some tenants are again in for a rent rise shock,” says Rightmove housing market analyst Miles Shipside.
There will be a few glimmers of hope in 2013. Pundits say areas of London benefitting from the arrival of Crossrail services in 2018 will next year see the first influx of buyers for homes near new stations. Other infrastructure improvements, such as the four-mile Kingsteignton bypass being built in Devon, will also produce property hotspots. But these will be rare exceptions in a difficult market.
David Orr, chief executive of the National Housing Federation, says 2013 looks grim: “The market’s at the point of no return with millions of families struggling to afford their home. The future is looking even bleaker.”