Emerald Group Publishing Limited
Copyright © 2000, MCB UP Limited
The rise and rise of the UK housing market
Fading memories of recession, low and more stable inflation, increasing consumer confidence, the expectation of yet lower interest rates, and a growing belief in the renewed investment potential of housing will all help to push up house prices well into the next millennium, according FPDSavills Research.
In 1996 FPDSavills predicted that mainstream average house prices would rise by 50 per cent before the end of the year 2000. At that time this forecast was greeted with incredulity. Yet, figures recently released by Nationwide Building Society show that average prices are rising at an annual rate close to over 11 per cent, and are now more than 30 per cent higher than they were three years ago.
The summer issue of the FPDSavills UK Residential Research Bulletin, forecasts growth of 12 per cent in the mainstream UK market in 1999 and, "we are increasingly confident", writes Yolande Barnes, director of research at FPDSavills, "that at least 20 per cent nominal growth will be added before the end of 2000".
Average house prices conceal a wide range of experiences. Depressed areas dominated by manufacturing industry and obsolete stock are pulling the average figure down. However, the best properties in the most prosperous places have experienced growth since 1993 that is nearly as high as between 1982 and 1987. This prime growth has also been more widespread this time round. "More property in more places all over Great Britain can now be described as prime than was the case in 1987", says Ms Barnes.
This phenomenon has its roots in the growth of the service sector economy which is increasing demand for period properties, smart city dwellings and prosperous enclaves all around the country.
The secondary market has also caught the fever, just as it did in 1987-1988. Agents in outer London boroughs and strong regional centres are reporting that demand at present far exceeds available supply. "Once again, we are seeing the inelastic supply of housing result in localised mini-booms around the country", says the report.
The upward trend will not last forever, but is likely to be sustained well into the next millennium by restricted supply and high purchasing power. The ratio of house prices to disposable household income is well below its long-term - 1973-1998 - average in most regions and average mortgage payments now represent just 15. 7 per cent of household income, a level unseen since the 1960s.