Property consultancy Savills Research is forecasting that demand will be sustained by stock shortages but price growth will be constrained by more limited access to mortgage finance.
It predicts 40% inflation adjusted growth in the mainstream property market over the next ten years, much more in line with the long term average. This follows inflation-adjusted growth of 71% in the noughties, a fall of 14% in the 1990s, and 43% and 49% growth in the 1980s and 1970s respectively.
‘We expect to see an ongoing pattern of much more sober lending in the next decade, a factor that will clearly set the next ten years apart from the pre-credit crunch noughties which saw very high inflation adjusted growth in comparison to the historic norm,’ said Lucian Cook, director of Savills Research.
He believes that the legacy of the noughties will be a residential market split, possibly irrevocable, between the equity haves and have nots. ‘A regionalised market recovery is now inevitable with a ripple effect rolling out from the prime markets of London and the South East,’ explained Cook.
‘Our forecast anticipates sustained house price growth in the equity rich, prime hotspots from 2011 onwards with a significant lag in areas blighted by low levels of equity, high unemployment levels and the prospect of very slow economic recovery,’ he added.
The company also forecasts a very different geographical pattern of growth compared to the noughties and a reversal of fortune in some areas that have outperformed the average over the past ten years.
Most notably, the areas showing the highest levels of growth did not include the majority of Central and South East England, in part because they had seen the strongest uplift in the early part of the 1997 to 2007 growth period.
The strongest areas for house price growth in the last decade were in the far South West of England, West Wales, North Norfolk, Northern England, with London and the South-East only registering with the lower value east of City London boroughs such as Newham, Barking and Dagenham.
‘A decade of relative sobriety in mortgage lending suggests that the regions where equity and cash are most concentrated will see the earliest and most sustainable price growth over the next decade. Without doubt, this points to many of the higher value prime areas which have recorded the lowest percentage growth over the noughties,’ Cook added.
