The September UK residential market forecast from Jones Lang LaSalle’s says that despite an improvement in sentiment in the past six months, the market revival is likely to be unsustainable.
‘Our view is that the present recovery is quite fragile and that at sometime over the next six months housing market sentiment and prices will fall back. This could occur quite naturally or have a trigger event,’ the report says.
‘The surprising revival in house prices over the past six months has, in our view, substantially changed the outlook for annual house price growth over the next couple of years. This development is not a positive one,’ it adds.
In the report analysts say that recent price indices and forecasts showing that between February and August this year average house prices have increased by 8.4% should be observed with caution.
‘This early and strong recovery has surprised everyone and in many respects defies the fundamentals of both current and future economic weakness. It obviously raises questions as to whether the recovery in prices can be sustained and whether the house price falls are indeed over for this part of the cycle,’ they say.
‘More crucially, it also raises the more fundamental questions about the resilience and performance of the UK housing market under any circumstances as well as the appropriateness of current house price forecasting models,’ the report continues.
While the recent drive in the market is encouraging, it is impossible to ignore the short-term risks posed to the UK residential sector by rising unemployment and poor credit availability, it explains.
‘On balance we believe that the present housing market revival is unjustified and unsustainable and those economic fundamentals will soon subdue and reverse current housing market sentiment.
This is unlikely to occur immediately and price falls may not return until 2010. Our central case forecast is that UK house price growth will be slightly positive during the rest of this year but in 2010 we expect house price falls to resume.
The magnitude of decline is difficult to judge but is most likely to be in the order of -7%.’
Analysts conclude that they do not expect a sustained recovery until 2012 but UK house price growth is expected to rise by 8% by 2014 with London and southern regions recovering first and fastest.
