Price falls in UK property market will not be disastrous, just put off full recovery by up to a year

As all the latest price reports published in the last few days show either falling or static prices, Savills residential research team has restated its belief that the market will face declines.
 
‘This will not be a repeat of 2008 as some doomsters have suggested but a necessary short term correction of recent growth which was driven by abnormal market conditions rather than fundamental demand and wealth. The market now faces short term price falls followed by a period of low or zero growth,’ said Yolande Barnes, head of residential research at the property adviser.
  She still believes that prime markets will lead the recovery and Savills 2010 forecast for prime central London remains unchanged at 1.0%, but the recovery has been pushed out by six to twelve months.
 
‘We firmly believe that the UK residential markets have seen the worst of the price falls, though lower turnover is expected to be a longer term feature of the market. For investors, our mantra is clear: seek out quality and invest for the mid to longer term and you will have little to fear from the market,’ explained Barnes.
 
But estate agents are more upbeat. Hamptons International, one of the UK’s premier residential estate agencies, has announced a 24% increase in the number of net sales achieved in July 2010, compared with July 2009.  The news comes as downbeat industry price predictions show no signs of slowing sales volumes in London and the South.
 
The upbeat market in July follows what was a subdued June across the industry due to austerity measures delivered in the emergency budget and the fallout from a changing political landscape.
 
July, however, has seen a sharp return in confidence as a greater understanding of the personal financial impact of the budget, along with more realistic pricing by vendors, has encouraged large numbers of buyers to enter the market, it says.
 
‘As predicted, housing stock levels are increasing across the board as speculative vendors make a welcome return to the market. The more stable pricing outlook for the remainder of the year is acting as an incentive to prospective vendors. With no reason to hold back from putting property on the market to benefit from future potential short-term gains in pricing, we are seeing a welcome number of new properties coming onto the market to help meet increasing demand,’ said Marc Goldberg, head of sales at Hamptons International.
 
We saw the pricing expectation gap between vendors and purchasers deepen during Spring 2010.  We are, however, looking towards an autumn where low interest rates coupled with higher stock levels will create a stable market environment. July has been an active and positive month for Hamptons International but the overall market still shows signs of inconsistencies with some areas outperforming others,’ he added.
 
The National Association of Estate Agents says that UK property market experienced one of its strongest months of the year so far in July. Its latest monthly market report found that demand for housing had increased, more sellers were putting property onto the market and the average agent made more sales than in June.
 
Prices rose 0.8% in the second quarter of the year compared with a 2.8% rise in the first three months, according to the latest figures from the government that are based on mortgage completions.
 
They were unchanged since May and are now 9.9% higher than in June 2009 with the average house costing £210,775 in June, the figures also show.
 
There is a mixed picture regionally with average prices rising 10.5% in England, 3.7% in Scotland and 13.5% in Wales but fell 7.7% in Northern Ireland.