UK residential property prices growth expected to slow in the second half of 2010

The latest forecast from consultants Jones Lang LaSalle expects the annual rate of growth to fade during the remainder of 2010, ending down 1% across the UK and flat in the London market by the end of the year.
   
‘The recovery in UK house prices, which started during late 2009 with great momentum, surprised the market. Prices are now only 9.8% lower than peak values witnessed towards the end 2007. However, this recovery is now at risk as the political environment remains in a state of flux,’ said James Thomas, Head of Residential Investment and Development at Jones Lang LaSalle.
 
‘The impact of structural changes to the national economy, aimed at curbing the national debt, has left buyers and sellers unsure of the right time to act. London and the South are likely to fare better and outperform the wider UK market as a result of global investment capitalising on the continued weakness of sterling but the new government’s emergency budget in June will have a significant bearing on existing stability,’ he explained.
 
The UK Residential Market Forecast report highlights the effects the result of the general election will have on the housing market. The plans to overhaul capital gains tax from 18% to at least 40% on non business assets, such as second homes and buy to let property and the eradication of the Home Information Packs, which is likely to increase housing supply in the short term both present downside pressures on pricing, it suggests.
 
But analysts expect 2011 to be stable. ‘Looking beyond 2010 we can expect 2011 to show signs of market stabilisation, allowing time for the economic recovery to be fully embedded by 2012,’ said Rob Bruce, Head of Residential Research.
 
‘The outlook for the housing market remains strong over the medium to long term. Demand, activity and pricing will build through 2012 to 2014 encouraged by further lender and developer participation. By 2013 we can expect house price inflation to accelerate towards double digits, partly fuelled by the structural undersupply of new housing in the UK,’ he added.