2010: Year of the big property freeze?

26 December 2009, The Daily Telegraph

By Graham Norwood

Sit tight: prices aren’t likely to rise any time soon, although not all of us will fare badly. Graham Norwood predicts the winners and losers of the year ahead.

Let’s get the bad news over first: the build-up to 2010 – rising values and estate agents claiming five buyers for every seller – may prove far better than the year itself.

If you think tales of woe will add to your post-Christmas indigestion, look away now. For almost every analyst, lender and agent warns that while top homes in London and the country may hold their value, most others will experience 2010 price falls of up to 10 per cent.

There will be relatively few sales, too. Top-end purchasers are likely to sit tight until after the May election and some deals, mainly in central London, may collapse if they were relying on City bonuses that are now being taxed or scrapped. “The attack on high-value bonuses has the potential to hit that sector of the housing market hard, at least in the short term,” says Ray Boulger of mortgage broker John Charcol.

At the other end of the scale, the typical first-time buyer, who already has to find a 20 per cent deposit for a home, must now secure an extra £500 thanks to the end of the stamp duty holiday on January 1. In the past year, 132,500 purchasers – more than a quarter of all transactions – took advantage of the break, and most were first timers.

The rest of us, those who buy homes priced £250,000 to £750,000, may well be unlikely to feel like moving, what with a deteriorating economy, growing unemployment, rising taxes, falling public spending and possibly interest-rate rises.

These middle-ranking properties face 10 per cent falls in value next year, easily wiping out their 2009 gains, according to business consultancy Capital Economics.

“Our hunch is that considerable job losses are in the pipeline,” warns Capital Economics spokesman Ed Stansfield. “But even if we’re wrong and the recovery turns out to be stronger than we expect, the housing market looks vulnerable to the increase in interest rates that would be triggered by a strong recovery.”

The reintroduction of full VAT at 17.5 per cent may have an effect. Everything from conveyancing fees and estate agents’ charges to the hire of removals firms will rise in cost from next week. Peter Bolton King of the National Association of Estate Agents says: “There’s a danger that the property slump that hit thousands of families hard over the past 12 months will hit thousands more, harder, in the year ahead.”

Yet it may not be all dreadful. There will be significant regional variations according to Savills’ research team and local agents in each area.

The canny few

Among the few people likely to do well in 2010 are those canny owners who have added value to homes, or those with ”best in class” houses in the country.

Matthew and Rachael Sutton believe they have a house that fits both categories. Their stunningly refurbished home, in part of a large house at Nidd, is in one of the country’s most sought-after locations on the rural edge of Harrogate.

Their hard work, in just seven months, has turned it from a wreck into a classic home. “It was a repossession with period features but everything else in poor condition. We started from scratch, keeping the features, replacing everything else,” says Matthew, 32, a joiner. He and Rachael, 28, a manager, are moving into central Harrogate.

“We didn’t intend to move so quickly but we miss the city. We know the market is unpredictable but we hope our location makes our home desirable,” Matthew says.

The Suttons believe their home (on sale for £550,000 through Savills, 01423 535807, www.savills.com ) is one of those that will tick all the must-have boxes for increasingly demanding buyers.

“Houses that sell well are those without blights near good schools in the traditional areas. Best in class properties will always attract competition, with
peak market figures achieved in some cases,” predicts Philip Selway, of the relocation company The Buying Solution. But he admits those homes are rare – perhaps just a few thousand around the country.

For the rest of us, despite the apparent recovery of recent months, the 2010 housing market may be something we just have to grin and bear – a bit like opening that intriguing-shaped gift on Christmas morning, only to find it was a cardigan disguised as something more interesting.

Remember buy-to-let?

Like Mark Twain’s death, rumours of the demise of buy-to-let have been greatly exaggerated.

Rental demand rose in 2009 and there is no sign yet of a reversal. “Restricted access to mortgage finance means would-be first-time buyers are renting.

Uncertainty over house prices means ”treading water renting is a safer option than risking negative equity”, says Barry Manners of Chard lettings agency in London. He knows shrewd investors buying ex-council flats at low prices and enjoying 13 per cent annual rental yields.

Can anything upset the applecart in 2010? The return of full stamp duty may deter some investors expanding their portfolios but the acid test will be if interest rates rise. That may force highly geared landlords to quit, causing the flood of flats on sale that some pundits expected a year ago. It may be a knife-edge market late in 2010.

South West down 2.8 per cent

“The election may fuel the desperate need for stock by frightening off potential sellers. This could result in a premium for property in popular areas, giving a false sense of security,” says Richard Greetham of Bradleys in Exeter.

South East down 3.1 per cent

This region will see improving transport links to London, such as the 68-mile high-speed railway connecting St Pancras to the Channel tunnel. “Canterbury until now has seemed a vast distance from the capital, but will only be an hour away,” says Philip Harvey of Property Vision.

London down 4.1 per cent in Greater London, flat in prime locations

Prime areas such as the West End, Holland Park and Docklands are different from the normal market. Camilla Dell, of London buying agency Black Brick, tips Mayfair, Knightsbridge and Belgravia to remain strong because of their many foreign buyers.

Wales down 6.8 per cent

“It’s still too difficult for new entrants to the property ladder,” says Nigel Jones of John Francis estate agency. Almost all buyers in Wales need mortgages, so the number of movers may remain low.

Midlands own 4.5 per cent

Prime areas of the Cotswolds will enjoy stable prices but this region is dominated by average and below-average-priced homes with buyers heavily reliant on mortgages. Job losses will rise, too.

Northern England down 7 per cent

Patrick McCutcheon of Yorkshire’s Dacre, Son & Hartley says the future relies on realistic sellers: “If vendors jump on the bandwagon and start increasing their prices it could derail the recovery.”

Scotland down 7.5 per cent

More than 85 per cent of buyers rely on mortgages so the credit crunch still bites hard. Prime Edinburgh homes will stay in good shape. “It’s grown to be a major European financial hub. That reputation hasn’t suffered in the downturn,” says Savills’ Jamie MacNab.

All figures: Savills 2010 Forecast

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