UK residential property prices are expected to be flat for the rest of the year with no real significant growth until 2012, according to a five-year growth prediction from real estate consultants.
The current stagnation of prices will not be helped as the government’s spending cuts take effect but with economic figures proving better than expected there will be a boost in confidence say consultants Jones Lang LaSalle.
Looking ahead the company is predicting ‘significant’ house price growth in 2012. ‘Prices are forecast to move towards the long term average rate of growth circa 7%,’ it says in a report.
What happens in the more immediate term will depend on whether or not the economic recovery is sustainable. Figures earlier this week showed that the pace of economic growth in the third quarter of the year at 0.8% was twice the expected 0.4% predicted by most economists and exceeded all expectations.
The experts still point out that a VAT rise in the New Year and spending cuts have still to make an impact and analysts will be watching the effects on the property market.
Indeed, the Comprehensive Spending Review (CSR) brings a new set of challenges to the housing sector in the UK, JLL points out. Generally the theme is ‘do more, with less’ as the government appears to have cut committed social housing expenditure by nearly 50% to £4.4 billion, whilst simultaneously setting a target of delivering 150,000 new ‘affordable’ homes over a four year period.
‘With depleted government resources, the biggest threat to new development and land values remains the cuts to local planning departments and the uncertainty around the localism agenda. We have already seen the early proposal of a super council amalgamating the services of the London boroughs of Westminster, Hammersmith & Fulham, and Kensington and Chelsea. Ideally sharing the cuts will minimise the cost to public services, helping streamline the planning approval system,’ it says.
‘The positive news for local councils and landlords is the announcement that social rents can be increased to 80% of the open market rental rate for new tenants in the locality. This opens the door to a wide scale workable model whereby a form of affordable rental fills the void between the social and private rented sectors,’ it adds.
It expects demand to remain strong in the private rented sector in London. ‘Statistics show the rate of uptake in this sector has increased markedly in recent years. A significant number of young professionals have been priced out of the sales market, or simply chosen the lifestyle option of rented accommodation, allowing greater freedom and flexibility whilst building up their career and their capital. Over a five-year period, rental tenure has increased 5.4% per annum against other housing tenancies. Those opting (or able) to become owner-occupiers have increased by a mere 0.1% per annum,’ the report points out.