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Market cools: What will your home be worth in five years?

Thursday 10th April 2008

English homeowners should prepare themselves for falling house prices in 2008, according to the latest predictions from Your Mortgage magazine, but performance will be far from uniform across the country.

Some areas, including Warwickshire and the West Midlands Metropolitan County, will see prices fall by up to 6.4%, whereas other areas such as London will see smaller decreases, averaging 0.9% for inner London and 1% for the Greater London area.

And while the counties and unitary authorities of the South East are all predicted to see a drop in prices of between 4% and 5%, property prices in the North of England will see smaller falls, ranging from 2.2% (Northumberland) to 3.7% (South Yorkshire, West Yorkshire and North Yorkshire).

Despite this, the data has revealed the value of homes across much of England will recover over the five years to 2012. East Anglia and Essex, along with London and the South East will all attain positive price growth over the period.

The North, on the other hand, will only see patchy improvement in property prices. For instance, while prices in areas of the North East, such as Darlington and Middlesbrough,
will see a return to positive home price growth again by 2011 (1.1% and 1.3% respectively), the total average for both areas for the five year period to 2012 will remain negative (-2.5% and -1.6% respectively).

“The predictions for the next five years could have a number of implications, depending on the type of buyer you are,” said Pauline McCallion, editor of Your Mortgage.

First-time buyers

“The silver lining of falling property prices tends to be that it gives first-time buyers a chance to get on the ladder. Mortgage lenders are tightening their criteria in light of the credit crunch, which could affect the borrowing ability of some first-time buyers, but a slowdown in the property market – however small – could give many buyers the boost they need to finally buy their own home.”

Current homeowners

“Falling property prices will obviously affect those looking to sell this year, so it might be an idea to consider staying put for the time being, if possible. However, given rocketing prices over the past decade, selling up at this point could still yield a profit for some homeowners, so do your sums before making any decisions.

“It’s worth bearing in mind that, although the prediction for your region may be negative, property prices are so specific that the outlook could be quite different at street level. Visit yourmortgage.co.uk to use our postcode price predictor for a more detailed five-year forecast.”

Buy-to-let investors

“It is in this sort of environment that proper research will really pay off. Experienced and dedicated investors should be able to continue turning a profit, provided they do enough research to ascertain the best buy-to-let locations going forward. It’s vital to think carefully about the age of the property, the likely tenant demand, as well as the number of other landlords that already let properties in the area. Also keep an eye on the local news – planned regeneration projects and new transport developments could attract rental demand in the future. Just look at what happened in East London when the city won the bid for the 2012 Olympics.”

The research, conducted on behalf of Your Mortgage by analysis organisation Prophit, drew on a number of sources (see notes to editors) to predict average property prices over the next five years for the whole of England.

England House Price Predictions: A Your Mortgage Guide is available with the April 2008 issue of Your Mortgage magazine, on sale now.

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