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06/08/07 -
UK Housing Starting to Slow Down |
Savills residential
research department is predicting that the slowdown in the UK mainstream
housing market will last well into 2008 leading to a period of low turnover
and house price growth...
Lucian Cook Director Savills research comments, “Current interest levels are
impacting on affordability, however as long as there remains a reasonable
prospect for rates to drop below their current levels by the end of next
year, we do not predict falls in average UK house prices.
“We believe that we are currently witnessing the beginning of a slowdown
similar in nature to that of 2004/05, when the number of transactions
reduced significantly and house price growth stalled. Unless there is a
conspiracy of factors which significantly erode market confidence, we expect
the market to respond by slowing for a period, allowing households to
rebuild their monthly finances.”
The effects of higher interest rates already vary significantly between the
regions, and looking ahead, a strong north-south divide is expected with
more robust southern and prime markets being supported by a lack of supply
and wealth both generated in and attracted to London. By contrast
affordability is particularly constrained in northern areas which are
currently bearing the brunt of the slow down.
Scotland bucking the trend
However the one clear exception to the north-south divide is Scotland where
house prices have continued to grow regardless of interest rates.
In light of growth in the first part of the year, Savills remains confident
that its forecast for 7% annual house price growth in 2007 will be achieved.
In 2008 house price growth will be lower given the likelihood of slow growth
in the first six months of the year. Even with a market expectation that
interest rates will fall back to 5.5% by the end of next year, we expect
house price growth to be no more than 5%, the final figure being dependant
on how quickly market sentiment reacts to the prospect of a return to a
lower interest rate environment.
Cook again, “In addition to purely economic drivers, extraneous factors,
such as the recent flooding are likely to have an impact on market
confidence, particularly in those areas most badly affected. However the
extent of the impact will only become truly apparent when the Autumn market
is underway.”
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