It has been a grim year for residential property. Buyers have suffered a lending drought and sellers have seen prices tumble. The mortgage market is unrecognisable compared to last year. Only 2,336 mortgage deals were available at the start of this month, 86% less than in June 2007, says Philip Aldrick in The Daily Telegraph. And with repossessions predicted to soar in 2009 – the Council of Mortgage Lenders is expecting a 67% rise to 75,000 – the banks are unlikely to start lending generously anytime soon.
According to the Halifax and Nationwide – who produce the most-watched house-price indices – prices have dropped by 14.9% and 13.9% respectively, leaving average prices at £163,605 and £158,442. This is a marked change from December 2007, when Halifax recorded an annual rise of 6.3% and Nationwide 4.8%. Sure, the accuracy of both indices is limited by the relatively small pool of data each uses – their figures only reflect properties for which they have supplied mortgages. However, their findings are supported by the Land Registry, which captures the final sale price of all registered property. According to its November statistics, house prices had fallen 10.1% compared to an annual rise of 8.1% reported at the same time last year.
Looking ahead the new year is not likely to bring much good news. While Halifax and Nationwide refuse to make predictions for 2009, most other forecasters are predicting more gloom. And none more so than Legal & General Investment Management (LGIM). House prices “will fall 10%-15% next year followed by four to five years of stagnation”, says LGIM economist Tim Drayson in The Daily Telegraph, “it will be at least ten years before we see prices return to their 2007 peak levels”.
Many other forecasts are pretty downbeat too. Capital Economics – branded by The Daily Telegraph as “perennial property market bears” – expects prices to fall 35% from the peak with a recovery in 2011. Barclays chief executive John Varley expects a 15% fall in 2009 and Lloyds TSB chairman Sir Victor Blank, the new owner of Halifax, predicts a 10% drop.
With lenders maintaining tight mortgage criteria and a recession threatening jobs, there will be little to cheer about in 2009.