What do residential property forecasts mean for renters?
Friday, 5 November 2010 2:12 PM
This morning, I went to a media briefing outlining estate agent Savills' five-year residential property market forecast.
While the research team's predictions were, essentially, quite positive for 'the market', they left me cold. So, despite their belief that, by 2016, the average property will have returned to its 2007 value, what inspired this chill?
After a one per cent downward shift in 2011, says Savills, prime central London property values will begin a steady ascent - and by the end of 2015 they will be worth 33.4 per cent more than they are now. This compares to a UK average increase of 12 per cent. However, this is merely an average: properties in the north-east will only be worth 0.7 per cent more than at present. Divergence between the north and south is set to become greater and greater.
As well as geographical divergence, this steady polarisation of the property market will create an increasingly brutal gulf between the rich and the rest. In lower-end properties, owner-occupiers will become few and far between, with buy-to-let investors snapping up as many low-end properties as they can in order to get their slice of the rental market pie. For those who can afford to do so, this is a wise move: because of the already-increasing demand for rental properties, Savills predicts that rents will continue to rise (in fact, in the words of Yolande Barnes, Savills' head of residential research, they are feeling quite "bullish" about this).
In turn, this means that many of those who were previously saving up for a house deposit whilst renting may well no longer be able to put as much - if any - money aside. And while Lucian Cook, Savills' director of residential research, said that mortgage-lending is the biggest unknown factor, and that even the Bank of England had been unable to offer Savills any predictions on the subject, he seemed fairly confident that lending would "never be the same again" - so if you were holding out for a 100 per cent mortgage, you could be waiting for a very long time.
Barnes also stated that as the average age of the unassisted first-time buyer goes up, so does the standard of property they expect to buy - gone are the days of climbing the ladder having started on its lowest rung; these almost-middle-aged investors expect their first property purchase to resemble something approaching their ideal home. This is another contributing factor to the lack of low-end property being bought by owner-occupiers.
Savills predicts that the 15 per cent segment of the market occupied by those with mortgages of over 50 per cent, and the 14 per cent wedge made up of the private rental sector, are likely to merge, with the growing prevalence of shared ownership and shared equity blurring the distinction between the two.
Furthermore, the announcement in the spending review that people will no longer be entitled to 'council houses for life' suggests that the current 18 per cent share of the property market taken up by local authority and housing association properties will be squeezed down, forcing yet more people into this hybrid category of privately renting/semi-owning.
You could argue that us non-rich, non-owning types haven't got anything to worry about: after all, most of Europe rents for life. But if we continue on this path, with no rent control system to put an end to the terrifying trajectory of rising rents, then no one will be able to afford to live in the properties so happily bought up by the buy-to-let investors - and where will that leave us all?
By Ele Cooper
