Kate’s Summary of the 2009 Property Markets

publication date: Jan 11, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Kate’s Summary of the 2009 Property Markets

Unlike many ‘so called experts’, I predicted that from April 2009 the market would start to stabilise – and was proved right. The main reason behind this was I didn’t believe that with all the ‘bad news’ and recession, sellers would continue to try and sell their properties. As such, supply dropped in some places lower than actual demand, which was what caused property prices to slightly increase last year.

The media often fall into a trap though of reporting ‘year on year’ data and of course comparing 2009 to 2008 was a bit pointless. What we needed to do was compare how 2009 performed versus the previously ‘successful’ market in 2007.

By the end of the year, transactions fell up to 65% of 2007 figures (Nationwide), with around 50,000 people buying/selling per month versus 100,000 when the market was performing well. Over time, on average we sell around 1.2 million properties, so we are looking for volumes to increase to around 80,000 for the market to have ‘truly’ recovered.

Price wise, properties fell around 20% and although prices on average seem to recover last year, predictions are it will still take until 2014 for prices to recover to their 2007 highs. An improvement in affordability, especially for first time buyers gave 2009 a bit of a ‘boost’ when normally buyers would have probably not risked purchasing.

Halifax’s affordability index shows that "the proportion of disposable earnings spent on mortgage payments by a potential new first-time buyer on national average earnings has almost halved from a peak of 50% in June 2007 to 27% in November 2009". They believe that “this improvement in affordability has been a result of the combination of lower house prices and interest rate reductions. Nearly a quarter of local authority areas became affordable for a potential first-time buyer between 2008 and 2009, increasing the proportion of affordable areas from 16% to 39%.” However it’s important to remember that these are ‘statistical averages’ and regionally affordability is a very different story (Read article 'Has the Credit Crunch made Homes Affordable Again?')

Rents dropped substantially – nearly 10% - even in ‘housing stock starved’ London which took some time to recover. But by the autumn of 2009, stock in many areas had been soaked up by people who couldn’t afford to buy due to lending restrictions and were fed up of living with friends and family! Although a slight seasonal fall towards December, tenants were still more likely to compete for somewhere to live whereas 12 months ago they would have had lots of property to choose from.

The Auction market expected a good year with repossessions predicted to reach 80,000 properties – similar levels achieved in the last downturn in the 1990s. However the government initiatives, especially the lowering of mortgage charges via interest rates falling, had such a dramatic effect that repossessions fell in some months BELOW the levels of pre-credit crunch! So volume going through auctions was low in 2009, although prices achieved did start to recover over the summer through autumn, then dropped back towards Christmas time.

Property investors had an interesting year. As with homeowners, investors split into two groups. Savvy cash rich investors who basically went on a spending spree for the first half of the year, then struggled to find good deals in the second half. The second group were those desperately hanging onto their portfolio, being repossessed or unfortunately giving their money (often life savings) to rogue investor clubs who promptly ran off with them, had to watch from the sidelines as one of the best buying opportunities since 1997 slipped by!

Overall, 2009 gave us a great insight into how the UK population now understands the property market and the decisions they make as to where and when they move and whether they rent or buy. The big learning from 2009 is that the rental market is now a much bigger one from a moving perspective. On average in 2009 around 2 million people rented, while around 700,000 people bought/sold a home.



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