Property prices through 2012 and 2013 - is now the time to sell, buy or rent?

publication date: Sep 18, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Future Market: Are we heading towards the bottom of the market or a new property price crash?

2012 hasn't been a particularly exciting market so far. In fact, many areas are either stabilising or falling. There are just a few areas in and around London and popular parts of the UK where prices have actually continued to rise.

The confusing data and resulting reports from the media are not helping the buying and selling market. One day prices are reported as up, the next they are reported as down, all because of a lack of understanding of the limits of the different statistics. On top of this, property in the UK is seen as something with drives sales of newspapers and viewing figures on the television. As such, the stories which are portrayed as ‘the norm' are rarely accurate and usually only tell half the story. For example, over playing buy to let investors pricing first time buyers out of the market - they aren't. Lenders are actually preferring to lend to investors than first time buyers as they have higher deposits, this isn't their fault, it's a problem with the lending criteria. However, that doesn't make as good a headline!

As we are heading towards the end of the year, we know property prices are likely to soften in most areas and the ‘double dip' in property prices will continue. What is interesting to take a look at now is what will happen to property prices in 2013?

Much of what happens over the coming months will depend on how confident and motivated people are to sell and buy. However, 2013 will be dominated by more people who are likely to have to move, rather than have a choice. 2013 will be the sixth year of the credit crunch. Going back to the last recession in the 1990s, this is how our property prices are comparing:-

Average property prices Average property prices

1989 54,846 2007 223,405
1990 59,785 +9% 2008 227,765 +2%
1991 62,455 +4.5% 2009 226,064 -0.75%
1992 61,336 -2% 2010 251,634 +11.5%
1993 62,333 +1.5% 2011 246,293E -2%

For the future, we can look to what happened in the past:-

1994 64,787 +4% 2012
1995 65,644 +1.5% 2013
1996 70,626 +8% 2014
1997 76,103 +8% 2015

To better understand whether consumers are confident or motivated enough to buy and sell, it's worth looking at the confidence figures.

Consumer Confidence
The GfK NOP index agrees with housing commentators that the Jubilee hasn't helped improve consumer confidence. They say "Any suggestions that consumer confidence would receive a ‘Royal bounce' from the Jubilee, as it did from William and Kate's wedding last year, have been proven wrong. The Index remains the same this month - with the poor weather possibly off-setting any positives from the long Bank Holiday"

Consumer Index September 2012

From a future perspective, Nick Moon, Managing Director of Social Research at GfK doesn't believe things will change anytime soon "There has never been a year where the figures have remained so flat. The stagnant level of consumer confidence suggests that the public is stuck in a period of constant depression, which it is finding very hard to snap out of. While the current position is better than it was at the depths of the financial crisis in 2008, the figures do mark a dispiriting new type of low. Consumer confidence has been at -29 or worse for an entire 12-month spell - the worst run in its 40-year history."

* Research carried out by GfK on behalf of the European Commission

Unemployment Figures and Wages
Despite the double dip recession hitting the UK, the unemployment figures are looking more healthy.

The whole economy earnings annual growth rate for total pay was 1.4 per cent in the three months to April 2012. Bonus payments in April 2012 were slightly higher than in April 2011, partly reflecting a change in the timing of bonus payments. However, over the five month period from December 2011 to April 2012 bonus payments were lower than in the same period a year previously. The majority of bonus payments, particularly in the financial sector, are usually made between December and April.

The Office of National Statistics April to June data shows latest the latest unemployment rate was "8.0 per cent, down 0.2 on the quarter. There were 2.56 million unemployed people, down 46,000 on the quarter". Other stats show "the total number of unemployed people fell by 46,000 over the quarter, but increased by 51,000 on the year, to reach 2.56 million. The number of people unemployed for over one year was 882,000, little changed on the previous quarter."

Some forecasters such as the CEBR suggest unemployment will continue to increase to up to 10% by 2016, while others are less pessimistic and think unemployment will peak in 2013 at 9%. The Chamber of Commerce forecasts: "the 2013 jobless peak prediction is that unemployment would rise in to a peak of 2.9 million in Q1 2013."

Despite the predictions on growth in unemployment and a rise overall year on year, due to quarterly ‘good news', what hasn't happened as much over the summer as expected is talk of unemployment by the media. This is important in the property market as lots of news about unemployment reduces people's confidence to buy, so they hold off. This hasn't happened as expected, partly due to the dominance of ‘happy news' (for once!) about the Olympics and our fantastic medal haul. This is helpful to the market as it helps to hold buyers' confidence, but the

fact that unemployment hasn't fallen as much as expected also means there are potentially less people who are forced to sell due to unemployment, and less desperate sellers helps to lower the chance of another crash.

One trend that is emerging from the employment figures is the large number of people who are going into self-employment and although this hasn't yet impacted on the property market, being self-employed is not something lenders reward you for! Often you will need three years of accounts to be able to secure a mortgage. So in the UK the more people who end up self-employed who don't have a home or a decent deposit, the more people will be forced into the rental market.

Housing Finance
From a finance perspective, this very much depends on what ‘risk' you are categorised by a lender. For example, first time buyers with 10% or less deposits are seen as ‘high risk', so have to pay a higher mortgage interest rate. For those who have big deposits of 40% or more, lenders are competing hard for your business, so rates are pretty competitive.

From a finance perspective, according to Bank of England statistics, lending has been quite volatile this year, mainly due to the impact of stamp duty changes. Year on year, there are more new mortgages than before, but June saw a big fall versus last year and month on month due to higher activity at the start of the year.

Bank of England Mortgages Jan to June 2012

In the main, the growth in lending activity appears to be down to buy to let investors, according to CML "Buy to let lending continues to increase year-on-year and support total lending-the volume of loans up 14% and the amount advanced up 18%. The sector accounted for 11.4% of gross lending in the second quarter of 2012."

With regards to lending in the future, CML comments their "Interpretation of recent trends continues to be challenged by one-off effects. We look forward to the September figures when the distorting effects of the Diamond Jubilee and the Olympics should largely have worked their way through."

It's always worth taking a look at what's happening in the auction market as this often ‘leads' the buying and selling market.

EI Group tracks residential property auctions across the UK. So far this year, 2012 has seen stronger activity via the auction houses than 2011. Latest trends though suggest the market is stabilising with only a 2% rise in lots sold in June 2012 versus 2011. Interestingly, although the percentage of lots sold is slightly down from 73% in June 2011 to 70% in June 2012, the number of lots sold was still up year on year.

Despite a softening of auction activity in June, overall activity in the last quarter generated 5% more turnover of property values and an 8% increase in lots sold.

This continued increase in activity in the auction markets does support a softening buying and selling market via agents/private sales. September Auction data will give a better idea of how difficult selling a property will be for the rest of the year.

Thinking of selling your home? Then try our Sellers Service
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