House Prices will plummet in 2010. Whoops, sorry, I meant house prices will rocket in 2010. Hang on a minute, sorry, No. I mean..That got your attention didn't it! If there's one thing that doesn't change in the property market, it's our fervent desire to try to gauge what the coming months and years have in store for property prices. Its not surprising since our houses are normally the single biggest investment assets that we own. Changes in their value, not only have a direct affect on our personal finances but can alter our overall feeling of financial affluence or otherwise.
So, what do the coming 12 months have in store?
I've just been on BBC Radio 4's Moneybox Programme alongside 4 other property experts and we were all asked that very same question. The show started with them playing clips of the predictions we made in December 2008 when we looked forward to the year that has just gone. Many of the doom-laden predictions from that time simply haven't materialised. One of my fellow broadcasters had predicted a 50% drop in house prices - overall we agreed that things certainly had not been as bad as many had forecast, although finance remained hard to secure, demand for property remained strong with shortages in some areas driving up prices. Developers continued to keep projects on hold for much of the year, again limiting supply. In the final quarter of 2009, there was a steady stream of positive news from the property sale world and overall the year ended with prices around what they had been at the start.
So, what of 2010? The range of predictions from my Radio co-presenters was from drops of 15% to moderate increases of 2-3% which were suggested by the representative from the Royal Institute of Chartered Surveyors. I myself, predicted that prices would be generally level over the coming 12 months, but that some areas and styles of property would be much better placed than others. No matter what the market conditions are, there will always be certain areas and styles of property which are more immune to wild fluctuations than others, and the key to successful investment is to know where and what these properties are.
Which properties perform better in an uncertain market
If the market is slowing, then all the principles of sensible property investing become even more important. The old rule of ?location, location, location' becomes critical. Even during uncertain times, people still need or want to buy property - you just have to make sure that yours stands out to get the best possible price. At the end of the day, well presented, attractive properties that are well located will always be in demand, so if you have purchased well, you will still be able to sell at a fair price.
There is no property that will remain untouched by a general slowdown in the property market, but there are sectors which will be affected more than others. The riskier properties are:
? City centre flats and apartments in large developments where there are hundreds of almost identical properties.
? Properties that are in run down neighbourhoods or have difficult access
? Properties that lack a crucial element for the market that they are aimed at i.e. family homes that have not parking or garden.
? Large family homes with a £1million to £3million price tag.
So, the properties which are likely to perform better in a slow market are:
? Individual properties that are one-off's or have particular character and features
? Properties that are located within regeneration zones
? Homes worth more than £3million. Research suggests that these tend to buck the trend as buyers are wealthy overseas investors.
? Properties in traditionally popular areas
? First time buyer level houses - such as terraced properties. Even if there is a % reduction, if the property is valued less it will be less of a slip in absolute terms.
Clearly, there are other factors which will affect the property market in 2010. Its not clear yet what affect the re-introduction of stamp duty on lower priced properties will have and of course, any increase in bank base rates could put downward pressure on prices. However, I think most people would still agree that medium to long term property continues to be a safe haven for your money. Much of the market in 2009 was driven by cash buyers using money from banks and building society accounts that were generating virtually no interest and this will continue over the coming 12 months. I really don't think that the doom mongering predictions will come true. At the end of the day, we live on an island where there is more demand for property than there are properties for sale, and this simple economic equation should give you confidence for the year to come and beyond.
