Property’s mixed prospects in 2011

PROPERTY price indices suggest house prices are falling again, but what are the prospects for home owners and property investors?

UK house prices fell 0.9 per cent in the final three months of 2010 and were down 1.3 per cent between November and December, the Halifax index shows. Some analysts expect them to fall further, while others anticipate a return to growth.

Interest rates, at 0.5 per cent, are likely to remain low for some time, helping those vying to get onto the housing ladder and limiting financial pressure on existing homeowners to sell. On the other hand, earnings growth is expected to be modest, taxes are rising and public sector job losses are looming.

Martin Ellis, Halifax’s housing economist, expects “limited movement, but with risks on the downside”, while Robert Gardner, chief economist at Nationwide, anticipates a similar picture to 2010, when the building society’s index recorded a 0.4 per cent rise in prices.

Gardner says: “Forecasting asset prices is always difficult, especially given the broader uncertainties surrounding the wider economy, but the market is likely to remain fairly soft in 2011, for both activity and prices.”

Meanwhile, Ray Boulger at John Charcol, the mortgage broker, is slightly more optimistic, pencilling in a 2 per cent rise for 2011.

Prime central London properties could do better, with IP Global, the property investment firm, predicting a 5 per cent rise this year. Looking further ahead, chief executive Tim Murphy expects 6 per cent growth in 2012 and 8 per cent in 2013. Over the next five years, prime central London property prices could rise by 33 per cent, he says.

Globally, for the first time since late 2008 prices are rising in each of the six world regions studied by Knight Frank, the estate agent. Asia-Pacific property prices rose the most in the third quarter of 2010, at 9.9 per cent, while Europe trailed with a mere 0.8 per cent increase.

However, nearly 30 per cent of countries that had experienced brighter conditions in 2010 saw quarterly price growth turn negative. Led by European markets, they include Greece, Iceland, Holland, Norway, Portugal, Slovenia and the UK, as well as China, Canada, Columbia, Dubai, New Zealand, South Africa and Taiwan.

Liam Bailey, head of residential research, says: “From the data, we can see there are still considerable issues playing out across global markets.”

Murphy at IP Global sees select opportunities. He expects Kuala Lumpur, Malaysia, to experience property price growth of 5 per cent this year, while New York should also fare well, after a rise of 10.2 per cent in the past year.

“The greater US has a few more years of struggle with its property sector, but New York is a tightly-supplied city: there are only 8,000 units on the market across 8m people,” he says. “We’re seeing green shoots of recovery and finding fantastic opportunities.”