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Savills: house prices facing W-shape dip

THE British housing market faces a sharp correction next year before emerging from a &lsquo;W&rsquo;-shaped dip, upmarket estate agent Savills warned yesterday.<br /><br />House prices will fall up to 6.6 per cent in 2010, more than wiping out a 3.7 per cent gain this year, according to the company&rsquo;s annual forecast.<br /><br />Savills said the market had been flooded with cash-rich buyers in 2009 who had distorted the supply and demand relationship by snapping up recession-hit properties.<br /><br />In contrast, public spending cuts, higher taxes, rising unemployment and falling demand are expected to combine to drag the market back into negative territory next year.<br /><br />Lucian Cook, research director at Savills, said: &ldquo;This will simply be taking out the excess growth we&rsquo;ve seen this year, so it&rsquo;s a softening of the market. But it could be a bumpy ride because of the short-term fluctuations in supply and demand.&rdquo;<br /><br />Savills&rsquo; outlook for the following five years is more upbeat. It forecasts 2.7 per cent growth for 2011, peaking at eight per cent in 2013 before settling back to 5.5 per cent for 2015. Cook emphasised the company was bullish in the medium term.<br /><br />However, the recovery risks opening up a north-south divide, with areas such as Tyneside not expected to bounce back to 2007 values until 2016.<br />&nbsp;<br />Prime property in desirable parts of London and the south is expected to be shielded from the worst of a &lsquo;W&rsquo;-shaped correction. <br /><br /><strong>FAST FACTS </strong> THE YEAR SO FAR<br />&9679; House prices have gained 3.6 per cent despite soaring unemployment and a 14.7 per cent fall last year, buoyed by cash-rich buyers<br />&9679; Uncertainty surrounding the general election and spending cuts will continue into 2010