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UK Property Predictions For 2008

Nov 25, 2007
As we start to move into the last few weeks of 2007, it's natural to look ahead to what might happen in 2008.

Often future predictions are made off the back of what's happened over the last 12 months. And it's been a very busy year for the UK property market.

There have been numerous changes and predictions for the future. We take a look at what's happened so far in 2007, and how that could affect the market next year.

First off the big issue that affects all of us - house prices.

UK property prices have had an interesting year. Some organisations have reported prices going down; others have claimed they have gone up in some areas. Overall it seems likely there has been at the very least a slowdown in the growth of prices.

The current average price for a UK property is 225,826. And the Nationwide building society says in 2007 the annual price growth was 9.7 per cent.

But a new report it has just released has predicted zero per cent house price growth in 2008.

It says UK property prices will stay exactly as they are now. This means in real terms that the value of homes will fall, as the cost of living continues to rise.

The building society blames this potential 'freeze' on a slowdown in the wider economy. It points out that price growth was supported in 2007 by the strength of the British economy, especially in the financial and manufacturing sectors.

But over the next 12 months it expects economic growth to slow from three to two per cent. And when that is combined with lower disposable incomes caused by the cost of petrol and other rising bills, plus high interest rates and tighter lending conditions, it's likely to slow the economy.

The Nationwide also believes there will be a fall in demand in buy to let houses, affecting UK property.

Of course, the likelihood is that any slowdown in price growth is going to be short-term only. Many experts agree that the long-term prospects for property value growth remain good. So it's only something to worry about if you are considering selling property in the next 18 months or so.

Let's take a closer look at one of the factors affecting prices - interest rates.

Since August last year, rates have gone up five times. But they have stayed the same for the last three months, and many people believe they will drop before the end of the year.

If the economy does see a slowdown as predicted, it's likely that interest rates will go down again in 2008. This is good news, as it will ease some of the financial pressures squeezing people and give them a little more disposable income. This is likely to give the economy a small boost, which may in turn be good for UK property.

The other major factor to look at for 2008 was a huge source of controversy in 2007.

Home Information Packs, or HIPs, were first introduced for four bedroomed houses on 1st August this year, and extended to three bedroomed properties on 10th September.

A survey by the Royal Institution of Chartered Surveyors in September revealed that that the number of properties needing a HIP coming onto the market continued to fall, when compared to the same month in 2006.

And 73 per cent of surveyors who responded to the survey saw a decrease in three bedroom or larger properties coming onto the market.

Experts predict that the effect of HIPs will lessen in 2008. They believe people will get used to the idea of needing to compile a document before they can put their UK property up for sale. And in time that will mean the HIPs have very little real effect on the market. Whether that will happen in 2008 or 2009 remains to be seen.
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