Housing: Property market will bounce back in 2010, report predicts

Housing: Property market will bounce back in 2010, report predicts

The credit crunch will soon become a distant memory, according to the first authoritative report which forecasts a bounce back in house prices.

But don't jump for joy yet. Coming a day after Halifax revealed a record drop in house prices, the report provides little comfort for recent homebuyers now sliding into negative equity. It predicts that prices will slump a further 15% in 2009, with this week's stamp duty cuts failing to halt the decline.

But from 2010 the property market will stage a swift recovery, rising 20% across the UK by 2012, then exploding again into another property boom. Average house prices in the south-east, it predicts, will be heading towards £500,000 by 2020, with a forecast gain of 79% over the period.

Prepared by Yolande Barnes of Savills, who is credited with identifying both the recovery from the early 1990s crash and the subsequent boom, it predicts that London, the south-east and Scotland will emerge first from the downturn, with prices starting to recover in 2010, followed by East Anglia and the Midlands. Only the north-east and Northern Ireland will fail to share in the boom, says Savills, which predicts that prices in both regions will not recover their 2007 levels until 2016.

In the last house price crash it took more than eight years for average prices to regain their 1989 peak levels, and yesterday few other economists were willing to predict the green shoots of recovery. At Halifax, chief economist.....continued below

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Martin Ellis said: "It's difficult to call the bottom ... the consensus view is that prices will fall 20% over 2008 and 2009, which will bring values back to the long-term average."

Savills said that a mix of easier mortgage lending, a more benign approach to repossessions and chronic supply shortages - new housing starts fell by 27% in England in the first half of 2008 - will make the recovery swifter than in the early 1990s. "For those brave enough to anticipate the upturn ... the rewards may be substantial," it said.

But for many recent buyers sinking into arrears brought on by rising mortgage, fuel and food costs, the prospect of a market recovery by 2010 will come too late.

Yesterday Britain's biggest estate agency, Spicer Haart, put a two-bed town house in Middlesbrough into auction at a guide price of £15,000 as it launched a new platform for selling repossessed homes, called mustbesold.com. Auctioneers report that cash-rich buyers have returned to auction rooms now that competition from amateur landlords armed with cheap buy-to-let finance has faded away.

Savills predicts that as the property market bottoms out it will become increasingly polarised between the equity rich, able to snap up bargains, and those in negative equity, unable to participate and left further behind when prices take off again. It said a "radical review" of housing policy is required if the government's target of 3 million new homes by 2020 is to come close to being achieved.

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