Simon Ward, SKY Money, Tuesday January 15, 2008
Homeowners may be worried about house prices now - but what's likely to happen in five years time? We look at a new report that predicts the future of the property market
Most experts are predicting a rocky ride for house prices this year. The latest in a long line of gloomy forecasts has come from think tank Policy Exchange, which claims UK property prices are the most over-inflated in the world and that a decline is inevitable.
The latest house price reports would appear to back this view up. Mortgage giant Halifax this month found that the annual rate of property price growth had halved compared to just three months earlier.
Property prices traditionally go through peaks and troughs. The crash of the 1990s was followed by a period of massive growth. The value of the UK's private housing stock has risen by a staggering 208% over the past ten years, according to another Halifax report.
So where can we expect house prices to be in another five years? Will the current slump continue or will prices bounce back? How much will your home be worth in 2012?
Well, Your Mortgage magazine has commissioned a company called Prophit to try and predict the answers to those questions. Using a variety of indicators - including interest rate forecasts and inflation predictions - here's what they've forecast for house prices in England over the next five years.
The big picture
If you're thinking about selling your home, you might want to wait a while. The Your Mortgage report supports many experts' view that house prices are going to dip over the next couple of years. While these price falls are going to be more severe in some areas than others, property values are predicted to pick up again from 2010. The research suggests that by 2012 many regions will be enjoying double-digit house price growth.
Winners
Perhaps unsurprisingly, prices in London are predicted to see the largest rate of growth over the next five years. In Greater London, prices are forecast to rise by 29.4%, with growth of 6% alone in 2010. Prices in upmarket boroughs such as Kensington & Chelsea and Richmond-upon-Thames are predicted to see the biggest gains, rising by a total of 35% and 32.2% respectively.
The survey predicts that no London boroughs will see prices fall over the coming five years - and by the time the Olympics begin, homeowners in the capital will have made a tidy profit.
Elsewhere, prices in Surrey will see growth of 20.8% while property values across the South East as a whole are predicted to rise by nearly 20%. There will also be big gains for Buckinghamshire (19.6%), West Sussex (19.1%), Oxfordshire (18.9%), Hampshire (18.7%), Kent (18.7%) and East Sussex (18.3%).
The East of England will also see prices rise by a total of 16%, while the North East's resurgence will continue with gains in excess of 14%. All these areas are predicted to see slow growth over the next two years and then bigger gains from 2010 to 2012.
Losers
The West Midlands is the area to avoid in the next five years, if these figures are proved to be correct. Prices in the West Midlands Metropolitan area - which includes Birmingham and Coventry - are predicted to rise by just 1.8% in the next five years. The news isn't much better for the neighbouring counties of Worcestershire (up by 2%), Warwickshire (2.1%), Staffordshire (2.4%) and Shropshire (2.9%).
Homeowners in these areas are set to suffer prices falls as high as 3.5% this year, according to the new research. Prices will recover in 2010, but even these gains will only be in the region of 2%.
The East Midlands region won't suffer quite so badly but Nottinghamshire, Leicestershire, Northamptonshire, Lincolnshire and Derbyshire won't see any double-digit growth in the next five years. Instead, price growth in these areas will be hovering around the 6% mark by 2012.
