HOUSE PRICE PREDICTION FOR 2010

As someone famously once said “A year is a long time in property”. Few would have predicted the turmoil of the last 12 months and those who did, had been suggesting it was on the cards for the previous ten years as well. The law of averages meant eventually they would be right!

Industry predictions for 2010 vary wildly. Nationwide head the league for pessimism in expecting the now infamous 'W' type recession or 'Double Dip' (as it has thoughtfully been dumbed down to for those of us unable to fathom what a 'W' is shaped like). Their belief is that the market will take a second substantial drop in prices, maybe up to 10%. At the opposite end of the spectrum, there are analysts who expect some kind of mini boom again and prices to rise 10% next year.

The laws of supply and demand dictate that when there is a lack of availability for a product that seemingly plenty of people want, then the price goes up. In the case of UK properties, it isn't that there is a bounty of buyers, but a ridiculously small number of homes for sale. ‘Double Dip’ theorists would assume the volumes of marketed properties are going to increase substantially, thus outweighing the demand and dropping prices again, where as mini boomers believers expect little change in the number of sellers.

The stats quoted above give me about a 20% window of opportunity to claim to be more knowledgeable than these experts. Here are the 3 factors that I believe will dictate the climate.

1. Government Policy
There is an election in 2010 and that result will have a marked impact on the property market. The good news is that we have the freedom to vote and influence the outcome. The bad news is that there is such public apathy with politics generally I can only imagine a ridiculously low turnout at the polling stations. The Conservatives have said they’ll ban HIPs, which I have to confess to being in favour of. A party making a coherent plan for the complete overhaul of Stamp Duty may be likely to attract my attention.

2. Unemployment
A recent survey concluded the public's number one fear in regard to property purchasing is unemployment. With nobody predicting this to fall any time soon, at least not with any significance, this has to remain a concern.

3. Lending
The banks appear to be collectively forming a strategy to alienate themselves from as many people as they possibly can. Guess what? It’s working! Even without the breathtaking ignorance of allowing the bonus culture to reconvene less than a year after the turmoil has started to dissipate, the strictness of their lending policies has created a totally false market. By this I mean an unusually small amount of property is coming on the market. This is the main reason the predictions for 2010 vary so wildly that nobody is quite sure how false the false market is. Let's be clear; banks are not in trouble because of mortgage lending in the UK. In the third world maybe, in the US definitely, but the UK hardly had a ripple of bad debt by comparison. Errors of judgement abroad has forced the UK banks to make the required deposits on loans over 2 and 3 times higher than before. In doing so they have knocked out a serious proportion of the potential homebuyers who simply can't access this extra cash to buy a house. The banks are starting to compete again for lending, so this should start to ease the problem.

Whilst unemployment, lending criteria and government policies remain as they are or show little change, I don't see how the market can suddenly change. Not that I necessarily think that’s a bad thing. I certainly don't advocate another boom and I'm sure all business owners would be much happier with a healthy balance than the roller coaster ride of the last few years. I predict approximately a 5% rise in prices in 2010. Watch this space.

Many industry experts have suggested extra help for First Time Buyers as a way to kickstart the market, but I disagree entirely. It may have an impact but I genuinely believe that the discipline of saving for a decent deposit on a new home and the security that size of deposit gives them going forward is a very healthy step for young people. Even if parents decide to subsidise that deposit, at least the parents will be conscious of ensuring their offspring can manage such a debt.

There is room for improvement in the market without creating pandemonium. I've highlighted two factors I think would achieve this; by promptly changing the completely inappropriate Stamp Duty system and by lending criteria being more logically considered as opposed to a blanket view that is currently in place. These measures would release the pressure valve without flooding the market and swamping the buyers. It would create greater volumes of transactions, which would be good for everyone involved in the property market.

My recommendation to the banks would be to make the deposit criteria for existing borrowers, ones with a proven track record of payment, a whole lot easier. At present they can't move up because they’ve lost equity on their current home and now the banks want a larger deposit on the next one. If that person / couple have been making regular full payments on a previous mortgage surely they present a better risk than those mortgaging for the very first time? Why lend them 95% three years ago, follow them through three years of good credit and then only offer to lend 80%? Surely a proven track record has to be the sort of lending they’d want!

On a very different note, I'm writing this article the day after Watford, and from what I can gather much of the UK, ground to a halt because it snowed. My own horror story started with an essential 50 mile round trip I started at 4pm. Six and a half hours later I managed to walk over my threshold having all but lost the will to live.

However, not wanting to finish on a negative, at least the chaos has come at a time of year when most of us do get a bit of a break anyway. My daughter loves the chance to play with snow. I've seen neighbours helping each other push cars up hills and clear drives at a time when I think we’d all thought the notion of community spirit had gone. We may well wake up on Christmas Day to the picture postcard winter's scene.

Season’s greetings to you all!