The problem for anyone writing about the property price market is that from a national perspective, nothing really has happened over the last two years.
Apart from a few flurries of activity caused by government changes to stamp duty and new incentives, nothing much has happened to property prices.
The regional picture though is very different. During this time, some areas have recovered incredibly well while others have been in double dip for the last 12 months and show no signs of turning a corner.
The secret to any forecast for 2013 is to understand the key indicators which influence the national and regional markets, then work out what will happen to them in 2013. Since the credit crunch we've monitored how the different economic forecasters have performed and in the main we look at the Centre for Economic and Business Research. With their economic forecasts, considering other expert views and looking at what has happened during other recessions, we will give some idea of what you can expect from the property market in 2013.
When we celebrate the New Year in, many people who have been thinking about buying or selling for the last few years will probably make a decision early in the year to either stay still or to move on. We are now five years into the credit crunch. The property market is half the size it was. Buyers know what they want, what they can afford and what they will and won't spend their money on. They also can spot in today's market a seller who isn't really serious about selling and is completely unrealistic about prices.
Looking back at the last property recession and comparing it to this one, we see both the economic and property price recession is lasting longer.
To predict the future, we can look to what happened in the past
What this forecast shows - and it's not that different to other forecasters in the market - is it is going to take a lot longer for this property price to recover than from the 1990s.
The main influence over and above financial restrictions (or ease) is to look at the consumer confidence indexes to see whether people are feeling worse about committing to purchasing a property or not.
Consumer Confidence
The GfK NOP index reports that the UK Consumer Confidence Index increased by eight points during November, which considering the doom and gloom on the debt and a double dip recession is quite astonishing!
Nick Moon, Managing Director of Social Research at GfK comments:
"This is an unexpected rise in consumer confidence and comes despite uninspiring economic news recently. The improvement is especially dramatic following such a stagnant summer and represents the seventh highest increase since the Index began in 1974. The improvement in consumer confidence will be especially welcomed by retailers as the figures show that people are increasingly optimistic about how the economy will perform over the next twelve months".
As far as looking towards forecasting for property purchases in 2013, Nick Moon at GfK says:
"The direction things head in the New Year will be crucial in determining whether this is a short-term spike or the start of a long-term improvement in people's spending habits. When we saw a significant improvement like this in May 2011 the surge ebbed away over the following few months as the country returned to recession. Hopefully this spike is built on firmer foundations".
The confidence index measures what consumers feel about their finances, the economy and whether they want to commit to a major purchase or not. What is interesting is that the main reasons behind the jump in confidence appears to be people being sure of sorting their finances over the next 12 months, a lot more confidence in the economy moving forward.
Due to a renewed confidence in their personal circumstances, although the confidence to make a 'major purchase' hasn't reduced as much as their overall confidence, it is slightly higher at -26 than it was in October 2012 and this is similar to confidence levels in 2011.
So as we go into the New Year, we have a positive picture from a consumer perspective.
Unemployment Figures and Wages
As the double dip recession continues in the UK, according to the Office of National Statistics, surprisingly, the employment figures are looking extremely healthy as we head into 2013.
The whole economy earnings annual growth rate for total pay was 1.4% in the three months to April 2012, which is below inflation and confirms that consumers' disposable income is still reducing versus previous years.
The Office of National Statistics July to September data shows latest the latest unemployment rate was "7.8 per cent, down 0.2 on the previous quarter and down 0.4 on a year earlier and there were 2.51 million unemployed people, down 49,000 on the quarter and down 110,000 on a year earlier". The unemployment stats also show "The number of people unemployed for over one year was 894,000, up 12,000 on the previous quarter".
The Chamber of Commerce says "The latest job market figures are again encouraging and support our assessment that the UK economy will grow over the next year, albeit at a modest pace".
Going into 2013, the picture for consumer income and employment - at a national level - is looking very good for the first time since the credit crunch. The forecasts for disposable income (which impacts on people's ability to afford a mortgage or save for a deposit) are positive with both the Chamber of Commerce and CEBR forecasting increases. The CEBR estimate disposable income will increase from 0.7% to 1.5% with poorer families benefiting most. As a result, this is more likely to boost rents than help house purchasers. It may though mean more people currently struggling to pay their mortgage and living in fear of being repossessed may have their financial situation eased a little.
From an unemployment perspective, most forecasts still expect unemployment to rise next year and the 'good news' figures from ONS certainly don't affect the whole of the UK. The chart below shows CEBR's forecasts on future unemployment rates by region:-
The chart shows that areas such as the South East will see unemployment decline. The East of England will do well too, although unemployment is expected to be reasonably static. Although the South West, East and West Midlands will see an increase in unemployment it will be small, so unlikely to hold back the property market. Areas such as Northern Ireland, Scotland, the North East/West and Wales will see unemployment rates increasing by 1-2% and this is enough to keep local property markets static or contribute to further decline.
Housing Finance
From a finance perspective, you are either loved or hated by the lenders. This sounds quite harsh and in reality it is. Unfortunately lenders are looking after their balance sheets in the main - rather than having a consumer and economic focus.
Despite the fact that the major banks got us into this mess and despite the government's efforts, lenders are making life very difficult for buyers and this is definitely hampering the market's return. It doesn't help that the media and industry is encouraging people not to buy. Scary (and inaccurate) stories about the deposits first time buyers have to find and even nick naming them 'Generate Rent', mean young people who could save to buy a property don't bother. Schemes like shared ownership, a tenure created to help people who struggle to find a deposit and afford a home at a local level, are poorly understood.
July and August saw a drop in new mortgages compared to last year, September however was only slightly down on the same period in 2011 with October fractionally up on the previous year, suggesting a market recovering to normal after changes in stamp duties have caused 'panic buying' which in turn has skewed the stats on a monthly basis.
Overall, more mortgages have been taken out in 2012 than 2011, which is a good sign and hopefully with the government putting pressure and giving money to lenders to put out in the market place, then lending for 2013 could end up being quite competitive - meaning better deals for you.
Most of the lending growth however appears to be down to buy to let investors, according to CML "Buy to let lending continues to increase year-on-year and support total lending—the volume of loans up 14% and the amount advanced up 18%. The sector accounted for 11.4% of gross lending in the second quarter of 2012."
Auctions
The auction market tends to be a lead indicator of what happens in the general buying and selling market. EI Group tracks residential property auctions across the UK. So far this year, 2012 has seen stronger activity via the auction houses than 2011. The latest figures suggest the market faltered slightly during October being -3% down on lots sold in October 2012 versus 2011. The percentage of lots offered versus lots sold was also down slightly during October by 3% on 2011 to 70%, although there was a slight increase in the number of lots offered during the month.
The auction information does fit with the rest of the buying and selling market recovering. If lenders can sell repossessions through agents, they will as they get a better price. If prices are holding too, then getting a 'bargain' is more difficult, so auction houses tend to be a little quieter from a demand perspective.
Future 2013 Property Price Market Predictions
Looking to 2013, all of the existing data and the forecasters suggest it will be similar to 2011 and 2012. There may be a more level monthly performance which will throw up some 'headline' stats which will be inaccurate (for example there won't be the flurry of activity for First Time Buyers in March 2013).
So, most property forecasts, apart from the normal doom and gloom merchants, Capital Economics, are pretty optimistic for a slightly better year in 2013 than we've seen throughout 2011 and 2012.
This national forecast however hides what will happen in different regions. The property markets in the UK are now so tiny, from a consumer perspective, you need to find out and track what's happening in your local market.
To give you a slightly better idea, the following areas are predicted by Savills, CEBR and Capital Economics to do well in 2013:-
Most forecasters agree areas which will do well in 2013 include London and the South East and West. Areas which should hold their value include the East Midlands and the East of England. Everywhere else however is likely to see reductions in property values over their region.
