Housing market will see growth in 2005

“The market in 2004 has pretty much followed our predictions of last year, with house price growth slowing significantly in the last quarter. The series of interest rate rises by the Bank of England had a stabilising effect on the market, which is probably healthy in the long term. However, with employment levels still at very healthy levels and affordability still relatively good, I do not foresee any major corrections or price reductions. In addition, the supply/demand equation is still in favour of new homebuilders, which also bodes well for the industry. I believe we will witness annual growth nationally of between 2 and 5%. With most areas of the South being at the lower end of this scale, however certain areas of the North will exceed 5% growth.

“At Smartnewhomes.com we receive real-time feedback on the activity in the new homes market and our analysis indicates that the likely hotspots in 2005 will be in the North East, Wales (particularly North Wales) and the East Midlands. Some rural areas such as Shropshire will also be very popular and the North and South West will remain strong outside of the city centres that have already benefited from the strongest growth and investor activity. Overall investor activity will slow markedly as yields become more difficult to achieve, however serious investors will still be present as rental demand is still there.

“The result of these trends will be a more competitive market for house builders where achieving sales targets will be more difficult than in the last two years. I would therefore expect to see greater use of incentives and added value services, which will be good news for homebuyers and in particular the struggling first time buyers.”