Estate Agents Savills who had an annual turnover of £314.10 million in 2008 have predicted that house prices will rise by 27% over the next five years.
As has been reported in the press, buyers are outnumbering sellers five to one which may be creating a mini bubble after the deflation of the major bubble that reached its peak in 2007.
Housing economists at Savills have predicted that house prices may fall again next year but will recover to overtake the previous peak of 2007 raising the price of the average house to £197,917.
I am not saying that Savills have not priced in future interest rate increases but I question the general consensus amongst many economists that interest rates must stay low for years and being an estate agency there is always the potential that they may tend to paint a rosier than reality picture.
Do they have a vested interest for house prices to rise? Of course they do, but they also have a vested interest in high turnover of properties. So that may cancel out any incentive to paint an unrealistically optimistic picture of the housing market.
The other problem that many estate agents are facing across the country is that the demand for housing is not being met by the ability (particularly from first time buyers) of purchasers to raise the funds and are still struggling to make a profit in general.
I personally think it is a myth that buyers outnumber sellers. I believe that affordable property is out-numbered by buyers aboloty to purchase due to overpricing of property without the credit availability for the average worker to sustain current property valuations.
Gargantuan estate agents like Savills, who have a large exposure to the London property market which is dependent on the city’s performance, may well be seeing a sense of stability in achieving asking price in their sales but this is most certainly not reflected in the rest of the country.
So this leads me to the conclusion that this temporary mini-bubble is being driven by low interest rates and from my research and communication with estate agents there is a policy of overpricing by agents to achieve a somewhere near acceptable sale price for the sellers creating an illusion of a reasonable market price for the property for sale.
Even though there is competition by lenders for market share, the lending requirements will be altered with every increase in interest rates. As will the individual lenders own rates, so I would still say be very cautious about entering the property market because the economic foundation for this mini-bubble may be a false one.
------ Other articles of interest ------
No signs of stability in house prices
Lending accountability and reckless loans
Why are house prices defying gravity?
So you think house prices are on their way back up?
Tags: Estate Agents, First time buyers, House price increases, Housing Crash, housing market, Property Market, Savills, The news
[...] Savills predict 27% increase in house prices over five years … [...]
Doesn’t much matter – the price is already way out of reach for people on normal incomes.