No House Price Growth For The Next Decade?

The Telegraph reported yesterday on some research by Savills that suggests house prices will remain stagnant over the next decade. The Savills report raised points such as; the house price bubble created by cheap credit over the last ten years; the huge amount of flats that remain empty; the inability of first-time buyers to get mortgages – all of which will put a halt on housing market recovery for a long time to come.

The figure I found most interesting was this – in 2000 the deposit needed by a first-time buyer was around 20% of income. Now, it’s more like 100% of income. That’s a huge leap, and one that puts property out of reach of a lot of people (myself included).

The only sector of the market that will see a recovery is that fuelled by equity-rich backers. Buy-to-let property for example is expected to see a boost, as those like myself are forced into renting, and cash-rich buyers snap up the properties we can’t afford.

Another interesting point is the reference the report makes to the new city-centre flats that seemed like such a good idea at the time. The Telegraph says that old housing has risen in value far more than new housing – probably because new housing has a reputation of being small, poorly-built and poorly-located for amenities (think of all the new flats in Leeds and then think how many supermarkets there are in the centre of town…just one?).

These new flats may be snapped up cheaply by investors, but will anyone want to live in them? Even if cash-rich buyers are in the best position to take advantage of the next decade, I think they need to invest wisely to make sure their properties will give a return on investment. I’d feel a little bit smug if, ten years from now, the flats had become slums and were cleared to make way for proper housing. Arguably this should have been done in the first place.

As for first-time buyers, well, ten years of house price stagnation may give us long enough to save up a deposit