Is 2011 going to be the year that the green shoots start turning into something more substantial or when the light at the end of the tunnel turns out to be a train heading towards us?
I thought that the best way of dealing with my predictions for 2011 was to start with a review of the property market for 2010. The start of 2010 was anticipated to carry on a continuing upward trajectory just as 2009 had finished. This was slightly slowed down by the bad weather at the tail end of December 2009 and the start of January 2010, causing a slight dip in transactions in February. In general, between February and September, houses coming on to the market exceeded expectations and were on average about 20% higher than 2009. I would refer you to my blog of 10 November 2010 which included the graph from the Registers of Scotland showing the volume of residential sales over a number of years. In September, as you will see from the graph, the number of transactions dipped below 2009 levels. The figures for Dundee and Angus were slightly stronger and kept above line figures until November. The early snow at the end of November certainly curtailed market activity and this, linked with a number of negative press articles and a general feeling of economic uncertainty, caused the figures to dip further with market activity for December being about 20% less than December 2009. My feeling is that house prices did not show any remarkable drop and were relatively stable for 2010, however the caveat to this being that if you bought in 2007 the market has not yet reached those levels and also sellers in general are becoming more realistic regarding an achievable price for the property.
Now onto 2011.
My feeling is that with a lingering Christmas hangover, continuing economic uncertainty and the Government debt reduction plans starting to have an impact – including the VAT increase, the rise in fuel costs, the National Insurance increase and the public sector spending cuts – that the first three months of 2011 will see property activity levels below those of 2010, coming in at around 2009 levels. I would anticipate a slight pick-up in the second quarter with 2010 levels being reached by the end of June. Thereafter I would be expecting a strong last six months with 2011 ending on an upbeat note. Again, I would anticipate prices remaining relatively stable during the course of 2011.
Issues to look out for range from simply the weather to the sovereign debt crisis which shows the impact of globalisation when the Scottish housing market can be affected by potential problems in Portugal, Greece, Spain and Ireland. There is the question of the banks’ lending policies – if there is not significant support given by the banks to the property market then recovery will stall further.
My wishes for 2011:-
- Home Reports being abolished or at least temporarily suspended
- Tax breaks for property investors – through pension legislation
- Government assistance for first time buyers
- Tax breaks for the construction industry
- Government pressure put on lenders to increase mortgage lending and lending to small businesses
I have long been of the view that a strong housing market is essential to the UK economy and I would urge both Scottish and UK Governments to take all the steps possible to bolster the housing market for 2011.
Finally, I take this opportunity to wish all the readers of this blog a happy and prosperous New Year.
Head of Property Services
T: 01382 229222
- The Threats to the Market in 2011 (observer.com)