Predicting property prices

Property-price watching has become a favourite pastime in recent years for UK home-owners – as well as those who haven’t quite reached the first rung of the ladder yet, of course.

As a result, house price indices (showing historical prices) from lenders such as Nationwide, or from Government sources, such as the Department of Communities and Local Government, make major headlines on a regular basis these days.

After roughly a decade of impressive house price performance, values seem to be going in the opposite direction (even if only slightly) and the buoyancy of the market is at long last being called into question. But is there really any reason to panic or even worry about the value of your own property at this point in time?

As every good investor knows, what goes up must come down. Even if you see your house as a home, rather than an investment, it’s likely that you’ll want to sell at some point, or perhaps even remortgage to release some equity for an extension or some home improvements. In this sort of situation, knowing its worth will be priceless.

Your Mortgage produces a quarterly guide that looks at house price predictions over the next five years for England (see the New Year issue of Your Mortgage, which is on sale now, for a free copy). The guide provides a regional breakdown of house price values across the country, using sources such as Land Registry, HM Treasury and the Office for National Statistics.
Falling prices
The latest figures predict a downturn in 2008 for many English regions. In the West Midlands, for example, house prices could fall by as much as 3.5%, with Birmingham forecast to see a 3.7% drop. On the other hand, some regions don’t have such bad news in store. Unsurprisingly, Inner London is predicted to perform the best in 2008 with an increase of 4.6%, closely followed by Greater London (4.3%).

But for those taking a long-term view, the future is still bright. According to our figures, the majority of regions in England will see a recovery in house prices by 2009 and all regions should see improvements by 2012. While the likes of Worcestershire and Shropshire should see increases of 2% and 2.9% respectively by 2012, the Olympic-effect looks set to boost prices in East London by as much as 29% (Haringey) or even 30.5% (Hackney).

Looking ahead

House prices in London are already quite high in comparison to the rest of the country. So for anyone that may have missed out on the Olympic boom, it could be worth checking out the predictions for other areas. For example, the average house price in Yorkshire and Humberside is currently £154,695, according to Nationwide. If the latest predictions from Your Mortgage are correct, house prices in this area could grow by up to 11.5% by 2012 – giving the average homeowner in this region a possible £17,790 boost to the value of their home.

But just because your region is expected to perform well, that’s not to say your own property will necessarily keep up or, conversely, your particular area could outperform your region. To narrow the margin of error a little more, yourmortgage.co.uk provides a postcode sector level prediction tool, which should give you a more precise prediction.

Pauline McCallion is editor of Your Mortgage and Your Money magazine

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