James Thomas, Head of Jones Lang LaSalle's Residential Investment team, commented: "It is important to remember that the recent green shoots of recovery are still very green. The UK economy is still in dire straits and it is unlikely that the full impact of declining employment has yet to hit the housing market. It is also plausible that the current fillip is only temporary and due to the sharp fall in interest rates, improved affordability and activity from overseas investors taking advantage of the weakness of sterling.
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"The key obstacle will be significantly higher unemployment and the implications this has for repossessions and household finances. The number of properties on the market is also likely to mount up during 2009 as people struggle to sell their homes.
"The effect of negative equity for many homeowners will be an additional burden for the market as it will restrict the number of people who are able to move home. All of these factors will put a strain on prices, activity and confidence."
The forecast predicts that London will lead the housing market recovery seeing positive house price growth in the autumn of 2010, and will experience the strongest house price recovery during 2011-2012, in part due to the boost the capital will get from hosting the Olympic Games. The Midland and Northern regions however will be slower to recover. By 2010 it is expected that average house prices will be 28% below their 2007 peak and this will encourage new demand, and first-time buyer demand in particular, with both being supported by a more stable and generous mortgage market compared to now. Overall, UK residential price growth is calculated to be 4-6% during 2011 increasing to around 9% during 2012-2013.
(CD/JM)
