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Predictions For 2013 – Part 1 House Prices


By any standards 2012 really was an extraordinary year.

Whilst the UK basked in the sunshine and glory of a myriad of sporting successes, the mortgage and property markets stuttered after a promising start. We have seen the demise of interest only, lenders introducing a raft of underwriting criteria designed to reduce business, a double dip, stamp-duty clobbering properties over £2m, banking institutions lurching from one controversial episode to another with LIBOR rigging, Mexican drug cartels and a Government who have made more policy U-turns than a twisty-turny thingy.

They have at least made an effort by releasing a clutch of policy initiatives to try to help the beleaguered housing market and get lenders to lend; New Buy, First Buy and most importantly the Funding For Lending Scheme.

So whilst 2012 was always meant to be the year when everything began to improve, we can look back with a mixture of fondness and frustration, whilst 2013 promises much more.

In actual fact, our predictions last year were not bad at all and in sentiment terms at least, were pretty much bang on and showed that the harbingers’ of doom were wrong yet again.

House Prices in London and the South East

2012 Prediction: up 3%

2012: Actual up 5.5% London & 2.3% South East (depending on the index!)

2013: Up 3%

No sooner had the decorations been taken down than the doom mongers were out in force, muttering things about asteroids passing close to the Earth in February and that 2013 would finally be the year that house prices fell significantly, with even a correction down South. As usual, we just don’t buy that.

Although it is important to state that much depends on which House Price measure you look at, especially adjusting for inflation, in general last year was as expected, relatively flat. The Nationwide Property Index stated that overall in 2012 the price of a typical home declined by 1%, reversing the 1% increase recorded in 2011.

Meanwhile, figures from the Land Registry which records property prices in England and Wales, have put the average national increase at 1.1% and average prices at £161,600. They suggest house prices in London rose by 7% in the year to the end of October, far outstripping increases elsewhere, with the average London home now costing £365,000.

Whilst Halifax state that sunny Southend saw the highest property price growth with 14.8% rise in 2012, according to Hometrack prices in London grew across 70% of postcodes in 2012, up from 42% in 2011. In fact, “prices in the capital are now 10% higher than they were at the peak of the market (2007)” whilst the average time for a property in London to stay on the market for is now six weeks (6.5 weeks a year ago).

However, as Savills correctly point out, “in real terms, taking inflation into account, prices are now 24 per cent lower than in 2007. Housing transactions, meanwhile, are 45 per cent below their peak-time level.”

Meanwhile, the Royal Institution of Chartered Surveyors (RICS) noted that inquiries from would be buyers have been increasing at the end of last year which shows growing confidence.

With a proposed increase in Mortgage lending via the Funding for Lending Scheme and the fact that the Capital and the South continue to weather the economic storm better than other areas, there is no doubt that London & the South East will yet again lead the way, with foreign buyers from Europe and both the Middle and Far East still investing. We are brushing up on our French as London is fast becoming Paris 2 due to planned tax hikes on the wealthy that really are a little inSeine! (Sorry).

Whilst the scale of the North / South divide is now turning into a canyon, any brakes will be put on the housing market through affordability issues, especially where raising the required deposit is concerned and the fact that tougher mortgage criteria, though it may soften slightly, will be with us for a while yet.

However, it was interesting to see that more people believe prices will rise in 2013 than fall according to the latest Halifax Housing Market Confidence tracker and whilst commentators differ in their predictions there seems no reason to suspect we will not see similar price increases in the capital in 2013 as we did in 2012, whilst the UK as a whole will again remain broadly flat.

Taking inflation into account then, it all means much the same as we are now.

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Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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