What Will Happen To Property Prices In 2008?
In the world of property, this is one of the most hotly debated topics right now: just what is likely to happen with property prices next year. 2007 has been an interesting year with several significant developments that have affected the market in various ways. The biggest was the introduction of Home Information Packs, more commonly known as Hips. Research ten years ago revealed that more than a quarter of all house sales fell apart before the exchange of contracts, leaving an obvious gap for something to better regulate the market. That was the foundation of Hips, and they were formally announced in the Queen's speech in November 2003.You have to get a pack put together when selling your house in England or Wales. It must contain a number of documents that have to be no more than three months old.
They include an energy performance certificate, statement of sale, title documents for the property and local authority searches. There are other requirements if the property is leasehold.
So how have Hips affected property prices? After all the planning, they actually arrived at the beginning of August for houses with four bedrooms or more. Then on the 10th September they were extended to three bedroomed homes, and finally rolled out to the remaining one and two bedroomed properties on 14th December.
The effect they had was to add expense to the process of putting your property on the market. And some believe that reduced the supply of houses to the market a little, as speculative sellers were less likely to instruct an estate agent.
Another key factor that affected property prices in 2007 was interest rates. Since August 2006, rates had risen five times. And that pushed up typical mortgage payments.
The effect many people believe that had on the market was that sellers were more likely to stay put than move. Even if they could get a good property price in a sale, if they were struggling to meet mortgage payments, there would be little incentive to move (other than downsizing).
Interest rates went down in December which is good news for buyers and sellers. As inflation holds steady at just over 2 per cent, it's possible there will be more cuts to come in the New Year.
The final issue was a slowdown in price growth throughout the year, after nearly ten years of what has looked like continuous growth. Reports vary, but some banks and building societies have acknowledged a slight fall in prices in the last month or so.
So those were the key issues of 2007. But what trends will we see with property prices in 2008?
On one hand you can look at the economics of the market and see that house price growth is pretty certain. There is an accepted shortage of housing, and this won't get better if speculative sellers don't list their homes.
Market rules say where there is demand and a shortage of supply, property prices will rise. On the other hand, we may just be in for a period of price correction after a decade of growth. The market will grow, but only in line with inflation, meaning there is no real growth. What is certain is that the future of property prices for the year is going to be in the hands of the Bank of England. Further drops in interest rates are likely to have a positive effect on house sales, which in turn will give prices a boost.
If the economy cools off as predicted in 2008, your house price may be in for a year of growth after all.
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