The market

There is little prospect of a happy new year for anyone relying on the residential development market. Forecasts for 2008 generally make gloomy reading. The Council of Mortgage Lenders and Hometrack are forecasting house price growth of 1% for next year, Knight Frank and Savills optimistically go for 3%, but that is leavened by Capital Economics’ forecast of a 3% plunge.

When headline numbers are broken down into regions the picture gets more telling (see map). According to Hometrack, house price falls are on the cards for Wales and northern regions, potentially bad news for those in the difficult business of housing market renewal. That is perhaps not surprising given the fragile nature of those markets, but even the housing growth areas are not all in areas of greatest house price growth.

Milton Keynes South Midlands growth area falls in the West Midlands area which is expected to see house price inflation of 1-1.5% next year. The London/Stansted/Cambridge/Peterborough growth area is the eastern region where Hometrack expects zero price growth.

Only Ashford and the Thames Gateway are expected to register top levels of price growth, being securely in the South-east. Savills’ regional forecasts are generally more bullish, but only just.

The potential repercussions of market slowdown for the government’s housebuilding targets are already the subject of much speculation. Several top housebuilders have already said they will build fewer homes next year. Richard Donnell, head of research at Hometrack, says: “It is hard to see how you can improve output in a time of a slower market. There are some growth areas where, if we did double housebuilding, it would depress house prices.”