Predicting The Best Places To Invest In Residential Property

The property market in the UK has arguably been the sector worst affected by the recession of the last three years. With lenders still acting with caution and their tighter grip on lending criteria, property prices are at their lowest recorded levels. This has also, by no means, been helped by the extremely low base rate of 0.5 per cent, which certainly shows no signs of shifting any time soon. According to the 2010 Property Price Index released by the Land Registry, the lowest dip in property prices occurred in October last year. This is undoubtedly due to the increase in consumers looking to sell up at that time before the Christmas period. This clearly had an adverse affect on the supply/demand ratio. November showed little signs of improvement either as property sellers looked particular desperate to offload by offering their property at an average 3.2 per cent lower price.

In spite of these cuts and drops in asking prices, house prices on the whole have been slowly creeping back up from the rock bottom reached in 2007. Don't go jumping for joy yet as there's no sign of prices reaching the pre-recession heights, the Third Quarter Report from Nationwide showed any rebound in prices significantly weakened in the second half of 2010, which in turn does not inspire confidence for the first quarter of 2011. What we plan to do in this article is take a look and analyse the largest price increases in Britain and see if they show any trends or signs for the market in 2011.

It should come as no surprise to see London top of list of areas for property price increases in 2010, the average price being a high £341,105 in October 2010, which is a 7.6% increase from October 2009's £316,943. It's not just fuelled by millionaire pads in Mayfair in Chelsea, all 33 boroughs of the capital saw prices rise, some faster than others of course; Redbridge (up 10.2%), Merton (8.9%) and Camden (8.6%) all examples of healthy growth outside the popular/rich areas of London. The fuel in the London property market seems to be foreign buyers and investors seeing London property as a secure investment, especially with the turbulent Eurozone crisis rumbling on.

November this last year, specifically, saw the average price in London reach a record high of £383,243. According to major property website LSL Property Services/Acadametrics, this was the fourth month in a row in which London has reached a new peak price. However, the website also claims, that despite these impressive statistics, there has actually been a decreased acceleration of price growth in London over the last 3 months.

One of the main reasons for this slow decline in the property market in central London is, ironically, the improvement of the city's transportation facilities. With continuous upgrades being made to the underground system and with the Crossrail service currently being under construction, travelling to and from the city has become much more efficient and relatively hassle free. As a result, commuters are settling down in the quieter towns and cities surrounding the capital and instead just commuting to work.

Furthermore, London isn't the only city in the UK to see property price increases over the period between October 2009 and October 2010. Eight regions in England and Wales also saw increases, one of the largest being in the Welsh town of Merthyr Tydfil of +10.2%. Surprisingly, the area of Darlington saw the best monthly growth between September and October 2010 in the whole of the UK, with a rise of 3.1%. Nonetheless, as you would expect in comparison to London, the average regional statistics for the North West weren't quite as impressive. The North West actually experienced a slight decrease in property prices from an average £118,838 in October 2009 to a slightly lower £117,868 in October 2010.

While the North and South have always been divided when it comes to culture, accents and banter, this latest contributor of the property market divide marks more interesting debates. Especially when more recent figures suggest that the north and south property markets are, in actual fact, parallel with one another. For example, the driver of the UK property market as a whole is in fact Durham according to the Land Registry. Country Durham saw an increase in property sales by a massive 11.6 per cent and Northumberland saw an average increase in sales by 25.9 per cent in 2010 alone. You couldn't get much more northern could you really?

Returning back to property price increases though, and considering the UK as a whole, the largest rise in the average property price increase was seen in October 2007. However, these price increases are largely determined by the relative demand for different types of property. For example, the highest demand over the last 12 months was seen in detached properties; hence they saw price increases of around 4.8%. Next came semi-detached properties with saw a rise of 3.3% and lastly terraced houses which saw an average property price increase of 2.5%.

So what can we expect for the 2011 market? All the figures point to growth the length and breadth of Britain, all areas and all sectors which points to the fact that a recovery is underway, although it's a slow recovery. We see evidence of house prices beginning to slow again as time moves on, nevertheless certain experts and think tanks are still predicting growth over the New Year and into the first quarter of 2011. Foremost among them being the Centre for Economics and Business Research (CEBR), who predict a 0.8% rise in the UK as a whole and 1.2% within London, not the greatest growth figures but fears of a double dip recession have receded with such predictions floating about, if they turn out to be true, it's good news for us all.

So what can we take from all these numbers? Well, the first thing is to not assume that London is the best place to make a sound investment in property - with growth being experienced across a majority of regions in the country, you could be just as well grabbing a bargain in the Northern regions. Similarly, with the massive improvements in commuter links to the capital, it is likely that more and more people will look for property outside of the capital, in quieter, more suburban areas. The main thing to take from all this is to not despair at all the negative headlines out there about the property market at the moment, it may not be quite as bad as it is made out to be!


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Tim writes for Just Commercial Mortgages, the UK's top site for the latest commercail mortgage rates and commercial property finance news.