London will lead the way out of market despair

It may only be a spring bounce but there seems to be some positive news around at the moment concerning the housing market.

Although Nationwide’s optimistic report that house prices rose by 0.9% in March was quickly cancelled out by Halifax’s assertion that prices fell 1.9% in the same month, estate agents say that activity and interest from potential buyers is increasing.

They may be cash buyers rather than borrowers who have been able to obtain big mortgages from reluctant lenders but there’s a growing feeling that property bargains are there for the taking.

Of course, I’m not for one moment suggesting that this is the beginning of a sustained recovery in the market, nor will I use the term ‘green shoots’ that everyone about at times like this.

But there are some signs that confidence is slowly returning.

Nowhere is this more succinctly summed up than in Savills’ research on prime residential markets in London and the rest of the UK, which is out this month.

The estate agency was one of the first market commentators to speak frankly about the housing downturn and forecast that house prices had around 25% to fall from their peak in 2007. That forecast has since been tweaked to a 30% decline.

So although it is an estate agent it cannot be accused of simply talking up the market.

The good news contained in the research is not just the usual optimism displayed by estate agents and is worth a read.

The report states that the rate at which capital values in central London are falling slowed significantly in Q1 2009, suggesting that the worst of the price decline could be over.

Further falls are expected throughout this year but at least the freefall we have experienced seems to be ending.

So we have not reached the bottom of the market but buyer registrations in prime London markets have doubled in the past quarter, with deals agreed rising to levels not seen since March 2008.

Deals are settling at price levels some 25% to 30% off their peak, with a shortage of stock beginning to become apparent.

The report shows that falls of this magnitude are sufficient to motivate domestic buyers driven by need.

There are still problems. The tough outlook for the global economy and widespread job losses leads Savills to delay calling the timing of a recovery.

But it stands by its forecast of total price falls.

Values will take a while to recover, with prime central London prices set to pick up towards the end of next year, followed by the regions in 2011/12.

We are not out of the woods yet as transaction volumes remain low and turnover is significantly curtailed but at least the situation is less gloomy than it was six months ago, providing a glimmer of hope which will be welcomed by many.