Midlands set to see nominal house price growth

BNP Paribas Real Estate has warned that financial support from the government and public sector retrenchment are essential to ensure recovery in the housing market is sustained.

According to the firm’s latest Housing and the Economy report, the UK housing market rose by 0.43% in the first quarter of this year, demonstrating that the recovery has begun to flatten into a slow upward gradient that needs fostering.  

The report also highlights that the Midlands saw nominal house price growth increase by 0.30%, in Q1.

The report highlights that in Q1 2010 most regions in the UK saw modest rises in nominal house price growth.  This is in line with predictions that recovery in the long term for the housing market will be a slow process.

Matthew Walton, director of Birmingham planning at BNP Paribas Real Estate, said: “In the first quarter of 2010 house prices have risen modestly albeit slightly less strongly that was forecast.  

“The shadow of inevitable public sector cutbacks is to be seen in the regions which have experienced falls as those are the areas which are particularly dependent on public spending.”

Going forwards BNP has forecast that Q2 will see further growth of 1.61% across the UK with the total increase in nominal house price growth for 2010 reaching 3.3%.  

The Midlands is expected to see an increase of 1.08% in Q2 with house price growth for the year anticipated to reach 2.11%.

Mr Walton said it remained likely the recovery would gradually become more assured over the next two years and that the government would cut its spending steadily as recovery proceeded.

“Fears about the weakness of the housing market have tended to be overstated and despite the severity of the recession, house prices have actually fallen less from their peak than they did in the early 1990s,” he added.

“Recovery will nevertheless probably continue to follow the current irregular pattern, but assuming on the one hand that firm monetary support and on the other public sector retrenchment intensifies over a five year period, then there is no reason why the underlying upward trend should not continue.”

BNP said the coalition may not pose too many problems for the long term health of the sector.

“A coalition Government may not be as drastic a result for the housing market or the housing sector as a whole. Both the Conservative and Liberal Democrat manifestos included some good ideas to support housing delivery and my hope is that the Government has the wisdom to use the best and discard the worst of these ideas,” said Mr Walton.  

The firm is making six recommendations to the new Housing Minster including:  instilling  confidence in the market again; reutilising the 765,000 empty houses in the UK; inspiring housing trusts to be more enterprising; incentivising new development and investment; setting in place long-term mortgage assistance and re-energising the planning system.