Supply will force price rises

Competition for houses means rise in prices The latest residential report from Savills’ research department (www.savills.co.uk/research) suggests other demand-related factors are savers’ disillusionment with banks, bonds and equities. Despite price falls, the report argues that 'bricks and mortar could look like a safer asset to hold.' Prime property at the top-end of the market is likely to see any upturn first and there are emerging signs that the housing market is reaching the end of its free-fall period, the bulletin claims. Another key to recovery is the investment sector, first in prime central London and some favoured locations outside the capital. 'London and prominent south east towns and university cities will lead the recovery again, as in 1992.' Savills points out that these investors – many of them from outside the UK – are attracted by better rental yields that have moved up from 4.6% to 6%. The housing market recovery research also believes a 'gradual shift from mortgaged owner-occupation towards private renting was already being experienced even before the credit crunch.' This change in the structure of the market will mean continued private renting regardless of whether values bounce back quickly. Savills predicts stocks will become low over the upcoming months and we perhaps will begin to see “a shift from the low demand/high supply market of 2008 to one where transaction levels remain low, but the supply and demand for property is evenly balanced.” The study sums up that this will put us somewhere between the latter stages of house price falls and closer to the first of the stages in the recovery process. * Country houses for sale