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Prospects For 2012

Lets start off with my own observation that I cannot recall for many years when the consensus opinion amongst so many property market pundits was uniformly negative in respect of the overall UK market outlook for 2012.

The latest UK residential market predictions underline the prevailing lack of optimism and positive sentiment for the year ahead amongst many commentators and market analysts. As we report on page 9, Knight Franks latest expectation is for a 5% drop in (nominal) average prices by the end of 2012 which would leave average nominal property values nearly 15% below their 2007 peak. Given that we have been experiencing consumer price inflation within the UK at around 5% over the last year - if you accept the governments published figures - then in real terms, average residential property values by the end of this year could be some 20% less in real terms than they were around five years ago at the peak of the 12 year (mainly) upward trend from 1995 which followed the early 90s sharp UK market downturn.

On a more positive note, the absence of an upturn in large scale residential development, alongside an increasing expectation within the money markets of the BOE bank rate being kept low for a much longer period than seemed likely just twelve months ago, plus demand for housing still increasing in many regions, are the key reasons as to why property values are not expected to plummet over the cliff.

Clearly there is some fairly negative sentiment in most regions outside of the relatively buoyant London and South east market but this does of course create a climate whereby motivated sellers are increasingly likely to be more approachable for bargaining as the year progresses and more prepared to accept the current marketplace realities if they really want or have to quickly move on.

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