Blog Post

Outlook for the Property Market in 2011

David Boyd Jan 5, 2011, 12:37 PM

David Boyd, Managing Director, PAD4U Estate and Letting Agents Manchester looks into the crystal ball:


Predicting the property market, like the weather, can be an embarrassing task.  For all the news stories of property prices over the last year, nothing much happened (prices ended slightly higher over the period).  However, like the weather, predicting that it will be the same today as it was tomorrow is right more often than not, so in this vein my prediction will be 'more of the same' in 2011.  Although prices may end up lower over the year, I don't think it will be a significant drop and will probably be best described as flat.

My reasoning for this is firstly, it appears to be the favoured strategy of the Government, or at least the Housing Minister seems comfortable with house prices staying at the same level, so policy is likely to be in line with this goal.  A drop in house prices is effectively a drop in the wealth of the nation and would rein in spending even more than is already predicted in 2011, something the Government will be keen to avoid.   It seems the Government would prefer to see earnings rise to address the imbalance in the market.

Interest Rates

Given the recent tax hikes including the recent rise in VAT, along with a cut to many benefits, I believe it's likely the Bank of England will not increase interest rates by more than 1% over the year.  Simply because doing everything at once will put too big a squeeze on household incomes.  Therefore forced sales, although they may increase in 2011, are not likely to dramatically increase, thereby keeping a lid on the supply of houses in the market.  Without forced sellers in the market, house price reductions are likely to be curtailed.

This of course is dependant on inflation which is likely to remain above the 2% target.  However, I suspect the Bank of England and the Government are reasonably content to see inflation slightly above this level and given VAT rises, petrol prices, etc., there will be plenty of excuses for above target inflation in 2011, but I don't see the bank raising interest rates above 1% within the year, unless inflation really starts to fly.

The Banks

Given the low interest rates home-owners are likely to continue to take advantage and pay down their mortgages early.  The net inflow will help to re-capitalise the banks.  Along with Government funding and extortionate charges, I predict we will see a reasonably good year for the banks.   If this is too painful to watch consider buying some shares to ease the pain!  (This does not constitute a recommendation, share prices can go up and down, you should take independent financial advice).  Mortgages are still likely to  be restricted, but we will see more mortgage products, including more buy-to-let options.  But large deposits will still be on the menu if you want even a half reasonable deal.


The lettings market is likely to be stronger in 2011 as people  concerned about investing in property (or unable to afford a large deposit) will rent.  We're likely to see higher rents because of this demand, BUT, this will depend very much on the area and demographic, in low income areas rents are likely to be held back due to affordability as the austerity measures bite.

I still hope that a sensible Housing Benefit strategy will be put in place by the Government such that landlords will be paid rent directly, as this is better for both landlord and tenant.  Also, I hope cuts will not be made to Housing Benefit in areas where the rents are already very competitive such as many areas PAD4U operates - this is sensible.   Also, Housing Benefit departments need to communicate better, especially with landlords and agents.  If these changes can be made then Housing Benefit tenants may gain greater acceptance amongst landlords, however, until such time PAD4U's recommendation is that Private tenants will be the best option in the majority of cases.

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