By Ernest Rauthschild
The last decade has led to a polarisation of rich and poor, as well as a dramatic shift in house building from detached houses to flats, research by Savills for The Daily Telegraph shows.
These factors risk being exacerbated by a "relative sobriety" in mortgage lending as banks recover from the financial crisis and the mortgage market faces stricter regulation, such as the abolition of self-certified mortgages.
House prices end decade 117pc higher According to the upmarket estate agent, while inflation-adjusted house prices grew 68pc in the Noughties, prices will grow just 40pc in the next decade. This compares with -14pc in the 1990s, 43pc in the 1980s and 49pc in the 1970s.
"The Noughties will be remembered as a decade of polarisation – its legacy a residential market split, possibly irrevocable, between the equity haves and have-nots," Lucian Cook, director, Savills residential research, said.
The complications left by the last decade have emerged from the largest growth in house prices on record.
Pembrokeshire in Wales enjoyed the largest gain of 212pc during the Noughties, with the South East surprisingly lagging behind. In London, only Newham, one of the capital's poorest areas, featured in the top 10 risers.
The geographical variations were primarily for two reasons: first, some regions were playing catch-up on price rises in the South East during the late 1990s, and, second, the rise of the second-home buyers drove price growth in costal and popular holiday destinations.
Overall, the gains in the market were driven by low interest rates and strong wage growth up to 2005, and the increasing availability of mortgages in the run-up to 2007.
However, the substantial growth and impact of the financial crisis on mortgage lending, means that accessibility to home-ownership has been eroded.
Savills data shows that the deposit for a first-time buyer has risen from roughly 20pc of income in 2000 to almost 100pc by the end of 2009 – putting the equity-rich and prime regions in position to lead the market ahead of areas with high unemployment.
"A highly localised market recovery is now inevitable with a ripple effect rolling out from the prime markets of London and the South East," said Mr Cook.
A further burden is the masses of flats left by the Noughties. Changes in planning rules, the rise of buy-to-let, and the search for swifter returns from housebuilders mean the last 10 years were characterised by a rise in the number of flats being built at the expense of detached and semi-detached homes.
"The buy-to-let boom was driven by the bubble in easy and cheap credit," Liam Bailey of Knight Frank says. "It unfortunately led to the rise of the speculator led urban development and all those tiny one and two bedroom flats."
From 2000 to 2008 the proportion of newly-built homes that were flats rose from just over 15pc to almost 50pc. In contrast, detached housing fell from 45pc to less than 15pc.
This trend increased the supply of new homes and meant that over the last 10 years, old houses grew in value more than new houses.
For the new decade, the consequences could be more severe, with new buy-to-let mortgages stamped out by lenders following financial crisis and therefore a key source of demand removed. Mr Cook believes this could lead to a rise in the private rental sector as cash-rich institutions snap up the flats in bulk and potential homebuyers are forced to consider renting because of problems securing finance.
He added: "There is likely to be an increasing investment market driven by cash rich portfolio investors who diversify into build to let, shared ownership and niche residential sectors, the first wave of which has been student housing."
The last decade has led to a polarisation of rich and poor, as well as a dramatic shift in house building from detached houses to flats, research by Savills for The Daily Telegraph shows. These factors risk being exacerbated by a "relative sobriety" in mortgage lending as banks recover from the financial crisis and the mortgage market faces stricter regulation, such as the abolition of self-certified mortgages.
House prices end decade 117pc higher According to the upmarket estate agent, while inflation-adjusted house prices grew 68pc in the Noughties, prices will grow just 40pc in the next decade. This compares with -14pc in the 1990s, 43pc in the 1980s and 49pc in the 1970s.
"The Noughties will be remembered as a decade of polarisation – its legacy a residential market split, possibly irrevocable, between the equity haves and have-nots," Lucian Cook, director, Savills residential research, said. The complications left by the last decade have emerged from the largest growth in house prices on record.
Pembrokeshire in Wales enjoyed the largest gain of 212pc during the Noughties, with the South East surprisingly lagging behind. In London, only Newham, one of the capital's poorest areas, featured in the top 10 risers.
The geographical variations were primarily for two reasons: first, some regions were playing catch-up on price rises in the South East during the late 1990s, and, second, the rise of the second-home buyers drove price growth in costal and popular holiday destinations.
Overall, the gains in the market were driven by low interest rates and strong wage growth up to 2005, and the increasing availability of mortgages in the run-up to 2007.
However, the substantial growth and impact of the financial crisis on mortgage lending, means that accessibility to home-ownership has been eroded.
Savills data shows that the deposit for a first-time buyer has risen from roughly 20pc of income in 2000 to almost 100pc by the end of 2009 – putting the equity-rich and prime regions in position to lead the market ahead of areas with high unemployment.
"A highly localised market recovery is now inevitable with a ripple effect rolling out from the prime markets of London and the South East," said Mr Cook.
A further burden is the masses of flats left by the Noughties. Changes in planning rules, the rise of buy-to-let, and the search for swifter returns from housebuilders mean the last 10 years were characterised by a rise in the number of flats being built at the expense of detached and semi-detached homes.
"The buy-to-let boom was driven by the bubble in easy and cheap credit," Liam Bailey of Knight Frank says. "It unfortunately led to the rise of the speculator led urban development and all those tiny one and two bedroom flats."
From 2000 to 2008 the proportion of newly-built homes that were flats rose from just over 15pc to almost 50pc. In contrast, detached housing fell from 45pc to less than 15pc.
This trend increased the supply of new homes and meant that over the last 10 years, old houses grew in value more than new houses.
For the new decade, the consequences could be more severe, with new buy-to-let mortgages stamped out by lenders following financial crisis and therefore a key source of demand removed. Mr Cook believes this could lead to a rise in the private rental sector as cash-rich institutions snap up the flats in bulk and potential homebuyers are forced to consider renting because of problems securing finance.
He added: "There is likely to be an increasing investment market driven by cash rich portfolio investors who diversify into build to let, shared ownership and niche residential sectors, the first wave of which has been student housing."
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