As 2009 dawned and the UK began to wake up to the severity of its economic woes, it soon became obvious that there would be no quick fix to the country's troubles. Retail chains collapsed like dominoes, shares continued to spiral downwards along with interest rates and unemployment figures soared.
Predicting when the recovery might start became a hazardous game, with politicians chastised for even mentioning the phrase 'green shoots'. Yet in early February Halifax announced in its survey of UK residential prices a 1.9 per cent increase for January. Could this be the longed-for recovery? Few believed so, with the Halifax itself remaining very cautious about longer term trends.
This feature looks at what property buyers should look for in the current climate, which areas of the UK show most promise and where to find the new Notting Hill (where prices carried on rising in spite of everything).
Retreat to quality
The traditional view of property investment in a downturn is that you should go for the most expensive, well-established areas. The thinking is that in an upturn, people invest speculatively in new areas and these experience rapid growth. But as conditions worsen, investment seeps away from these areas like the sea retreating down the beach after high tide.
So in the UK, this means opting for London districts such as Chelsea and Belgravia, or for the upmarket districts of Manchester or Birmingham, where high earners still invest, safe in the knowledge that their money is unlikely to evaporate.
"As long as properties were realistically priced in the first place, areas like Belgravia are still the safest in which to buy," says Nathalie Hirst at Prime Purchase, part of Savills agency. She has noticed buyers preferring 'lateral' properties with wide living areas, rather than tall thin houses. "And parking is increasingly important," says Hirst.
With the exchange rate of sterling falling against the euro, foreign buyers have been attracted to UK property, but their interest is once again concentrated on the established districts. "There has been a change in the Italian tax structure which makes it more tax efficient to invest overseas," notes Hirst. "This has brought a lot of Italian buyers into London, since they prefer the city to Paris. But they will stick to areas they know well." A high proportion of purchases between £500,000 and £3m in the capital at the beginning of 2009 were by Italians, according to Hirst, whereas activity from Russians has 'dried up'.
Signs to watch for
Property professionals argue that certain factors prompt price rises:
Regeneration schemes
The London 2012 Olympics is a massive regeneration scheme which has already led to price rises in the East of London and is likely to present more opportunities in the coming couple of years. New roads, facilities and infrastructure will make the district around Stratford more attractive to residents and investors. Weymouth in Dorset, where the yachting competition will be held, may also see uplift in property values.
Other regeneration schemes include Bury and Bradford in the North of England, where historically low property prices mean that investments could provide high returns. Newquay, Portreath and St Just in the South West are undergoing regeneration, as is Dundee in Scotland.
Also in London, the area around the new Emirates Stadium in Islington has been thoroughly redeveloped, while other areas benefiting from regeneration include Canada Water in the docklands, White City, New Cross, and further east Thames estuary towns such as Rochester.
Transport improvements
The Olympics comes with its own transport schemes, such as the bullet train from Kings Cross to Stratford, but there are many other new rail links promising to boost property prices in the South East. The East London line extension (Catford and Forest Hill), the Dockland Light Railway extension (Silvertown and Woolwich), the Crossrail project (Maidenhead to the west of London and various points eastwards) and the opening of the high speed rail link from central London to north and east Kent in late 2009 and 2010 (Chatham, Strood, Gravesend and Ebbsfleet).
In Scotland, good transport links from Lochgelly, Paisley and Greenock to Glasgow and Edinburgh have encouraged buyers to relocate to these towns, while St Neots in East Anglia (close to Cambridge) is expected to profit from improvements to the A14.
Education and knowledge
The expansion of the UK's universities has had a significant knock-on effect on property prices in some towns and cities. A shortage of accommodation in and around Cambridge, for example, has kept prices high, along with booming conditions for the city's science parks and its proximity to London. The news that Emily Watson (Hermione in the Harry Potter movies) will be studying there should be worth another couple of percentage points.
Oxford, Edinburgh, Durham and Bristol have all seen a similar boost, similar in its function to the way popular state schools raise adjacent property prices.
Sports facilities
The Olympics is an obvious example, but more broadly, properties that are well situated for active sports such as swimming and walking, or with good access to leisure centres for tennis, squash and gyms will see higher than average price increases in the coming years. This is due to a growing public awareness of the dangers of obesity and a general renunciation of the junk food lifestyle.
Areas to benefit include cities such as York, with its central location amid the North York Moors, national parks and the Yorkshire Dales; North Derbyshire and Sheffield (the Peak District and the Pennines); North Wales; and North Norfolk, with its fantastic beaches and golf courses.
East Anglia as a whole experienced the most positive property price figures for the fourth quarter of 2008 (rising by 1.1 per cent, versus a drop everywhere else in the UK. In the decade between 1998 and 2008, the price of apartments in East Anglia rose by 208 per cent. The scenery may be flat, but flats are hot.
There may be troubles ahead, but, as they say in the North: "No crops without rain".