Newly built home prices are steady as we move into 2005, says SmartNewHomes.com, with average prices at the year-end running at a similar level to those at the beginning.

However, the average price of a new home in the UK fell by 0.9% last month to end the year at £266,380 according to data released from the firm yesterday.

Looking back at 2004

A slowdown in the final quarter of 2004 brought prices back to the level of the start of the year following several months of strong activity. Prices rose strongly in spring 2004 and remained high throughout the summer.

The fourth interest rate rise of the year in August and several media scare stories took some of the heat out of the market and caused an immediate dip in prices as house buyers became cautious. However the realisation that there would not be a crash caused buyers to return and prices stabilised over the last couple of months of the year.

Healthier market for 2005

David Bexon, chief executive of SmartNewHomes, comments: “The housing market in 2004 more or less followed our predictions for the year, with the return to a healthier market following the boom of recent years. The new homes market differs in terms of the balance between supply and demand, as the continuing shortage of supply minimises any price decreases."

“Moving into 2005, we expect prices to remain steady throughout the year. With interest rates still relatively low and employment high, there is very little chance of a drastic drop in prices. Instead, the new homes market is likely to see continued steady growth of 2 to 4 % over the year.”

Regeneration fuels hotspots

Wales and the North are tipped as the potential hotspots for 2005 after both areas experienced large price increases over the last year. The increase in city-living and investment opportunities following the regeneration of many areas of cities such as Liverpool, Birmingham and Manchester also led to strong price rises in the North West and West Midlands over the year.

The three most expensive regions of London, the South East and South West were the first to experience the effects of the wider market slowdown but prices in London and the South East have now begun to rise again, indicating that there will be no further decreases in prices across the country.

Apartments on top

A further consequence of the rise in popularity of city-centre regeneration schemes and new developments is the increasing proportion of new apartments for sale. Apartments now account for 52.8% of new properties for sale, compared to 41.4% at the same time last year. This gain has been at the expense of detached homes which have fallen from a 40.1% share at the end of 2003 to just 32.1% at the end of 2004.