House prices set to fall
This is according to Hometrack’s monthly national housing survey which forecasts price falls of 2% in 2011.
The latest survey of over 5,100 agents and surveyors recorded price falls across 36% of the market during December. Overall house prices fell by -1.6% over 2010.
Demand fell by -4.8%, the sixth month in a row as did supply (-1.5). The proportion of asking price achieved fell to a 16 month low (92.1%).
The time taken to sell increased over the month to 10 weeks – the longest period since April 2009. The time on the market is now over 3 months for three regions – East Midlands, North West and Wales.
The first half of the year saw an overall price rise of 1.3%, but as the second half of the year began, supply and demand moved in opposite directions and prices between June and December fell by -2.3%.
Over the course of the year, the supply of homes for sale grew by 24% while demand fell by 7%. In the final 6 months of the year, demand fell by 18%.
Prices tracked lower across 36% of the country in December. But across 15% of the country – notably London and the South East – prices in December are higher than they were at the start of the year.
Looking ahead to 2011, Hometrack believes house prices are likely to remain under downward pressure for the first half of the year. Weak demand and falling supply will be the defining features of the market. Lack of mortgage finance and falling consumer sentiment are trends that will continue into 2011.
Commenting on the survey, Richard Donnell, director of research at Hometrack, said: “The seasonal slowdown which began at the beginning of November continued apace into December.
“While house prices fell by -1.6% over 2010 we expect average prices to fall by a further 2% over 2011 on the back of continued weakness in demand and a lack of availability of mortgage finance, a factor that is being increasingly reported as a barrier to sales in recent months.
“A tightening in supply together with continued low levels of housing transactions will continue to act as something of a support to pricing levels and will limit the scale of further falls. The greatest risks for the housing market lie with the economic outlook, not least expectations over unemployment levels which have a major impact on market sentiment and levels of demand.
“Speculation over the short term trajectory of interest rates is also a key factor and while rates are unlikely to rise in the near term an eventual return to more normal levels will present challenges to the portion of the housing market on above average loan to income ratios.
“Factoring in limited growth in real household incomes and it is clear that house prices are set to track sideways for the foreseeable future.”