House prices fall 3% in December

13 December 2010 | By Samuel Dale

House prices have fallen by 3% in December and 0.4% in the past year, the RightMove House Price Index shows.

The average house price now stands at £222,410.

Asking prices have dropped by 3% in December, the fifth month out of six to record a fall., the RightMove House Price Index shows.

Rightmove forecasts that in 2011 sellers will continue to drop their asking prices with the national average falling by up to 5%.

It says the upsides of pent-up demand and fewer marketed properties more than off-set by downside risks of unemployment, increased forced sales, base rate rise and the ongoing mortgage famine.

The estate agency predicts that 2011 will be a good year for landlords, job secure equity blessed trader uppers and deposit-rich and a bad year for forced sellers, deposit and equity poor, tenants and first-time buyers.

But Nick Hopkinson, Director of PPR Estates, is predicting house price drops of 10% next year.

He says: “Despite the relentless positivity of estate agents in their enthusiasm to talk up the property market, UK house prices have gone nowhere in 2010.

“The fundamental factors behinds this: economic uncertainty, mortgage famine, further Inflation above trend, tax rises and public spending ‘austerity cuts’are going to remain with us for the foreseeable future.

“Against this backdrop, even the estate agents are already predicting a further 5% price drop next year. I fear they are being overoptimistic again, just as their thankless job requires.

“At PPR Estates we are forecasting 10% price falls next year for UK house prices. I understand that economic forecasting of this type is at best a ‘guestimate’but any property sellers wanting to hold out for a higher price need to be prepared to wait for years, I fear.”

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat

Readers' comments (12)

billie | 13 Dec 2010 10:59 am
The only way house prices will go up, is when the banks start lending money. And the only time they will lend money, is when interest rates go up enough for them to make lots and lots back.
Unsuitable or offensive? Report this comment
Grace Styles | 13 Dec 2010 11:49 am
According to NAEA sellers continue to have unrealistic expectations over the value of their property. These potential sellers are likely to be holding back in the hope of price rises during 2011.
http://www.mindfulmoney.co.uk/2672/economic-impact/unrealistic-sellers-are-stifling-uk-residential-property-market.html
Over half of young people in society think they will never be able to own a house – because of extortionate deposits. People aren’t selling in the hope of prices rises and few can afford to buy and are hoping for price decreases – it’s a vicious circle, whichever way the markets go there is going to be huge upset!
Unsuitable or offensive? Report this comment
Tony | 13 Dec 2010 12:08 pm
If the banks will only lend more when interest rates go up, that will not cause house prices to go up. It will cause a fire sale as many struggling to pay at lower rates will default, thus causing prices to drop.

Lending more is simply a pyramid scheme that runs out of players within a few years, most players are now stuck with loans they can't really afford, and new borrowers stuck with student debt and unaffordable houses. You need new borrowers (or first time buyers) to pay off the previous loans, and you need more of them that the previous generation because of the interest charged. Its an unsustainable pyramid scheme.
Unsuitable or offensive? Report this comment
Pete Hughes | 13 Dec 2010 12:31 pm
The pent-up demand for Bugatti Veyrons increased today as the National Lottery announced fewer Jackpot payouts

:-)
Unsuitable or offensive? Report this comment
Anonymous | 13 Dec 2010 1:13 pm
Banks are already making ten times the base rate on average mortgages - they need to drop their rates. Base rate at 0.5 %, savings interest at 2.0 % and mortgages at 5.0 %. Couple that with ridiculous mortagage arrangement fees then no surprise the market is not moving. There seems to be no danger of banks going under as has already been proven so there appears no incentive for them to be competitive - there appears to be some sort of banking cartel going on at the moment. Hopefully new foreign banks will step in and introduce less greedy competition to the market place.
Unsuitable or offensive? Report this comment
Anonymous | 13 Dec 2010 2:11 pm
yeah blame the greedy banks - this might save you having to tax your grey matter as to what is really happening

If 'anonymous at 1.13pm' had any idea about pricing he might relaise that margin is a largely a function of the cost of funding. If you haven't noticed, funding is getting rather more expensive and has gone upfrom circa Libor + 15 libor + 150bps. That's 10 x to save you the maths...
Unsuitable or offensive? Report this comment
Anonymous | 13 Dec 2010 3:10 pm
How about teh 400bn the banks need to pay back the state before the end of 2012 and before being hit by huge interest rates as agreed when they were bailed out? This I believe is why banks wont lend until at least the end of 2012...
Unsuitable or offensive? Report this comment
Anonymous | 13 Dec 2010 3:10 pm
How about teh 400bn the banks need to pay back the state before the end of 2012 and before being hit by huge interest rates as agreed when they were bailed out? This I believe is why banks wont lend until at least the end of 2012...
Unsuitable or offensive? Report this comment
Anonymous | 13 Dec 2010 6:21 pm
Property prices falling would be a good thing. People do not realise how bad it is if you are in a certain age group who didnt buy before the boom, it really has a bad effect on your life.

The house prices bubble was caused by artificially low interest rates for a prolonged period, courtesy of alan greenspan of the fed and and gordon brown following his actions. Keynseyian economics and fractional reserve banking caused the whole thing, and the turmoil is going to get alot worse.

I will be happy if the market crashes back to 3 times the average income.
Unsuitable or offensive? Report this comment
a | 13 Dec 2010 11:44 pm
At "circa Libor + 150bps", banks still making 350bps profit (excluding other fees) at 5% SVR charge. billie's comment is valid in a sense that even that profit margin is still not enough...?
Unsuitable or offensive? Report this comment