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House prices fall 3% in December

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.”

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Comments
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  • Stephanie Paulson 14th December 2010 at 5:04 pm

    Look, it’s quite simple.

    The banks are not the problem (see today’s papes) as they are paying back on the SLS ahead of time.

    The Rates are not the problem for all of the reasons stated above – it’s all relative and they are making money.

    The problem stems from Basle, the FSA, and shareholders. This is about prudency, risk, economics and return.

    Moreover, the ConDem pact have no interest in propping up the Housing Market and are happy for it to find it’s own level.

    The only way is down. Low confidence, austerity cuts, increasing inflation, hyped up values during the early part of 2010, low interest rates allowing lenders to avoid repossessions, use of LPA Receivers on BTL, barely stable employment, and more storms brewing in the US (their debt’s looking about a bad as Greece)all add up to a pretty confused picture. ‘Confused’ is the antithesis of a bouyant housing market.

    Add to that low affordability, high entry barriers, limited funding solutions and everyone wanting a bargain, and the housing market is in for a fall – and not before time.

    Post the next and imminent fall, when the dust settles, mortgages will be judged on better analysis of the borrower, an improved overall risk structure, and real;istic pricing. In time, deposits will shrink and stability will return.

    It’s in everyone’s interests (higher volume = fees) but the houseowners will have to pay. Better do it now and get the pain out of the way.

    Hold on, there’s a train coming.

  • Paul 14th December 2010 at 11:40 am

    @a, after write downs for bad debt +350bps isn’t a huge amount, especially as the loan collateral (house against which mortgage is secured) is dropping in value.

    Increasing risk of mortgagee losing job plus increasing risk of collateral being worth less than mortgage outstanding = greater risk for bank being reflected in interest margin.

    It’s called pricing for risk; failure to price for risk in the past is what led to the bust in the first place. Maybe you would lend your own money for less than +350bps, but I wouldn’t, and am gald that the banks in which I deposit my savings are not. Do we really want to bail them out again?

    Besides, those with the money makes the rules, not the wannabe debtors, and certainly not the people who make money out of pushing loans.

  • a 13th December 2010 at 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…?

  • Tony 13th December 2010 at 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.

  • Stephen 13th December 2010 at 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…

  • peter stimson 13th December 2010 at 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…

  • James Hewitt 13th December 2010 at 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.

  • Pete Hughes 13th December 2010 at 12:31 pm

    The pent-up demand for Bugatti Veyrons increased today as the National Lottery announced fewer Jackpot payouts

    🙂

  • Tony 13th December 2010 at 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.

  • Grace Styles 13th December 2010 at 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!

  • billie 13th December 2010 at 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.