Average house prices recorded a marginal fall of 0.2% in December. Over the 12 months January to December 2010, house price growth stood at 2.9%, compared to 5.3% in 2009. The rate of growth will slow as the larger gains of a year ago drop out of the calculations.
Richard Sexton of e.surv, comments:
"While average house prices are falling, the steady rate of the decline indicates a degree of resilience in the market. While it is true that there is a shortage of buyers seeking new properties, this is largely driven by the continuing drought in mortgage finance.
"Although the average LTV for first time buyers rose to 80%, the total number of house purchase loans is down 4% - indicating that mortgage refusals have become more frequent. However, if prices begin to tumble more quickly, the spectre of negative equity could have a significant impact on buyer and lender confidence.
"Nevertheless, there are currently plenty of would-be buyers available to take on mortgage products where they are offered and for those with a large amount of spare cash, the current market still represents a good opportunity to invest in affordable property.
“The disparity between the regions is widening. In traditionally high-value areas such as London and the South East price growth has been significantly stronger than the national average and this is likely to continue through 2011. Public sector cuts will have a particularly heavy impact on prices in northern England and Wales and this means the value-gap could become a chasm as the year goes on.”
Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments:
“The average price of a home in England & Wales has fallen marginally over the month to £222,827. At this level, it is down some £9,000, or 3.9%, from the peak of £231,828 which was recorded in February 2008. Over the last twelve months the average house price has increased by £6,314, or 2.9%, ie below the rate of inflation, so we are already recording falling real prices.
"Readers may also care to note that in the first two months of the year the index rose by 3.2% while subsequently it has been oscillating around zero growth, with a mini-peak for the year occurring in September followed by three months of minor price declines.
"On an annual basis, all indices have been showing broadly similar trends over the last twelve months. This single figure of near zero growth over the last ten months masks considerable disparities in house price growth between the regions.
"The North, Wales and Yorkshire & Humberside, are now experiencing house price falls on an annual basis, using average figures based over the last three months.
"Greater London, the South East and the South West continue to show annual price increases of 5% or higher but, even in these regions, prices have fallen over the last three months and we can see that there is a generalized trend downward across England and Wales.
"The question is how far this will go and whether all regions will go negative on a monthly and annual basis during the year? Much will turn on how the timing and scale of interest rate increases, the pace of economic recovery, changes in mortgage supply and crucially consumer confidence work through.
“The forecasts for house prices in 2011 are many and varied (somewhere between plus 2 percent and minus 10 percent) with most expecting further falls. With many sellers still reluctant to transact and many buyers being unable to get a mortgage, we have a market which is much reduced in transaction terms and we would not expect that to change a great deal in 2011.
"Clearly some households have to move because of life events such as death and divorce but discretionary moves are in general much lower. This reduced market puts some limits around price falls and rises and this is further underpinned by continuing government help to those in difficulty and low interest rates. As and when these change we can expect the dynamics of the market to respond.
“With the real possibility that we will see at best a flat market for the next year or two a new realism has to be embraced by sellers if their circumstances allow. The Housing Minister in England attracted some attention recently by arguing for a period of house price stability in which homes would gradually become more affordable.
"As much of the subsequent commentary has pointed out, although there is much merit in such an argument, more affordability can probably only be achieved long term if we see a significant increase in housing supply.
"However in the short term this is where we are - homes are becoming more affordable - but in somewhat unusual circumstances. It is far from clear that in the absence of policy change this will be anything other than a short to medium term blip before the upward trend in prices resumes.
“As always there are strong regional and local variations, and in this monthly commentary we look in some detail at ‘hot and cold’ spots across England and Wales. These point up the need for buyers and sellers to look closely at local trends alongside the national picture.”
“We estimate that the number of transactions in December will be 53,000, which is 5% down on November levels and 33% below the number of transactions in December 2009; however this latter figure was boosted by buyers seeking to purchase a property prior to the cessation of the stamp duty holiday on houses costing £175,000 or less, which came to an end on 31/12/2009.
"The current level of 53,000 properties sold in December is 43% below the long term trend over the last fifteen years of 93,800 properties sold in the month. It is likely that house prices will remain broadly flat until such ti
