Property in demand but will house prices fall?

The NAEA (National Association of Estate Agents) has reported that there is greater demand for property which is pushing house prices up but it’s not all good news as Savills is predicting house prices will fall in 2010.

The NAEA reports that the number of home buyers is outnumbering the number of sellers by 5 to 1.

The increase in home buyers, coupled with a reduction in the  average number of houses for sale on estate agents books, is helping to push house prices up.

Will the demand to buy property continue to rise though?

A key influencing factor will be what the banks do and how easy it is for home buyers to get access to mortgages finance.

There is a growing mortgage price war underway with a number of the key mortgage players having recently reduced their mortgage rates, including Nationwide and Abbey.

What the Government decides to do with the stamp duty is another factor. First time buyers in particular are currently being helped by the rise in the stamp duty threshold to £175,000 but this is due to return to its original threshold of £125,000 at the end of December.

As Gary Smith of the NAEA comments ‘We can only hope that common sense will prevail and that the Government will raise the lowest level at which Stamp Duty will apply to £175,000 for an indefinite period.’

The more glum news is that from Savills. Whilst it predicts a rise in house prices this year, in contrast it expects a fall in 2010. This fall being driven by an increase in the number of houses on the market such that house supply outstrips demand – the complete opposite of the current position.

It could be a case of roll on 2011 and beyond – when the economic outlook looks better and house prices are expected to start appreciating again, albeit by a modest 2.7% in 2011 but then up 27% between 2012 and 2015.