House Prices Set To Fall In 2011

House prices are set to fall slightly in 2011 according to the RICS UK Housing Market Forecast.

House prices are expected to finish 2011 around 2% lower than prices at the end of this year.

The expectation is that falling supply will help to stabilise the market in the first half of 2011. This will help to offset a likely continued drop in house prices in the early part of the year and may even lead to a prices edging up towards the latter part of the year.

The net result being only a limited drop in prices by the end of 2011.

Of concern is that the fall out from public spending cuts will have a bigger impact on the jobless total than envisaged, which will depress buyer interest by more than anticipated. However, even in these circumstances, the lack of supply will prevent the decline in prices amounting to more than 5%.

The suggestion is that the availability of mortgage finance will not show any significant increase, keeping transactions at roughly the same level as 2010.

On a positive, repossessions are likely to fall back slightly.

Simon Rubinsohn, RICS chief economist said: “The lack of supply in the market is likely to prevent significant house price declines in 2011. The narrowing gap between supply and demand will see the gentle downward trend in prices currently taking place at least partly reversed as the year wears on.

Transaction levels will remain flat as mortgage lending remains subdued for another year with many first-time buyers struggling to meet their aspirations of home ownership.”