House Price Update to 30 December 2009

UK House Prices Situation: Seasonally slumped but fairly stable

UK House Prices Forecast: No great increases in 2010, possible falls

RICS Forecasts 1%-2% Increase In 2010

The Royal Institution of Chartered Surveyors has forecast that average UK house prices will grow by 1%-2% at most in 2010. RICS believes that while transaction levels might “edge up” in 2010, the twin pressures of cutbacks in government spending and likely interest rate rises will prevent any major growth in the market.

RICS also noted that affordability may still be an issue for many buyers, especially first time buyers, who are struggling to produce the sizeable deposits required for the best mortgage deals.

The Nationwide Building Society ratio of first time buyer house prices to earnings reached its peak of 5.4% in 2007. It is currently at 4.5% but has already risen from a recent low of 4.1%. What is perhaps more significant, however, is that all of these figures are substantially above the ratio’s long-term average of 3.3% (since 1983) and 3.7% (since 1996, when the recent housing boom started). All of this suggests that prices may have further to fall; as the RICS report notes, “valuation metrics never fell as far as long run averages before picking up again.”

Hometrack Figures Report Fall in Demand

New figures published by property website Hometrack show that demand for property fell in December for the first time since January. There was a 0.5% fall in the number of sales agreed in December and although average prices rose by 0.1%, increases were limited to “just 11% of the country”, according to Hometrack.

Hometrack described the fall in demand as “the usual seasonal slowdown” and forecast an overall 1% fall in house prices for 2010.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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