Property price gloom gives way to optimism for 2010

Rising prices are expected by 53 per cent, survey shows, in reversal of sentiment
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The Independent Online

The majority of Britons expect house prices to rise this year in what the property website Rightmove described yesterday as "a huge shift in sentiment".

In its first consumer confidence survey this year, the company found that 53 per cent of respondents expected to see house prices increasing in 2010, compared with 13 per cent who predicted they would fall.

Last year, the same annual poll of more than 30,000 people saw just 10 per cent of respondents saying they thought prices would rise, against 69 per cent predicting falls.

Despite the consumer optimism, economists remain divided on the outlook for the market in 2010. Prices have been steadily rising for several months, and other indicators, such as the level of mortgage approvals, have also shown improvements.

However, activity levels remain low, and many economists are less than optimistic, with the National Institute of Economic and Social Research predicting that the market will again go into reverse later this year.

It pointed out that the affordability of housing was still stretched, even after the falls in prices induced by the recession. A new home still costs a relatively large proportion of average earnings.

Experts also say that part of the reason for the recovery has been the limited supply of properties for sale, with owners reluctant to put their homes on the market because of the continuing economic uncertainty.

However, Rightmove said its website had seen record levels of traffic in the early weeks of the new year, coinciding with a 1.2 per cent increase in asking prices in the first week of January.

The recent trend of gently rising prices has, said Rightmove, persuaded sellers to re-enter the market. They have also been buoyed by signs that Britain is finally emerging from the worst recession since the Second World War.

Miles Shipside, commercial director of Rightmove, said: "Given the looming election and the talk of pending austerity packages ahead, this consumer survey highlights a surprisingly positive property price outlook."

By contrast to many forecasters, Mr Shipside said he believed the property market was "in a virtuous circle scenario, where consumers are seeing less property up for sale and fresh to the market property selling more quickly".

He said this had "forced an impression" that there was likely to be upward pressure on prices, at least for the moment. Elections traditionally dampen activity, but 69 per cent of respondents said that they would not put off, or rush to complete, a transaction because of a general election, which has to be held this year.

The next survey will be conducted in April, which is likely to be just before the general election. Base rates, mortgage availability and property repossession levels will also have an impact on confidence.