House prices fell by 1.6 per cent in 2010 and will tumble further next year, driven by an ongoing weakness in demand, a mortgage famine and fear of unemployment, a survey by Hometrack will say today.
According to the market analyst, house prices will fall by 2 per cent in 2011. Richard Donnell, the director of research at Hometrack, said that a lack of availability of mortgage finance was a factor that is "increasingly reported as a barrier to sales in recent months". He added: "The greatest risks for the housing market lie with the economic outlook, not least expectations over unemployment levels which have a major impact on market sentiment and levels of demand."
The downbeat forecast for next year follows a 0.4 per cent fall in average house prices between November and December, bringing the total decline for this year to 1.6 per cent, Hometrack found.
Mr Donnell said: "The seasonal slowdown which began at the beginning of November continued apace into December." The firm's survey of more than 5,100 estate agents and surveyors found that house prices were now lower across 71 per cent of England and Wales than at the start of the year. But in 15 per cent of the country – notably London and the South-east – prices in December were actually higher than in January.
Hometrack said that 2010 was effectively a game of two halves for the housing market. Mr Donnell said: "The last 12 months have been characterised by a growing imbalance between supply and demand" He explained there was an overall rise in house prices of 1.3 per cent by June, but then "supply and demand moved rapidly in opposite directions" and prices fell by 2.3 per cent in the remainder of the year to December.
Over the whole of 2010, the supply of new homes coming on to the market rose by 24 per cent, while demand fell by the 7 per cent.
The survey's findings chime with this month's British Bankers' Association report, which said that mortgage lending rose at its slowest rate for more than a decade during November as the number of loans approved for house purchase also slumped to a 20-month low.Reuse content