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House prices “to fall 2% in 2011”

The downward pressure on house prices will continue next year as the imbalance in supply and demand results in property prices falling 2% by the end of 2011, it has been forecast.
Hometrack said that, after the rise in supply over the last six months, continuing weak demand will force vendors to reduce their asking prices or withdraw the property from the market.
Certainly, consumer concern over spending cuts and the economy has lead to demand for housing falling 4.3% in November, the fifth consecutive monthly fall and the largest drop since January 2009.
However, the supply/demand balance will change in the coming months, as supply begins to drop back.
Hometrack revealed it had recorded the first fall in supply for nine months in November, down 0.4%, which it said was intrinsically linked to weakening demand, as the majority of buyers are also would-be sellers.
Richard Donnell, director of research at Hometrack, said that a key factor in falling supply will come from estate agents attempting to adjust stock levels to realistic prices more closely aligned to demand.

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He said: “The reality is that in the months ahead vendors will either need to reduce prices or withdraw property from the market.
“This is a process that will run over the next three to six months and will result in a gradual tightening of supply, a trend that will act as something of a support to prices over the course of 2011. In the near term, we expect demand to remain weak and this will continue to put downward pressure on prices in the coming months. Over the course of 2011 we expect average house prices to decline by -2%.”
House prices fell 0.8% in October, according to Hometrack, compared to a drop of 0.9% in October. The proportion of the asking price being achieved also fell to 92.4% – the lowest level since September 2009.
Nevertheless, the extent of house price falls stabilised in November, with prices down across 54% of the country compared to 56% in October.
The average time to market has risen to 9.8 weeks, its highest level for 17 months, while the time on the market is over three months in Wales, the East Midlands and North West.
Donnell said: “The seasonal slowdown in the housing market has kicked in a month early with demand for housing falling at the fastest rate for 20 months according to the latest housing market survey from Hometrack. This mirrors similarly weak data on levels of mortgage lending announced earlier this month.
“It is inevitable that this trend will continue as we move into the New Year from both a seasonal and sentiment perspective.”