The Halifax said the pace of price falls has picked up over the last few months, but is still far from the 5-6% falls seen in the second half of 2008.
Martin Ellis, Halifax housing economist, said: “Higher numbers of properties for sale, combined with reduced demand, have caused the recent decrease in prices. There are, however, some tentative signs that homeowners are becoming more reluctant to put their properties on the market which, if continued, will help to relieve the current downward pressure on prices.”
Interest rates are likely to remain very low for an extended period, he predicted, supporting mortgage affordability for homeowners.
However, the low interest rate environment has slashed the cost of mortgage repayments from a peak of 48% of average disposable income in mid-2007 to 29% in Q3 2010, substantially supporting housing demand, said the Halifax.
House prices in November were 6.5% higher than in April 2009, producing an average price of £164,708, or £10,045 more than April 2009.
However, views remain mixed on the outlook for the housing market, with Dr. Howard Archer, chief European & UK economist, IHS Global Insight, suggesting prices could still tumble 10% further from the 2010 peak to the end of 2011.
“On the Halifax measure, this would see average house prices fall to £152,536 in 2011. If our forecast of a 10% correction proves to be right, this implies that house prices have around another 7.5% to fall, or £12,172 from the November level of £164,708,” he said.
Philip Clarke, managing director of property consultants, Fisher Property Services, agreed that sudden, sharp rate rises could bring further price falls, but added: “As long as rates remain at their current level, or in the same ballpark, we do not expect further significant price falls in 2011.”
