Rightmove said that asking prices will continue to fall next year, with extremes in the North and South of the country. The extent of the price falls will be determined by whether Bank base rate is increased and forced sale numbers rise sharply.
A fall of as much as 5% will be possible if lenders’ forbearance buckles under the pressure of falling prices and a resulting rise in repossessions.
However, Rightmove said that such a fall is relatively minor on a national level, highlighting that the national average is 6.5% lower in December than June.
December’s fall in asking prices followed a drop of 3.2% in November, bringing the average asking price to £222,410. The annual change in prices is now just 0.4%.
Righmove predicted that any positives brought by the pent up demand and fewer properties for sale in 2011 will be offset by the risks from unemployment, forced sales, base rate rises and the ongoing lack of mortgage funding.
Nevertheless, it said lenders could bring out more competitive deals and relax their criteria slightly if they fall short of their targets for the first half of 2011.
Rightmove added that around 1.2m properties will come to market in 2011, down 10% on this year, as potential sellers postpone their move until property price growth returns. While numbers will be helped by those who cannot delay their move, they will be pushed down by people who find they cannot trade up because they are equity poor and unable to get enough mortgage finance.
In addition, transactions levels will continue to be around half of historic norms for the second consecutive year at an estimated 600,000. Repossession sales currently make up about one in 15 of these sales.
For 2010, repossession numbers are expected to be fewer than 40,000, well below the expected estimate of 53,000. Naturally priced lower than other sellers, substantial numbers will decrease prices of other local sellers.
Rightmove said that the forbearance that has been shown by lenders will be under increasing pressure if arrears balances increase and the number of repossessions grow. It said that nervousness about falling house prices in 2011 could push lenders to repossess more readily. An increase in base rate could also push up repossession numbers.
Miles Shipside, director of Rightmove, said: “Existing unemployment black spots and local markets facing the threat of significant redundancies will be worst hit by any increase in forced sales. Areas such as the North East and North West of England could be the most vulnerable, with property prices taking a larger than average hit.
“There will be opportunities for buy-to-let investors and the equity rich, which in turn will underpin prices and return more activity to the market. We witnessed this in early 2009 when rental yields struck a return too good to turn down and value to owner occupiers had re-adjusted to tempting levels. It is important that base rates remain very low to aid recovery.”
He added: “In spite of economic woes, un-seasonally high numbers of searches on the Rightmove website show that prospective buyers are still looking.
“Sellers are going to have to price more competitively in 2011, though it takes time for that message to get through in the absence of another banking crisis. We cannot see conditions on the immediate horizon that would cause a significant fall in prices unless the credit crunch tightens.
“A continuing drift of a few per cent similar to what we have seen in the latter part of 2010 is likely in 2011 until the economic recovery gathers real pace. This would mean that prices could well be around 10% lower than the mid-point of 2010, helping overall buyer affordability and housing market recovery.”
