House prices may have increased by 0.8% between December and January pushing up the
value of an average home to £164,173, but the outlook for the year ahead is still miserable.
Monthly house price ups and downs are not a reliable indicator of the true state of the
property market.
The odd price fluctuation might introduce a ray of sunshine breaking through the clouds of
despondency, but the long-range forecast for investors is bleak.
Statisticians look at trends and the house price trend proffered by the Halifax – the originator
of the latest hopeful figures – is values are still falling.
During the quarter ending January 31, 2011, average house prices were up 0.7% but down
2.4% when compared to January 2010.
Activity in the property market is suppressed as well, with sales choked by lack of mortgage
availability.
The Land Registry recorded the sales of 884,000 homes in 2010, a notch up on the 846,000
for 2009.
In isolation, this looks good, but the trend is property sales are running at 50% of the 1.6
million a year for 2006 and 2007, when prices reached a peak.
2011 looks like a carbon copy of last year for buy to let investors
Martin Ellis, housing economist at the Halifax, expects limited movement in house prices for
2011 but inevitable monthly peaks and troughs.
“The prospects for the market in 2011 are closely aligned with the performance of the wider
economy. Consumer confidence has fallen recently, partly as a result of nervousness about the
economic outlook,” said Mr Ellis.
“There have been further signs that the recent downward trend in prices is causing
homeowners to be more reluctant to put their properties on the market. This development
should help to relieve downward pressures on prices as long as it is sustained.
“We also expect interest rates to remain low for some time, supporting a favourable
affordability position for many existing mortgage borrowers and those entering the market.”
His comments are backed by The Association of Mortgage Intermediaries (AMI), which is also
predicting a flat housing market for the rest of the year.
“This year could be a carbon copy of 2010. However the second half of the year still has
potential for an upside if government decides it needs to encourage more support for first
time buyers,” said AMI director Robert Sinclair.
“The bright spots will be the buy-to-let sector and a pick up in re-mortgaging, for those who
can meet lenders strict criteria and fear the risks of rate rises.”
