According to the Royal Institution of Chartered Surveyors, the shortage of available housing in the UK will ensure house prices do not drop too severely this year.
The London based group predicts that house prices will decrease gradually during 2012 and end the year about 3% lower than in Q4 2011. The RICS says prices in London will move sideways whilst northern England will register the weakest performance.
Simon Rubinsohn, the chief economist at the RICS, explained that the general economic climate will have a profound influence on the housing market. As unemployment rises, prices could fall, but the general lack of supply will prevent house prices dropping significantly.
Demand for housing has dropped as contractor mortgage hunters struggle to secure finance and the government’s spending cuts squeeze household budgets. There is unlikely to be an upswing in first time buyer enquiries, at least during the first six months of the year, the Institution says.
It is now widely expected that the Bank of England will keep the base rate at its historically low 0.5% until 2013 and this will keep mortgage interest rates down. The RICS expects to see the number of house purchases increase slightly to 880,000 this year, but this would still be way down on the 1.67 million registered in 2006.
The RICS November estate agents survey found that East Anglia, Northern England and Yorkshire were the areas where most agents predicted falling house prices. London was the only region where more agents predicted a rise in prices than a fall. London benefits from foreign investors and although the continuing global economic turmoil could affect performance in the Capital, the London housing market is still a safe haven.
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