Housing prices in the UK drop 1.9%

Housing prices in the UK drop 1.9%
Dec 29, 2009 - PropertyGuru.com.sg

Year-on-year housing prices in England and Wales dropped 1.9 percent in December, the smallest annual decline since May this year, according to property data company Hometrack.

But the monthly result of housing price increases suffered a slowdown of 0.1 percent in December, compared to 0.2 percent in November. Hometrack predicts that prices will drop one percent further in 2010.

Mortgage lenders Halifax and Nationwide also report that prices have already increased by 2 percent in the year to November.

“Unexpectedly buoyant demand and a chronic lack of housing for sale were the key drivers of the housing market in 2009,” said Hometrack’s director of research, Richard Donnell. “While a scarcity of housing for sale is set to remain an important feature of the market in 2010, it is the prospects for demand that will dictate the outlook for prices in the next 12 months.”

Several real estate agents surveyed by Hometrack reported that registration from interested homebuyers this year has increased 41 percent, while supply of property rose by only 7 percent.

Hometrack said this pattern will likely continue into 2010, with home sales equivalent to the average household moving once every 25 years, leading to a volatile price.

However, a possible increase in the unemployment rate and the growing concern about tax increases, as well as spending cuts after the June elections were likely to limit the demand.

“Against the backdrop of low sales volumes, equity-rich households could continue to put upward pressure on prices in localised markets in 2010. Yet a sustainable and broad-based recovery in the housing market needs a broader base of buyers,” Mr. Donnell said.