16
Dec
House prices will be stable throughout 2012
The "highly resilient" housing market will not suffer a slump in
2012 but will instead remain subdued and stable, according to a
forecast released by Halifax.
Despite the significant deterioration in the outlook for both the
UK and global economies, the housing market has held up with the
current average sale price of a house – £161,731 –
little changed from the end of last year.
Halifax expects little movement in prices in 2012 –
estimating movement somewhere between a 2% increase or decrease
– but with the market set to be strongest in London and the
south-east there are further signs of a north/south divide in
fortunes.
Halifax's outlook is based on Bank of England interest rates
remaining at a record low of 0.5% throughout 2012, and the positive
impact this will have on levels of forced selling and in mortgage
affordability for homebuyers.
Martin Ellis, Halifax's housing economist, said: "This resilience
in the face of very challenging economic conditions provides
encouragement regarding the prospects for next year."
The Halifax noted that the rate of mortgage affordability for new
borrowers was at its lowest point since 1997, having fallen from a
peak of 48% of average disposable earnings in 2007 to 26% in the
third quarter of 2011, which is significantly below the average of
37% over the past 25 years.
Halifax said the favourable affordability position will help to
keep down the numbers of homeowners forced to sell their properties
because they cannot keep up with mortgage payments.
When the number of forced sellers is high there is usually a sharp
fall in house prices, so this scenario is more likely to be avoided
with an affordable interest rate.
However, the Halifax warned that demand for housing will be
constrained by the weak economic growth and the prospect of high
levels of unemployment led by large scale public sector job
losses.
Pressure on household finances is also likely to be a factor in
subdued demand for housing, as families continue to keep a tight
hold on their purse strings and focus on reducing their debts.
Ellis said: "Overall, we expect continuing broad stability in house
prices nationally during 2012. Prices are again likely to end the
year at levels close to where they begin with the market continuing
to lack any real direction."
Recently, Halifax reported house prices had fallen by 0.9% in
November, reversing a 1.2% in October.