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Housing Market Predictions 2011

With many commentators now expecting a rise in interest rates, we have collated a selection of commentators’ predictions on house prices for 2011.

Nigel Lewis, property analyst at FindaProperty.com, told MSN Money: “It is unlikely transactions will rise next year, and completion prices are likely to fall 3-5%, with a slow recovery predicted in 2012.”

Martin Ellis, housing economist at the Halifax, told MSN Money that, although interest rates are likely to remain low for some time, tight mortgage finance availability, along with modest earnings growth, tax rises and significant public sector job losses will all curb the market – thereby dampening house prices.

Factors Reducing House Prices

• More sellers than buyers. Very weak buyer demand.
• Distressed selling is becoming more prevalent particularly at the higher end of the market.
• Baby boomers and the inheritance generation are starting to liquidate assets as parents downsize, die, move to sheltered accommodation or just look to boost pension income.
• The financial squeeze and lack of consumer confidence may make matters worse. In particular, the prospect of spending cuts in 2011 is raising fears over a prolonged economic slump. Many jobs could be lost in the public sector with knock on effects.
• The mortgage and remortgage market remains in turmoil. In particular proposed mortgage regulation could make it even more difficult to get mortgages. For example, proposal to end interest only mortgages.
• As prices drop the equity against a mortgage drops and it is harder to remortgage.
• New property has come onto the market and has yet to become fully occupied.
• Buy to let investment has dramatically slowed down.
• First time buyers have lost confidence and have less savings for a sizeable deposit.
• The housing market is very nervous.

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