UK asking prices are falling, and it appears that the price slide could reach 10 percent in 2011, potentially triggering a wave of repossessions. While a combination of economic factors weighs down the housing market, landlords are reaping the rewards of growing rental demand. See the following article from Property Wire, an international real estate news site.
Residential property prices in the UK fell by 3% in November and have now gone down in five of the last six months, according to the latest real estate index published today (Monday December 13).
That means that the average house in the UK lost almost £7,000 off its value, the Rightmove index shows. And estate agents are predicting worse to come in 2011.
Already in December sellers have cut asking prices and Rightmove forecasts that in 2011 sellers will continue to drop their asking prices with the national average falling by up to 5%, with north/south extremes.
But 2011 will be a good year for landlords as forced sellers, first time buyers who can’t afford deposits and fears of unemployment and interest rate rises will increase the demand for rented property.
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Rightmove says that new sellers will have to drop their asking prices further during 2011, the extent to which hinges upon whether base rates rise and/or forced sale numbers increase
substantially.
‘At best prices will be flat, but a drop by as much as 5% is predicted if sorely stretched lender forbearance buckles as prices fall and repossession numbers jump as a consequence,’ said Miles Shipside, a director of Rightmove.
‘Price falls on a national average basis of up to 5% are relatively minor, indeed, national average asking prices are 6.5% lower this month than they were in June. However, in areas of over supply and where forced sales are more prevalent, a more extreme re-adjustment of sellers’ price expectations will be necessary. These are likely to be more concentrated in the north of the country,’ he explained.
Repossession numbers are expected to be under 40,000 this year, well below original estimates of 53,000, Rightmove says. But Shipside warns; ‘The forbearance that has been so far shown to some of the 175,000 who currently have arrears of 2.5% or more of their outstanding balance will be under increasing pressure if these balances, and the number themselves, continue to grow. In the climate of more stable property prices that we enjoyed until recently, lenders took a more benign view.’
He added; ‘Recent price falls and some nervousness about prices in 2011, combined with growing arrears, could lead to lenders deciding it is in their best interests, and those of debtors, to go down the repossession route. If base rates increase then repossession numbers could form a much larger percentage of total sales, and at an extreme this could lead to even greater price falls than we are forecasting.’
Indeed, Nick Hopkinson, director of PPR Estates, believes that many properties are worth a lot less than people think. ‘Despite the relentless positivity of estate agents in their enthusiasm to talk up the property market, UK house prices have gone nowhere in 2010. In fact, if you remove the distorting impact of high value, prime London property and factor in around 5% inflation then most homes are actually worth 10 to 20% less than a year ago,’ he said.
‘The fundamental factors behinds this: economic uncertainty, mortgage famine, further Inflation above trend, tax rises and public spending austerity cuts are going to remain with us for the foreseeable future. Against this backdrop, even the estate agents are already predicting a further 5% price drop next year. I fear they are being overoptimistic again,’ he explained.
‘At PPR Estates we are forecasting 10% price falls next year for UK house prices. I understand that economic forecasting of this type is at best a guestimate but any property sellers wanting to hold out for a higher price need to be prepared to wait for years, I fear,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.
