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House prices and repossessions to fall in 2011

House prices and repossessions to fall in 2011

Category: Mortgages

Updated: 22/12/2010
First Published: 22/12/2010

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The fortunes of the housing market are likely to be mixed in 2011, as house prices look set to fall, while repossessions also decline.

The Royal Institution of Chartered Surveyors (RICS) has predicted that house prices are likely to continue to slip in the coming months, but that falling supply should provide a platform for the market to stabilise at some point in the first six months of next year.

It could mean that prices begin to edge back up again in the latter part of next year, meaning they end 2011 at a similar level to where they are presently.

Despite a narrowing of the supply and demand balance, it is thought that sales activity will remain flat, with the volume of transactions amounting to little more than 900,000 over the course of the year.

The public spending cuts could have a bigger than expected impact, according to RICS, which would depress buyer interest more than has been anticipated.

However, the lack of housing supply will prevent a decline amounting to more than 5%.

In better news, it is thought that repossession levels will fall back in 2011.

Compared with the 36,000 repossessions made in 2010 – a number markedly down on original estimates – it is predicted that the number will fall to 33,000 in 2011.

"The lack of supply in the market is likely to prevent significant house price declines in 2011," Simon Rubinsohn, RICS chief economist said.

"The narrowing gap between supply and demand will see the gentle downward trend in prices currently taking place at least partly reversed as the year wears on.

"Transaction levels will remain flat as mortgage lending remains subdued for another year with many first-time buyers struggling to meet their aspirations of home ownership."

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