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Housing market makes a sluggish start to 2011

Housing market makes a sluggish start to 2011

Category: Mortgages

Updated: 27/01/2011
First Published: 27/01/2011

MONEYFACTS ARCHIVE
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A sluggish start to the new year has led to fears that the housing market could be experiencing something more than the post-Christmas slump.

House prices fell by an average of 0.5% over the first month of 2011, figures from Hometrack show.

Price falls were recoded across 37% of the UK in January, up from 36% in December.

More worryingly, however, is the marked fall in both supply and demand.

Surveyors reported that supply fell by 5.4% in January – the largest monthly fall for four years, while demand slumped by 9.5%.

"This suggests that the housing market is facing more fundamental underlying issues than the usual post-Christmas slowdown," commented Richard Donnell, director of research at Hometrack.

"With recent rises in the cost of living, household budgets will come under further strain if concerns over rising inflation translate into higher rates.

"Mounting concern over a possible interest rate rise will act as a further dampener on demand."

It is predicted that the supply of homes for sale is likely to dwindle further over the next six months, although this will not be enough to offset downward pressures on house prices in the short-term.

Under supply could help support prices over the course of the whole of 2011 though.

The housing market in the UK is currently fractured, with conditions varying depending on location.

"Wide variations in the relative health of the housing market can be explained by different underlying dynamics between supply and demand," said Mr Donnell.

"The average time on the market in the North and Midlands is now close to three months, compared to just over two months in the South."

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