House prices in 2013 'will fall 1%'

For sale signsChris Radburn/PA Wire

House prices across the country will edge down 1% during 2013 as the London market shows signs of cooling, property analysts have said.

Prices fell 0.1% month-on-month in December, marking the sixth month in a row that this has happened, and average prices ended the year 0.3% lower than a year ago, Hometrack said.
It predicts that a reluctance by struggling families to take on more debt will continue to act as a drag on the housing market next year and prices will be more volatile with continued low sales.

Hometrack's monthly figures for December show prices were flat in London and East Anglia, fell 0.1% in the Midlands, the South and Yorkshire and Humberside, dropped 0.2% in the North West and Wales and by 0.3% in the North East.

One in five postcodes in England and Wales recorded price increases over the past year but prices have fallen across two-thirds of the country.

London has had strong demand from wealthy overseas buyers and consistently outperforms other regions, seeing prices rise in seven out of 10 postcodes this year. Property prices are now 10% higher than at the peak of the market in 2007. But price growth in London, vital to keeping average prices up in the rest of the country, is predicted to slow over next year, with a 2% annual increase pencilled in.

Richard Donnell, director of research at Hometrack, said: "Affordability constraints and a general unwillingness by households to take on debt will continue to act as a drag on the housing market in 2013, at least until such time as the economic outlook sees a clear improvement. Hometrack forecasts that average prices will remain under slow downward pressure, falling by 1% in the 12 months to December 2013 against a backdrop of continued low turnover and greater price volatility."

Around 912,000 sales should take place next year, well below the Council of Mortgage Lenders forecast that transactions will pick up to around 950,000, Hometrack said.

Hometrack's predictions jar with some other recent surveys, including one from Rightmove which said increased competition among mortgage lenders and a continued shortage of homes to choose from will help to push asking prices up by 2% across England and Wales next year.

The Council of Mortgage Lenders has said it expects the housing market to "feel more stable and positive" next year, with much of the boost coming from a multibillion-pound Government scheme which has already helped to increase mortgage availability. But the council has also said demand for mortgages could be held back by the weakness of the economy and much will hinge on the continued resilience of UK employment.

© 2012 Press Association
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