House prices bottom out but slow growth seen | Shanghai Daily

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September 10, 2009

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House prices bottom out but slow growth seen

HOUSE prices in the United Kingdom have finally bottomed out but a return to growth will be slow and steady as supply gradually increases, a Reuters poll showed yesterday.

Average house prices are seen as ending the year just slightly down from where they started and will rise by just below half a percent in 2010 and around 2.5 percent in 2011, the poll of over 30 analysts at banks, investment firms and consultancies found. House prices sank 16 percent in 2008.

That is a far rosier picture than the 8 percent fall for this year and a flat outlook for 2010 predicted in a June survey.

Average home prices in the UK had tripled in the 10 years to the peak struck in 2007 but came crashing down as a global financial crisis set in and mortgage lending evaporated.

Eighteen of 31 forecasters said house prices had now stabilized, with eight saying they would within a year. Five said it would be a year or more before prices bottomed out.

"Prices do appear to have stabilized, at least for now - and the peak to trough fall of around 20 percent was much smaller than the doomsayers predicted," said Colin Ellis at Daiwa SMBC.

House builders agree - Bovis Homes confirmed a growing trend of stabilization last month, while Bellway and Taylor Wimpey posted positive trading statements.

Recent surveys have also suggested house price falls may be starting to level off, although that may be partly due to a lack of supply as homeowners prefer to sit out the downturn rather than accept a lower price for their property.

Property Website Rightmove said the number of new sellers entering the market in August was 48 percent below pre-credit crunch numbers as tight mortgage lending criteria continues to restrict transactions and stifle property coming to market.

Average UK house prices will have fallen around a fifth from their peak in 2007 to trough, according to the poll, against a 25 percent fall seen in June's poll.

The survey provides scant optimism for anyone who bought their property in the boom years when banks were lending at record levels with few restrictions on how much one could borrow, sometimes as much as 125 percent of a home's value.

Banks have tightened lending criteria but mortgage approvals - loans agreed but not yet made and a good early indicator of where house prices are headed - rose above 35,500 in July, a 17-month high.




 

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