Knight Frank forecasts 'perfect storm' for house prices

November house prices went up 0.3% compared with October, to stand at £160,780, an annual price decrease of 1.9%.

The only region in England and Wales to experience an increase in its average property value over the last 12 months is London with a movement of 1.4%.  Annually, North-East house prices fell most, by 5.4%.

Transactions data runs until the end of September 2011, when there were 61,031 house sales – up 6% from the 57,463 in the same month of 2010. In the months between June and the end of September, sales volumes averaged 60,805 per month, a decrease from the same period of 2010, when sales averaged 62,293 per month.

The number of properties sold in England and Wales for over £1m in September 2011 increased by 1% to 729 from 720 in September 2010.

Meanwhile, Nationwide has reported that house prices in December fell by 0.2% compared with November, to stand at £163,822 – a rise of 1% over the year.

Robert Gardner, Nationwide’s chief economist, said: “The 1% rise recorded over the past 12 months could hardly be described as a strong performance, but against a backdrop of anaemic economic growth and a deteriorating labour market, UK house prices were surprisingly resilient in 2011.

“Resilience was less evident in other areas of housing market activity in 2011. For example, the number of mortgage approvals remained low, at just over half the long-term average.”

He warned: “2012 isn’t shaping up to be much better than 2011 for the UK economy or the housing market.”

He said that challenging labour market conditions are likely to deter buyers from entering the housing market this year.

According to Nationwide, the worst region in 2011 for housing was Northern Ireland, where property prices fell 8.7%. In London, prices rose 5.5%.

Meanwhile, Knight Frank is forecasting a ‘perfect storm’ this year which will cause UK house prices to fall by 5%.

It is expecting the country house market to slip by 2.8%, but believes that prices in prime central London will continue to buck the trend and climb 5%.

Grainne Gilmore, Knight Frank’s head of UK residential research, said: “We forecast that mainstream UK house prices will fall by 5% in 2012. Once inflation is taken into account, this will result in a deeper fall in real terms.

“There will be regional differences in house price performance, however, with the South-East and London holding up better than the North.

“We expect interest rates to remain low, which will support the market to some extent, but we still see prices falling, as a perfect storm of deteriorating economic performance, public sector job cuts and lack of mortgage lending hits activity and prices.”