House prices will be ‘more or less flat’ in 2011

In contrast, January 2010 saw a 1.5% monthly increase in house prices, as overly optimistic sellers were carried away by the resumption of UK economic growth.

Independent forecasts for house price growth in 2011 are predictably varied with some expecting steep falls but very few expecting significant increases. The majority opinion is that house prices will be more or less flat in 2011 as loose monetary policy offsets tighter fiscal policy to some extent.

The key to the housing market recovery will be a steady increase in mortgage lending, which recently rose for the first time since April 2010 according to the latest data. This is undoubtedly achievable if monetary policy makers have the resolve to keep interest rates low despite consumer price inflation threatening to breach the 4% barrier in the short term.

Robert Bartlett, Chesterton Humberts’ CEO, comments:

“Transaction levels are picking up but continuing shortage of mortgage finance and reluctance of owners to bring stock to market are holding back activity.    

“While the Chesterton Humberts/CEBR House Price Poll of Polls showed house prices ending the year in a slight decline, we don’t expect a dramatic downturn in values.  If the availability of mortgage finance improves we would expect to see an uptick in transaction levels due to pent up demand.” 

Douglas McWilliams, Chief Executive of CEBR, comments:

“We are encouraged, but not overjoyed, by recent the stabilisation of mortgage lending volumes, albeit at woefully low levels. The Monetary Policy Committee must ensure that lending volumes continue to rise by having the resolve to maintain the base rate at its historic low as inflation is almost certain to fall back in the medium term. However, the government also needs to play its part by encouraging the banks to increase their lending with the various carrots and sticks at their disposal.”

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