The UK Property market is set to stagnate further according to the latest forecasts from market analysts, however, property value is set to pick up next year and could see house prices increase by up to 5%.
According to Halifax’s latest report, there was a drop of 0.5% in October after a similar decline in September – this marks the first time since 2005 that property prices have dropped across two consecutive months.
This latest drop has reduced the annual rate of house inflation to 8.9% for the year to the end of October, which is down from a peak of 11.4% in August.
Despite falling house prices, there are still positive reports coming in suggesting that this is simply a ‘glitch’ in the market as the economy stabilises itself following the turbulence of the recent credit crunch. But as the effects of high interest rates and inflated mortgage repayments linger, there is a fear that the number of repossessions may well see an increase – from 30,000 in 2007 to an estimated 45,000 in 2008.
Yet the difficulties experienced by the credit squeeze will be followed by a period of growth, according to estate agents, Savills, with London, the South East and Scotland out performing other regions. House prices in these areas are looking at an increase of 5%, while the South West will rise by 3%. The regions likely to see the smallest increase are thought to be the North East and North West where a mere 0.5% lift is expected.
Commenting on the trends, Martin Ellis, Chief Economist at Halifax, said: "House prices fell by 0.5 per cent in October. Prices in the three months to October were 0.3% higher than in the previous quarter – a good guide to the underlying trend - continuing the steady easing in house price growth since the end of 2006. The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity.
“The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices,” he adds.
Other factors set to affect the market include the further rolling out of the Home Information Packs scheme for one and two bedroom properties which may contribute to a drop in the number of available properties for sale and push up house prices further.
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