House Prices Fell by 1.3% in 2011

Data released by the Halifax suggests that house prices fell by a total of 1.3% in the year of 2011.  The bank said that the housing market had been surprisingly resilient in the face of falling incomes and a deteriorating economy, but it cited a house price fall of 0.9% for the month of December 2011.  This brought the average house price down to £160, 063.

The lender predicted that property value would remain stable in 2012, but admitted that the outlook was uncertain.  If the UK can avoid recession, we expect broad stability in house prices in 2012, said Halifax housing economist Martin Ellis.  There is however, considerable uncertainty regarding the prospects for the UK economy, which will, to a large extent, depend on how events in the eurozone unfold.  In addition, the extent to which households choose to reduce their debts will also affect growth.

The UK property market was stagnant in 2011, as lenders continued to ration their mortgage products and rising unemployment further eroded the number of potential home buyers.  According to official figures, sales in the eleven months to November were 3% down on the previous year. With the Council of Mortgage Lenders (CML) predicting a further drop in lending this year, sales numbers are set to continue falling.  This continuing downward trend may well push asking prices down.

The Bank of England has also warned that lenders were preparing to be even more stringent with their mortgage lending criteria in the first few months of 2012.  They are worried that falling house prices might undermine the security of their existing loans and that the worsening state of the economy will have a negative impact on the ability of borrowers to repay.

Conversely, the Nationwide cited a 1% rise in property prices for the year of 2011, even though the building society cited a 0.2% fall in the market for December.  It values the average house slightly higher than the Halifax, at £163,822.