Citywire for Financial Professionals
Stay connected:

View the article online at

House prices stuck in the mud for 2011

It looks as though 2011 is going to be another dull year for the property market with house prices largely static or slipping – but not collapsing.


It looks as though 2011 is going to be another dull year for the property market with house prices largely static or slipping – but not collapsing.

Silver lining

First-time buyers hoping for a big drop to make homes more affordable are likely to be disappointed. But on a more cheery note, interest rates are likely to remain low.

The big imponderable is whether arrears and repossessions will rise on the back of public sector redundancies, hitting homebuyers’ confidence. The number of public sector employees fell by 33,000 to 6.01 million in the three months to October but about ten times that number are expected to lose their jobs over the next four years.

Price falls

Average house prices have gone nowhere in 2010. Nearly all the increase happened in the first half of 2010 and in recent months prices have been falling. Nationwide recorded a fall of 2% for the three months to the end of November. House prices now stand at only 0.4% above their 2010 starting level according to Nationwide while Halifax puts the annual rate at minus 0.7%. Land Registry figures which record actual house prices – but are usually at least six months out of date – put the annual rate of house price increases at 3.4%.

Yolanda Barnes of estate agent Savills points out that, ‘average UK house prices have already fallen during the second half of 2010 and we expect this to continue in 2011.’ She predicts a decline of 0.5% for 2010 with a further drop of 3% in 2011.

As usual, London and the south east will lead the way. ‘There are significant regional variations around this average – with the North and Midlands significantly underperforming London and the South. These variations also apply to different types of property,’ says Barnes. 

Savills reckons prime central London will continue out-performing with only small falls during 2011 of around 1%. Top quality stock, ‘will out-perform the average over the next five years by about 5%. Poor quality stock on the other hand will underperform by around minus 5%. Over the medium term, we expect house prices in London and the south east to be 25% to 30% higher in five years than they are now but prices in the north east and Yorkshire & Humberside barely changed. At the end of 2015, we expect average UK house prices to be just 12% higher than they are now,’ says Barnes.

Liam Bailey of agents Knight Frank is not expecting any fireworks either. ‘The mortgage market has been constrained by tight lending and there is unlikely to be any increase. Our estimate is of a 6% fall in house prices due to the risk of interest rate rises and the impact of government cuts.’ But like Barnes he thinks there will be a two-tier market. ‘Anything that is top quality performs differently from the rest of the market and there is more certainty of a sale with wealthier buyers who have cash. The premium property market has been much more resilient and we expect that to continue in 2011.’

Meanwhile, the Royal Institution of Chartered Surveyors is predicting a dip of 2% in house prices over the coming year with the possibility of a 5% decline if government austerity measures push up unemployment. ‘Although house prices are likely to continue to slip over the coming months, falling supply should provide a platform for the market to stabilise at some stage in the first half of 2011,’ says Simon Rubinsohn, RICS chief economist.  ‘Indeed, by the latter part of the year, prices could be edging up again, with the result that by the end of 2011, they may not be very different from where they currently stand.’

Low interest rates

The good news is that interest rates are likely to remain low – even if they do start to edge up later in the year. ‘It is unlikely that Bank base rate will rise significantly in the short term and it is quite possible that it will remain unchanged at its current level of 0.5% for the whole of next year,’ the Council of Mortgage Lenders is predicting. ‘Continuing low interest rates will underpin house prices and keep arrears and repossessions in check.’

And with the exception of the Confederation of British Industry, which is predicting Bank base rate at 2.75% within two years, most experts believe interest rates will remain low during 2011. ‘Despite short-term worries about inflation, low interest rates will be needed for an extended period, not only to support the economy but also to help re-capitalise our banks,’ says Ray Boulger of mortgage broker John Charcol who has a good track record on predictions.

‘It would therefore not be surprising if Bank rate remains at 0.5% throughout 2011, although a small rise to 1% in the second half of the year is equally likely.’ Boulger predicts that house prices are likely to drift slightly lower during 2011, ‘but low interest rates will prevent a significant fall. House prices will end the year with a small net gain of about 2%.’

Sign in / register to view full article on one page

14 comments so far. Why not have your say?

Dislexic Landlord

Dec 27, 2010 at 18:44

well not a lot of suprises there

Im hopeing for futher drops this is the best time BTL has had in years

you need deep pockets to do the deal but if you have the cash buy buy buy

report this


Dec 27, 2010 at 19:47

...and adding to Dyslexic's comment, booming rental demand means better cashflow than ever for landlords. As I predicted over a year ago, we are now in a phase of acute shortages of rental accommodation and rents are going to double over the next five years at this rate of increase. 2011 could be one of the best years for buying investment property in UK...if you can wade through all the rubbish put out by doomsayers...cheaper property is A Good Thing

report this

Peter Jason Taylor

Dec 28, 2010 at 11:14

Outright owners like "dyslexic landlord" and Landlord X can reasonably sit tight. But highly leveraged owners on variable rates will suffer much higher interest charges and an inability to remortgage on reasonable terms. Increasing rents will not keep pace with the interest they have to pay, and some will succumb to repossessions and forced sales. Then will be the time for cash buyers to pounce.

report this

John Howard Norfolk

Dec 28, 2010 at 11:26

If we could take the word "likely" out of Lorna Bourke's writing it would be far more exciting!!

report this

William Phillips

Dec 28, 2010 at 11:29

All the 'experts' quoted are people with vested interests in maintaining confidence in property as an asset class. Asking such people if the market is going to be in trouble is like asking a butcher if meat is tasty.

Has there ever been a recorded instance of an estate agent, moneylender or surveyor predicting a collapse in house prices? Yet collapse they do-- not often, and not for long, but painfully and without warning.

Britain nurses so fatuous a faith in bricks 'n' mortar that most people would be less surprised by a European country going bankrupt than by a 30-40% slide in the value of their precious little rabbit hutch.

report this

mark douglas

Dec 28, 2010 at 12:37

so run rabbits run rabbits run run run.

bang bang bang goes the farmer's gun, no wait the little rabbits are still breading, keep your powder dry.

either rates are raised to prevent inflation or they will chase it once it's out of the gate but they WILL rise.

report this

Peter Jason Taylor

Dec 28, 2010 at 12:51

The permanent value of property is in the land, not the bricks and mortar.

report this

robert munro

Dec 28, 2010 at 13:16

If the land is where land is wanted. It might be today but tomorrow?

report this

allan c

Dec 28, 2010 at 14:14

welll ive bought one cottage at a very low price completed on a friday and rented out on the monday.

looking at another ...though one this year will be my limit as deposit money is drying up, prices are low and really i dont intend to sell any for a long time,

report this


Dec 28, 2010 at 15:20

"The good news is that interest rates are likely to remain low "

Good news??????

Not for the very many of us who rely upon interest income to make ends meet. Just when can savers look forward to "good news" and stop subsidising mortgagees?

report this


Dec 28, 2010 at 15:29

A drop in house prices by a few percent would not make much differance.

My concern is that

1/ banks are now showing sufficient profits to remove their over mortgaged properties from their books.Dumping significant numbers of properties through auctions.

The government and councils are reducing the rent they are prepared to pay. Another bunch of over extended landlords becoming Insolvent or bankrupt and more properties on the market.

University fees increasing and students will want to go to uni near their home, living at home saves rental payments etc. How many landlords are reliant on the students.

The property building companies have to start building again on their substantial tranches of land and then sell at any price to keep the cash flow going. Again a reduction of values.

So my advice is to wait until April or May check on the prices and it should be a good time to buy or see if is still falling to chose your time to jump in. Cash is king.

If however you are looking for top of the range properties there are limited quantities so the prices should be stable.

So what can i say

Happy New Year and be careful out there

report this

Peter Thoresen

Dec 28, 2010 at 22:04

Look at the US. Interest rates are going to go up dramatically. The housing market can still collapse. Get out of bonds and property. The stock market may appear to recover but in reality will fall as the dollar and pound devalue due to QE. Gold and silver are the place to be for the short to medium terms........ historically undervalued in real terms and not in a bubble (contrary to the press who are influenced by the banks and government who dare not allow anyone think that there's a safer place for money than a bank paying 0.1%.)

report this

Chris Powell

Dec 29, 2010 at 09:48

Gold will crash it’s not if it is when. When normal times arrive, the gold price will collapse and I think that time is soon. To say gold is safe and to compare it to cash is stupidity of the highest level. The history shows gold over the long term (100 years) is a poor investment and you can lose most of your money if the timing is wrong!

report this


Dec 29, 2010 at 18:13

My niece in Catford had a purchaser who, on the day they were to exchange contracts last week, reduced his offer by 20%. They have been assured by two agents that their property was not overpriced. This is the second time they have been ‘gazundered’ (a word we are sadly getting used to) and they again refused. Trouble is, their son is due to start school soon and has to be registered by 15 January. Do they try and get a bridging loan or let the new property slip through their fingers? Any advice welcome.....

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts

In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet