Expert Market Predictions for 2012 – 74% Expect a Fall in a recent poll


With less than a fortnight of 2011 to go, conversation at the UK's dinner tables may already be turning to the future direction of house prices in 2012. Up, down, sideways; a recovery, a nosedive, a consolidation? Here's what the “experts” think.


Halifax – little change

Halifax is predicting little change in house prices in 2012. It says movement could be anywhere between -2% and +2% with only modest variations across the country. The lender's housing economist, Martin Ellis, says: “Prices are likely to be strongest in London and the south-east as these regions perform better economically. House prices outside southern England are expected to be constrained by these areas' weaker economic performance and their greater dependence on public sector employment.”

He believes low interest rates and a lack of housing supply should support house prices next year, even in the face of weak economic growth and rising levels of unemployment. “The path of the economy during 2012 will, to a large extent, depend on how events in the eurozone unfold,” Ellis says. “In addition, the extent to which households choose to reduce their debts will also affect growth over the medium term. As a result, the outlook for both the economy and house prices is particularly uncertain.”

Henry Pryor, buying agent – down 10%

Pryor says homes are currently being overpriced by those trying to sell: “Asking prices from Rightmove and sold prices both from Halifax and Land Registry since the credit crunch show sellers have little appreciation of what has happened to deal prices. Estate agents contribute to this as some of them will give optimistic valuations in the hope of getting the business.”

He believes there will be little improvement in the availability of affordable credit in 2012, and points out that about 1 million people who bought between 2007 and 2009 may no longer have any equity. “This means they have no deposit for the next home and are effectively 'bed blocking' the next generation of first-time buyers who could have expected to buy their properties. For the maths to work, house prices need to fall by more than 10% for them to become affordable with today's mortgage offers.”

Rising unemployment will also be a factor, but housing is still in short supply, he says. “Few sales, less equity being spent in the high street, and falling prices all add up to a pretty miserable 2012. The good news is that apparently 'we're all in the is together' – with the exception of those in Kensington and Chelsea, I suspect.”

Knight Frank – down 5%

Knight Frank, which specialises in the top-end of the property market, is predicting a fall in the average UK house price, and a “slow correction” over the next few years.

Grainne Gilmore, head of UK residential research, says: “After falling by 15% in 2008 it was widely forecast that the market would dip again the following year, but this failed to happen – largely because of the drop in interest rates. We believe this correction is still to come, but that it has been pushed further and further out because of low base rates.”

She says in 2012 prices will fall amid “a perfect storm of a struggling economy, public sector cuts and rising unemployment … As interest rates start to rise, prices will struggle to maintain any notable growth until 2015.”

Knight Frank predicts the prime central London market will continue to be very different from the rest of the UK. Here, it suggests, prices will rise by 5% in 2012 before pausing in 2013 and rising by a further 4% in 2014.

Cumulatively, it says, prices will rise 24% by the end of 2016. This is being driven by a weak pound, renewed wealth creation in emerging markets, the search for safe-haven assets and flight capital from overseas.

Rightmove – a rise of 2%

According to Rightmove's Miles Shipside, naitonal house prices will rise by “circa 2%” in 2012. He says: “It is clear that in these turbulent times the UK housing market is made up of many fragmented micro-markets that are performing very differently. Those that are involved in buying or selling in 2012 need to understand their local market dynamics to help them deliver the right recipe for success. That will include gauging under or oversupply of property types; buyer demographics and mortgage profiling; unemployment concerns and exposure to public sector cuts or the likelihood of external investment.”

Howard Archer, chief UK economist at IHS Global Insight – down 5%

Archer believes the first half of 2012 will see a 5% drop in prices, but the market will remain flat in the second six months of the year. He says the market will be weighed down by “squeezed purchasing power, a now markedly weakening labour market and major concerns over the economic outlook … On top of that, there still seem to be significant difficulties in getting a mortgage for many people, notably including the need to raise high deposits (particularly for first-time buyers).”

Archer says these factors will outweigh the benefits of low interest rates, while the government scheme to back 95% mortgages is too small-scale an initiative to make any significant difference to prices.

He adds: “The squeeze on consumers' purchasing power should ease as 2012 progresses as inflation falls back markedly, and this may help house prices to stabilize in the second half of 2012 along with ongoing very low interest rates. However, unemployment is likely to rise appreciably further and wage growth looks set to remain muted, so the overall environment will still be very tough for households.”

Nationwide building society – uncertain

“The outlook for house prices remains uncertain, but with the UK economic recovery expected to remain sluggish next year, house price growth is also likely to remain soft, with prices moving sideways or drifting modestly lower in 2012. The ultra-low interest rate environment that has helped to provide support for the housing market is likely to persist through 2012. The Bank of England will need to be convinced that the UK recovery is gaining momentum before it starts to contemplate raising interest rates – this is not likely to happen until 2013.”

National Association of Estate Agents – gradual recovery

NAEA chief executive Peter Bolton King says 2012 will see a “gradual” recovery for the UK property market, as it continues to bounce along the bottom. He adds: “I don't believe that we will see a significant fall in house prices over the next 12 months as some have feared. But equally, it is unlikely we will see any great upturn to help the market back to full capacity. It is likely that property transactions will remain at a similar level to that in 2011.”

Tracy Kellett, BDI Home Finders – down 6%

Kellett does not believe the market will crash. “Technically it should, but low interest rates mean relatively few repossessions and distressed sales as mortgages remain very affordable. Supply will remain low and it is bolstered by the very high cost of renting, particularly in the south-east – therefore people will prefer to buy if they can so supply and demand will maintain an artificially stable market.”

She predicts prices will drop 5% in the south-east but adds: “These averages will be made up of good properties doing well and being highly in demand – getting 2007 prices – but compromised properties falling dramatically as buyers become even more discerning and cautious. The rest of the UK will consist of affluent hotspots and areas severely hit by economic factors.”

Although Kellett predicts a fall of 6% nationwide, she says average UK house prices should be taken with a pinch of salt. She believes central London will remain buoyant due to lack of supply and is predicting a 5% rise in prices in 2012. “I see price falls rippling out from London suburbs across the UK in concentric circles, getting worse as they spread, with hotspots of stable economy towns and especially desirable properties being protected somewhat.”

What are your forecasts for house prices in 2012? Vote and give your reasons below

What will happen to house prices in 2012?

 27.5% Fall by more than 10%
 25.3% Fall by 5%-10%
 21.2% Fall by up to 5%
 18.1% Stay the same
 4.4% Rise by up to 5%
 0.9% Rise by 5%-10%
 2.6% Rise by more than 10%