2010 Housing Market Predictions

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by: Sharon Flaherty
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Word Count: 554
Date: Fri, 5 Feb 2010 Time: 8:55 AM
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Looking back at 2009, the housing market was surprisingly resilient in the face of continued recessionary difficulties.

Although a lack of mortgage lending still dogged many would-be borrowers throughout the course of the year, mortgage lending did seem to get better towards the end of 2009, with mortgage lenders coming out with more rates of interest and higher loan-to-values.

House prices also didn't suffer as badly as they could have, and even rose in some months of the year, according to various house price indices.

Added to this was the fact that the number of homes repossessed or taken back into ownership by lenders even begun to decline by the third quarter of 2009 on the start of the year*.

And of course, the low interest rate environment - where the Bank of England Base Rate was held at 0.5 per cent for nine months - arguably improved the fortunes of the housing market.

Taken together, this could make some people positive on the outlook for the housing market for 2010, so what is likely to be in store?

What to expect from 2010

Well, if a survey conducted with consumers and by the Building Societies Association (BSA) is anything to go by, then property prices will rise by 3 per cent in 2010.

The Royal Institution of Chartered Surveyors (RICS) -a respected source of house price information - expects more properties will be put up for sale in 2010, and that more sales will be completed as a result. Importantly, it believes that at the end of 2010, house prices will finish one or two per cent higher than 2009 levels.
At the same time, the National Association of Estate Agents (NAEA)are forecasting that in some parts of the country, house prices may even drop slightly in the first half of the year, to then pick back up and remain stable in the second half of 2010.

Finally, Capital Economics, a leading economic research consultancy says it is difficult to predict when house prices will change but has pencilled in falls of 10 per cent in 2010, and falls of 5 per cent in 2011.

What are the barriers to a healthy housing market?

The high rate of unemployment is an obvious block to a housing market recovery as the lack of job security means people are less likely to move home, or try to climb the property ladder.

First-time buyers are also still being locked out of the housing market and although there is still pent up demand, high deposit requirements are preventing many from buying a home.

And of course, another underlying reason as to why the housing market may remain a little constrained in 2010 is mortgage lenders aren't lending enough to kick-start a recovery, although there were some positive moves at the end of 2009, which potentially bodes well for 2010.

Moreover though, a 2010 housing market recovery is hanging on what the Bank of England decides to do with interest rates. For the last nine months, the bank has held them steady at 0.5 per cent, which brought some security to mortgage holders and arguably propped up the housing market, so what happens there is likely to be vital to the housing market in 2010...

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