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UK property prices to fall 1% in 2010, according to new report

The year-on-year fall in real estate prices eased to 1.9% and is now at its smallest since May 2008, according to property data company Hometrack.

But the monthly pace of property price rises has seen a seasonal slowdown to 0.1% in December from 0.2% in November.

Last year Hometrack predicted prices would fall 10% in 2009 but a recovery in prices in the latter part of the year has made it a better 12 months than many predicted with some indices, most notably from the Halifax and Nationwide, showing that prices rose by around 2% in the year to November.

An unexpectedly buoyant demand and a chronic lack of properties for sale were the key drivers of the real estate market in 2009, according to Richard Donnell, director of research at Hometrack.

‘While a scarcity of housing for sale is set to remain an important feature of the market in 2010 it is the prospects for demand that will dictate the outlook for prices in the next 12 months,’ he said.

Estate agents surveyed by Hometrack reported a 41% increase in registrations from prospective buyers in 2009, while the supply of property rose by just 7%.

Hometrack said this pattern was likely to continue in 2010, with a pace of sales equivalent to the average household moving just once every 25 years leading to volatile prices.

However, a probable rise in unemployment and growing concern about tax rises and spending cuts after an election due by June were likely to limit demand, it also said.

‘Against the backdrop of low sales volumes, equity-rich households could continue to put upward pressure on prices in localised markets in 2010.

Yet a sustainable and broad based recovery in the housing market needs a broader base of buyers,’ Donnell added.

While Hometrack is not expecting the market to move upwards by much others are predicting a more positive outlook for 2010/ Most notably the Centre for Economics and Business Research (CEBR),  said it believes prices will be 2 to 4%  higher by the end of the year, despite concerns about economic recovery and a predicted rise in unemployment.

‘We still expect house prices to be around 15% higher at the end of 2012 than today,’ said Ben Read, managing economist. Estate agents Chestertons and Hamptons are also forecasting a rise of between 2 and 4%.