At the start of the year the Royal Institute of Chartered Surveyors predicted that prices would fall by 10% in 2009 but now due to a considerable shift in sentiment in the housing market over the past few months which has seen prices starting to pick-up in some areas, it now predicts a brighter outlook.
It now looks likely that the average house price in the fourth quarter of 2009 could be slightly higher than the same period in 2008, RICS says in its latest housing market survey.
However this does not indicate a quick return to the boom time, as activity remains very weak by historical standards, the report points out. Although mortgage approvals have gradually improved recently even if they continue to do so transaction levels would still be well below the long-run average as a significant increase in approvals is still being hampered by the limited availability of mortgage finance.
It also warns that a return to a more orderly market is still some way off. The new instructions balance has been in negative territory for 26 consecutive months and this lack of supply has been giving some support to house prices in recent months, it says. Also while buyer demand has improved, further increases in mortgage rates, rising unemployment or prolonged weakness in the economy could all challenge the emerging recovery in the market.
'There has been a clear change in the housing market over the past few months and, as a result, it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year. Instead, the return of buyer demand and the limited availability of housing on the market could be enough to support prices so it wouldn't be surprising to actually see prices increase further from here in the short term,' said RICS senior economist Brigid O'Leary.
'However, the outlook for 2010 is fairly uncertain and there is a real risk that prices may slip back again. Affordability is still stretched and mortgage finance, while improving, is fairly hard to come by. The positive news we have seen has been a recovery from record lows and there are still many uncertainties in the economy. In particular, we are concerned about the mortgage finance environment and the impact of further increases in unemployment on house prices,' she added.
Meanwhile the report adds that the lack of new house building, which was already a major cause for alarm, has been exacerbated by the recession. Housing completions in England could come in at around 75,000 this year and failing to address this issue will add significantly to affordability pressures in the future, the report says.
Indeed, the latest NHBC figures show private sector housing starts are down 36% on a year ago although they have reached the highest point in almost a year. Some 21,637 applications were received by the NHBC to start new homes in the combined private and public sectors during the last three months, a 12% rise on the previous quarter.
However, there is a significant fluctuation in the number of applications across the UK, with figures for some regions, including Greater London and Merseyside, more than 50% down on a year ago.
