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House prices limited by lack of stock

A lack of stock is set to limit house prices in 2012, according to the RICS Housing Market Forecast.

The report shows that prices at a headline level will fall by around 3%, but significant decline will be prevented by low levels of supply. Transaction levels will see a slight resurgence to around 880,000 - though this is still only half of all sales in 2006.

Simon Rubinsohn, RCIS chief economist commented: “Transaction levels should see a slight increase, although mortgage lending is likely to remain subdued which will limit the scope for improvement.

“As a result of this, the lettings market will remain firm which means that rents are likely to increase further, albeit at a slower pace than in 2011.”

Over the next six months the weak economic picture means that demand for property is unlikely to increase, and alongside the prospect of unemployment, the market should remain broadly flat, despite the Government’s recent attempts to help more buyers onto the property ladder.

By contrast, the residential lettings market will perform well during 2012, but as the gap between demand and supply shrinks, evidence suggests that rental values will eventually slow down as the year goes on.

Simon added: “The general economic climate is likely to be the biggest influence on the residential property market next year.

“Prices could edge a little lower as unemployment continues to rise.

“However, the lack of supply in the market is likely to prevent any significant house price declines.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .