House prices set to plummet by up to 10% in 2011, experts predict

House prices will fall next year, the vast majority of economists canvassed for a poll are predicting.

Fifty of the 56 who took part expect that prices, which have been dropping in recent months, will continue their downward path.

Most did not expect a crash but think a fall of five to ten per cent is likely, according to the survey by the Financial Times.

Gloom: Prices falls of between 5 and 10 per cent are expected next year - although London and the south-east will escape the worst

Gloom: Prices falls of between 5 and 10 per cent are expected next year - although London and the south-east will escape the worst

Slump: The average British home now costs £164,708

Slump: The average British home now costs £164,708, this latest-available set of figures revealed

Chris Williamson, chief economist at the consultancy Markit, said: ‘I expect the traditional three-bed semi outside London to see the worst of any downturn as public sector employees suffer reduced pay or job cuts.’

Ian McCafferty, of the CBI, said prices are ‘likely to slip rather than plummet’ in 2011.
Some economists thought a fall would be a good thing as prices have reached levels which leave millions unable to afford a first home. Willem Buiter, of investment bank Citi and a former member of the Bank of

England’s interest rate-setting committee, said: ‘Anything that reduces house prices has to be a good thing on balance.’

But significant falls would leave many struggling with negative equity, when their mortgage is bigger than the value of their home.

The Royal Institution of Chartered Surveyors expects house prices will be largely unchanged next year, but could drop by ‘a negligible two per cent’.

Australia sees big house price rise

Australia had the fastest-growing house prices in the world in 2010, figures revealed today.

They soared by 9.4 per cent - but the market is not expected to perform as well next year when interest rates go up.

Amazingly, in the first quarter Down Under prices had gone up by 15.9 per cent in the first quarter - after inflation had been taken into account.

France saw 6.8 per cent gains, in Sweden they were up by 5.6 per cent and by 4.7 per cent in Scotland, according to Canada's Scotiabank who looked at figures for 12 leading economies.

There were modest falls in Japan, Italy and Ireland while the United States and Germany saw no overall movement in prices.

Scotiabank analyst Adrienne Warren said: 'While Australia's close trade ties with Asia and resource wealth will continue to underpin a solid pace of domestic activity, higher interest rates will worsen already strained affordability,.'


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