I thought I’d round up a bunch of house price predictions for 2011, like I did last year [1].
Well, obviously last year the predictions were for 2010, not 2011. They ranged from the bearish -10% of Capital Economics to broker John Charcol’s indecisive and unfeasibly bullish 4-9% rise.
As it turned out, UK house prices fell 1.6% [2] over 2010, according to the Halifax House Price index [3].
The decline left the ‘average’ UK house 18.5% cheaper at £162,435, compared to £199,766 at the 2007 peak. Quite a drop – and those are in nominal terms, too. Adjusting for inflation, the real decline will be more like 25%.1 [4].
The entirely honorary prize for the most accurate prediction for 2010 goes to upscale estate agents Savills, which predicted a 3% decline, easily beating the rest. Who said you couldn’t trust an estate agent?
Down your way?
Of course, you don’t need me to tell you that the ‘average’ UK house is a phantasm at the end of a cul-de-sac off the Watford Gap, and that local prices are all over the place.
Conwy in Wales, for instance, saw prices rise by 13% in 2010. In Aberdeenshire prices remain 46% ahead over five years, compared to just 1% higher for the UK as a whole.
The Halifax figures are less reliable than they once were, too, due to the mortgage drought. Here in London, many expensive homes are now purchased mortgage-free, and for the past 18 months they’ve been largely bought by upscale overseas buyers flush with a valuable currency.
That’s pushed prices in the top postcodes to all-time highs. But due to it only recording properties bought with its mortgages, you won’t find this recorded in Halifax’s index, which still has London prices well down on 2007.
Nevertheless, I like to follow the Halifax index because it’s the longest running data set. The trends all tend to converge over time, anyway.
House prices in 2011
Without further ado, here’s what the pundits predict for 2011:
| Prediction | Source | |
| Jonathan Davis (HousePriceCrash.co.uk [5]) | -10% | BBC News [6] |
| Capital Economics | -10% | BBC News [6] |
| Halifax | -7% | The Guardian [7] |
| Savills | -3% | Savills PR [8] |
| Hometrack | -2% | The Telegraph [9] [8] |
| Royal Institute of Chartered Surveyors | -2% | BBC News [6] |
| Centre for Economics and Business Research | 0% | Daily Mail [10] |
| Nationwide | 0% | This is Money [11] |
| John Charcol (Broker) | 2% | BBC News [6] [11] |
All predictions are for movement in the UK average national house price. The ‘source’ column links to where the prediction was cited. No predictions are more than a month old.
In some cases, these are summaries of more nuanced views – or more dubiously specific ones, depending on your perspective.
The Council of Mortgage Lenders, for example, offers a very detailed rationale for its forecast [12], which I couldn’t really summarize. Then again, its members aren’t doing much lending, so I guess it has a lot of time on its hands!
I feel prices should be going lower, but I have to be wary of my London bias. Truth is I am surprised to see prices down so much across the rest of the country. Affordability has improved in the provinces, too.
Another 10% off and I’d start wondering if it was time to load up on housebuilding shares. As I’ve written several times, I don’t think the spending cuts will be half as painful for working people as is popularly supposed, and my prediction last year that Britain had recovered [13] is now evident on the ground.
Interest rates are still low, too, and given the way they look set to hand out big bonuses, the banks may have the money to increase the flow of mortgages.
On the other hand, my prediction of a 5% advance in prices in 2010 was well off the mark, especially as while I predicted any surprise would be to the downside, I said it would be probably be due to a shock interest rate rise. Oops!
Also, property still looks expensive by several measures. I’ll recap these ways of trying to value houses in a future post, so please do subscribe [14].
Where do you think UK house prices will end the year? Tell us below, with a link if it’s not your prediction. Maybe I’ll give a prize if we’re all here in 2011!
- Sorry, it’s late and I haven’t worked out the accurate deflated figure. 25% is a guess! [↩ [19]]