House prices look likely to end the year higher than they started, according to a new report by the Royal Institution of Chartered Surveyors (RICS).
The RICS Housing Market report for August 2009 predicts an annual rise in house prices following a significant shift in sentiment in the housing market over the past few months. RICS no longer expects house prices to fall by 10 per cent in 2009, as was predicted at the beginning of the year. Instead, it is now expected that the average house price will be slightly higher than in the last quarter of 2008.
However, the report warned that the market still faces considerable challenges in 2009, as the predicted rise in prices does not indicate a quick recovery. Activity is still very weak by historical standards and is well below the long-term average, due to the limited availability of mortgage finance hampering mortgage approvals. Therefore, a return to a more orderly market is still some way off.
RICS senior economist, Brigid O'Leary, said: "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. That would be consistent with more positive expectations that have been reported in recent RICS Housing Market Surveys.
"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."