The phenomena of too few buyers and too many properties will see house prices fall in the first half of 2011, according to mortgage lender Nationwide.
The average price of a property rose slightly in 2010. In December, the average price of a home was 0.4 per cent higher than in the same month a year earlier, at £162,763. It was the first monthly rise since May.
On balance, prices declined in the last six months of 2010, and Nationwide said this will continue in the first half of 2011 as supply is expected to continue to outstrip demand.
Nationwide chief economist Martin Gahbauer said: “At the moment, there are probably still too few buyers chasing too many properties.
“As a result, the slow drift down in house prices is likely to persist in 2011, at least for the first half of the year.
“Whether it continues into the second half will depend on the flow of new property on to the market.”
Although prices rose 0.4 per cent month-on-month in December, the longer-term picture was one of modest decline, he added.
The quarter-on-quarter figure, which is a more stable indicator of house price movements because it averages out monthly fluctuations, was down 1 per cent compared with 1.3 per cent a month ago.
“Despite December’s increase, house prices have fallen in four out of the last six months and it would be premature to suggest that the recent downward trend has been broken on the basis of one month’s figures,” he added.
House prices lost most of their gains from the first half of the year as mortgages became more difficult to secure and the coalition Government’s decision to scrap home information packs caused an increasing number of properties to be put on the market, he added.
The current downward trend was very slight compared to the depths of the recession in the second half of 2008 when the quarter-on-quarter rate of change dropped as low as -5.5 per cent, he added.