UK Housing Demand 2007 to 2010 and forecasts for 2011 and 2012
This chart shows why UK house prices will fall in 2011 (click to enlarge).
We’ve seen two significant periods in UK housing demand since 2007. Firstly , the 25% fall in UK property prices in 2008 was driven by a collapse in demand which began in late 2007.
Secondly, the 2009 recovery (of around 8 to 10%) was driven by lack of supply.
We are now clearly into a third and relatively new phase – following the abolishing of HIPS plus increased tax on capital gains, which has pushed up supply of property sharply (vendor instructions) just as tax rises and weaker job prospects cut back demand.
Almost certainly, 2011will be a year of falling property prices and nearly every property price forecast is predicting this.
2010 property prices will end down too.
The key question is what will happen to prices in 2012? Well, demand, not supply is now the key measure which will either undermine or support property prices. And demand will be strongly influenced by mortgage rates, unemployment prospects and net take home pay.
Needless to say, it is unlikely that any of these three factors will be significantly stronger in 2012 than 2010.