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House prices are likely to drop by an average 3% over the coming year, predict estate agents.
The number of homes sold may climb, but wider economic problems and the fear of losing jobs will keep the market flat, says the Royal Institution of Chartered Surveyors.
Even increasing house sales to around 880,000 for the year will see the market running at half the 1.67 million properties bought and sold in 2006.
Estate agents are expecting a tough six months, with little help to improve the market from government schemes supporting first time buyers like the mortgage indemnity scheme.
Their view is supported by the Council of Mortgage Lenders which has already warned that mortgage funds available for 2012 are unlikely to exceed this year’s £130 billion.
Buy to let is likely to continue performing well, says RICS, with a strong demand to rent from would-be first time buyers who cannot raise funds to purchase a home.
Simon Rubinsohn, RICS chief economist, said: “The general economic climate is likely to be the biggest influence on the residential property market next year. Prices could edge a little lower as unemployment continues to rise. However, the lack of supply in the market is likely to prevent any significant house price declines.
“Transaction levels should see a slight increase, although mortgage lending is likely to remain subdued which will limit the scope for improvement. As a result of this, the lettings market will remain firm which means that rents are likely to increase further, albeit at a slower pace than in 2011.”
Meanwhile, while would-be buyers do not have the finances to purchase and the number of homes available to let dwindles, the number of empty homes in England has risen to 662,105, according to the Halifax.
The number has climbed by almost 2% over the past 12 months.
An empty home is a property that is between occupants, undergoing modernisation, in disrepair or awaiting demolition.
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