Halifax: 2012 house price forecast

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by Gill Montia

In its housing market outlook for 2012, Halifax is predicting little change in house prices, which could fall up to 2%, or see a 2% rise.

With the Bank of England’s base rate likely to end 2012 at 0.5%, the lender expects favourable affordability, low levels of forced selling and a long-term supply / demand imbalance to underpin the market.

However, weak economic growth, pressure on household finances and mortgage funding pressures will be running alongside.

According to Halifax’s housing economist, Martin Ellis, steady market conditions have helped to stabilise house prices and sales in 2011, with a similar outcome expected for 2012, as the market continues to lack any real direction.

On the one hand, typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in mid-2007 to 26% today.

On the other hand, the ratio of house prices to earnings is still above its long-term average and any price growth is therefore likely to remain weak over the coming few years, Mr Ellis suggests.

On a regional basis, economic factors are likely to mean that prices will be strongest in London and the South East in 2012, whereas house price movements outside southern England are expected to be constrained.