House price growth experienced the usual seasonal slowdown in December on the back of a fall in the volume of sales agreed and the first monthly decline in buyer demand (-2.2%) since January 2009.

Property research group Hometrack said in it’s latest monthly report that rising unemployment, strained household incomes and a fragile economic backdrop are likely to push house prices lower in 2010.

Average house prices during December were up 0.1% over the month, following a 0.2% increase in November, although price rises were limited to just 11% of the country. House prices ended the year -1.9% lower than in the same period a year earlier.

Buoyant demand and a chronic lack of housing for sale were the key drivers of the housing market in 2009. A scarcity of housing for sale is set to remain an important feature of the market in 2010 but it is the prospects for demand that will dictate the outlook for prices in the next 12 months.

Hometrack believes that a supply/demand imbalance will continue over the next 12 months. Over the last year, estate agents across the country registered a 41% increase in demand while in London this figure reached 70%. In contrast the volume of homes for sale across the country grew by just 7%. In the South East there was a fall in the number of homes for sale while in London and the South West supply grew by 2%.

General scarcity of housing for sale looks set to continue.
Looking ahead Hometrack expects the general scarcity of housing for sale to continue – a trend that will continue to act as a support to prices. Housing sales are expected to remain below 1m a year for the foreseeable future and as supply remains constrained so we are likely to see continued house price volatility at both a national and local level.

Richard Donnell, Director Research, Hometrack said: “The New Year will see a growing focus on the election and further speculation over possible changes to fiscal policies and Government spending. On the basis of the economic outlook and market evidence Hometrack believes that it is unlikely that the improved market conditions of 2009 will be replicated in the New Year.

Hometrack’s central forecast is that UK house price will fall by 1% in 2010, following no growth in prices over 2009.”