UK house prices may extend their decline in 2011 before stabilization

UK house prices may extend their decline in 2011 before "stabilization" as a shortage of supply helps to limit falls, the Royal Institution of Chartered Surveyors said.

The indicators "point to the downward trend in the stabilization of the spring with prices starting to creep up again before the end of the year," the group said in a statement today in London. Prices in the fourth quarter of 2011 may be a "negligible" 2 percent compared with current levels.

The demand for housing has weakened as banks restrict credit and the British are prepared to cut public spending and raising taxes to reduce the budget deficit. While RICS said there is a "risk" of the tax burden could be more damaging than expected, "even in this environment, our view is that the lack of new supply is likely to prevent the fall that amounts to much more than 5 percent "in 2011.

The group also said there was "little reason" to believe that easier access to mortgages early next year, citing the Bank of England Credit Conditions Survey.

At the same time, the need for lenders to refinance loans that the Bank of England ends some of its liquidity programs could mean higher costs, which in all probability, is likely to be passed to borrowers. "

"The alternative outcome would be for banks to reduce the balance and control the availability of credit to an extent even greater than is currently the case," said RICS.

At least seven measures of housing prices, recent data have painted a mixed picture of the UK market. Acadametrics Ltd. and LSL Property Services Plc said on 10 December that the price of housing rose to the highest in more than two years in November. Mortgage lender Halifax said prices fell 0.1 percent, while indicator RICS held near the lowest in 18 months.

Housing standards-transaction "falls flat as mortgage lending remains low for another year," said RICS chief economist Simon Rubinsohn in today's report. However, "reducing the gap between supply and demand is the gentle downward trend in prices is taking place at least partially reversed in the year carries on."