Britain's housing market is set to grind to a halt this year as worried consumers think twice before moving house and banks continue to be wary about lending, according to the Centre for Economics and Business Research.

The CEBR economists said that after year-on-year growth of 6.4% in 2010, the housing market recovery would stall in 2011, leaving house prices 1.7% lower by the end of the year.

The decline could be good news for first-time buyers if they can come up with the large deposits now required by most lenders. The thinktank believes affordability for first-time buyers will reach an 8-year high this year thanks to low mortgage rates and weakening house price growth. First-time buyers are expected to spend a quarter of their disposable incomes, on average, on mortgage payments.

The CEBR's chief executive Douglas McWilliams said: "We expect house prices to grow tentatively over the coming years, given that household incomes are being squeezed and banks are still wary of lending. There is currently significant uncertainty in the market caused by the government's spending cuts and a choppy recovery, which has greatly impacted transaction levels."

The thinktank said rising unemployment and anaemic growth in take-home pay would drag down demand for housing and bring down prices, particularly in regions most vulnerable to austerity cuts such as northern England.

Bank of England governor Mervyn King recently warned that families faced the worst squeeze on their spending power since the 1920s, with inflation-adjusted wages falling over the last six years. House price growth is set to resume, but at a slow pace from 2012 as banks' lending criteria are relaxed and consumer confidence recovers.

Shehan Mohamed, the report's author and economist at CEBR, said lower consumer confidence would rein in demand for mortgages, which will average around 50,000 per month – still around 50% lower than pre-credit crunch levels.

http://www.guardian.co.uk/business/2011 ... ll-in-2011

Suits me

last years price gains were always unsustainable. The Bank of England's liquidity programs mean that the banks did not have to foreclose. Plus the change in accounting rules that effectively allow them to keep them on their books for more than they are really worth because they decide that they are worth more. Eventually that trick will be exposed and there will be another credit crunch because the banks assets are not worth anything like the reported figures. I still think we have a huge property bubble and it still has to properly deflate.

My sister and brother in law are struggling to afford a small three bedroom house and they've got 30k in cash, it's ridiculous! I think they're mad to buy at the moment, but you know what some people are like.

You say that, but every year they wait is another years rent down the drain.

That's exactly why we have just bought a house - the difficulty of getting a mortgage for many inflated the demand for rented houses, pushing the rent prices way up. £800+ pcm rent a standard family home is taking the p!ss.

We made the move because there was a real danger of us hanging on too long and eating away at our savings.

Can buy a house in Middlesbrough for that

Seriously, there are places where the average price is still <£25k

Doesn't help me and my gf are looking for places... It's cheaper to find a place to rent that is a 3 bed detached house than a 2 bed flat

Yes but if you buy now and prices fall 25% your life savings are wiped out. And then it will trun out that you were only rent anyway - from the bank. Now is a bad time to buy. Interest rates will eventually go up and towards 5% so can they afford that sort of increase in their mortgage? Probably not. There are too many uncertain factors with the economy. If unemployment looks like staying at this level till the end of 2012 and that will mean no prospect for property inflation. If there is another crisis somewhere then things will deteriorate again. Greece and Ireland will default at some point and then Europe will have another crisis. The Great Depression lasted for more than a decade, what makes anyone think that this time the experts are so good that they have solved it in three years? We are barely there.

we still have some 'down' to go
this will bottom out about/maybe 2013/15

up until then its a world of pain ...

I personally think that it will be many years before house prices are back to the level we have now. The japanese property market fell for more than twenty years. I do not think that it will be that long here but I do think that it will fall for maybe another 7 years or just stagnate for 15 years. Not a great place to stuff £30k of your savings.

Quite.

This is though I assume pre inflation - so with inflation running around 4% prices will actuallt rise by 2.3% which is a 1.7% fall in real terms (assuming your salary is going up by inflation)

No they will fall by 1.7% and inflation will take another 4% and yet I doubt that many will get rises that will even protect them against inflation. So in real terms they will fall by more then 5%. Though if wages are stagnant then it will bring them into line sooner rather than later. Though if we look at the example of Ireland wages fell there as well so the debt burden rises and brings many more closer to bankruptcy.