Home sales to dip in 2011, no sharp price fall - CML

Published 01st Jun 2011

Property sales in Britain are likely to dip this year and more people will have their homes repossessed by lenders than in 2010, but house prices are unlikely to fall sharply, the Council of Mortgage Lenders said.

Publishing its updated forecasts for 2011 and 2012 on Wednesday, the CML revised down its forecast for the number of residential property transactions this year to 840,000 from an original forecast of 860,000. There were 886,000 sales in 2010.

The CML said its forecasts were consistent with mortgage approvals rising to around 50,000 per month in 2012.

Bank of England data published earlier on Wednesday showed mortgage approvals fell to 45,166 in April -- just half their long-run average before the financial crisis of around 90,000 per month. "Lenders have been reporting weak demand for house purchase loans for several quarters, and we expect this to continue over the short term," said the trade body, which represents lenders covering more than 90 percent of the market.

Mortgage approvals provide a gauge of future house price trends, and the CML said it expected prices to be soft this year, except in London and southeast England.

"We do not foresee a sharp fall in prices, in the absence of a significantly higher volume of forced sales. Moreover, with a modest recovery in household incomes anticipated next year, the housing market should develop a more positive tone in 2012."

The housing market has been weakening since the middle of last year and prices are now about 1-2 percent lower than 12 months ago. Analysts reckon house prices will fall slightly this year before recovering modestly in 2012.

The CML said it expected the weak economic outlook to encourage the Bank of England to leave interest rates at their record low 0.5 percent for longer than it initially thought, helping to keep debt-servicing costs under control.

But it still expected home repossessions to total 40,000 this year and rise to 45,000 next year from 36,000 in 2010.

"Although we do not envisage a further deterioration in the overall magnitude of arrears next year, possessions may continue to nudge upwards in response to higher interest rates and stick at higher levels beyond the forecast period," the CML said.

Financial markets are pricing in a first interest rate rise in February next year.

Source: ' Reuters '

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