house prices forecast in UK 2012

property market news today - house prices forecast in UK 2012 ; It’s that time of the year again. For those of you already depressed at what the value of your home is doing at the moment, turn away now, as the outlook for the next few years doesn’t get any better.

Knight Frank, the upmarket estate agent, this week kicked off the start of the latest round of residential market forecasts. I’m afraid it did not have an upbeat story to tell.

It estimates that average house prices in the UK will rise by 1.3 per cent this year - but with inflation currently at 5.2 per cent this means that values are already falling in real terms.

Now for 2012 and beyond.

Knight Frank is predicting that average house prices across the UK will fall by 5 per cent in 2012 and won’t start growing until 2014 - albeit with small rises of 1 per cent in 2014 and 2 per cent in 2015.

Some parts of the UK will fare worse than others. Average prices in Wales are expected to drop by 6.7 per cent next year, while both the North East and Scotland will see falls of 5.9 per cent.

London, South East, East Anglia and the East Midland are forecasted to do better than average UK values but will still see falls of between 3.7 per cent to 4.1 per cent.

But that’s not the only bad news. Knight Frank has estimated that with the 5 per cent fall in prices next year, mainstream property values will be nearly 15 per cent below their 2007 peak. To emphasise the fact that house prices will see little growth over the next years, the firm notes that average prices won’t hit 2007 levels again until 2018.

On top of this - when you factor in inflation, “the picture is even more subdued”, says Gráinne Gilmore of Knight Frank.

House prices, adjusted for CPI inflation, have fallen by 21 per cent since the peak of the market and will continue to decline until 2015, at which point prices will have dropped by 29 per cent of their value. “On this measure, prices will not reach their previous highs until 2028,” warns Gilmore.

Not such a pretty picture.

Forecasts for prime central London are slightly more upbeat, however.

Knight Frank believes average values of upmarket homes in the capital will rise by 5 per cent next year - but will be flat in 2013, followed by a 4 per cent and 6 per cent rise in 2014 and 2015. This shows that the huge growth seen by this market over recent years - rising by 37 per cent between March 2009 and September 2011 - isn’t expected to continue but should see some growth in real terms from 2014 onwards.

Prime homes across the UK will not fare well either. Knight Frank predicts falls of 5 per cent in 2012, followed by small rises in 2014 and 2015.