Predictions for the housing market in 2009

There is little doubt that 2008 has been a particularly turbulent year when it comes to the housing and mortgage markets, and there have been a lot of changes and problems in these sectors. When it comes to mortgages the number of mortgage products on the market has been slashed by two thirds, and with stricter lending criteria coming into place an increasing number of people have found that it is difficult or even impossible to get an affordable mortgage loan.

Although the base interest rate has been slashed by the Bank of England many banks have failed to pass on the rate cuts, which means some borrowers may still be paying a fortune on their mortgage. Lenders have started demanding ridiculous deposit levels such as 20 or 25 percent minimum, whereas previously borrowers could easily get away with a 5 percent deposit and in many cases with no deposit at all.

The housing market has also suffered hugely over the past year. Property prices peaked in around October of last year, and since this time prices have been falling month on month after a ten year boom. With the bubble finally burst homeowners have seen their equity levels plummet, and whilst non-homeowners may have thought that the fall in house prices would finally allow them to get their foot on the property ladder, the lack of mortgage availability has put the kibosh on this.

Property sales levels have suffered hugely during this time, and many homeowners that were hoping to sell their properties have found that they have either had to drop the asking price lower than they would have liked or have found that the property has been left stagnating on the market with little to no interest from buyers. Would be buyers have been put off buying for a couple of reasons, including the lack of finance available from lenders and the threat of falling into negative equity due to ongoing house price falls.

This combination has resulted in a very bleak year for the housing market and there is much trepidation about what 2009 will bring when it comes to the housing sector, with a number of industry groups and professionals making predictions with regards to property sales and house prices over the coming year. However, in such a difficult and turbulent climate some major lenders and groups have decided not to even bother making predictions and forecasts, which reflects the volatility of the housing market at present.

The Royal Institute of Chartered Surveyors is one of the agencies that has made a forecast with regards to house prices and property sales for 2009. Officials from RICS have predicted that over the course of 2009 house prices will fall by a further 10 percent, having already fallen by over 15 percent since the peak in 2007. The institute has also predicted that the sale of properties will increase by 10 percent, which is good news considering that earlier this year property sales levels fell to record lows with estate agents selling an average of less than one property per week each. However, whether or not property sales do rise by this level will be dependant partly on whether the government is able to increase liquidity in the mortgage markets further in order to get things moving again.

Tow major lenders that have become well known for their yearly forecasts on house prices, which are widely followed, have decided that they will not be making any forecast this year. The Halifax recently stated that it felt that making a prediction or forecast on house prices would be inappropriate this year given the impending takeover by Lloyds TSB. The Nationwide said that it felt that the market was too volatile and difficult to make a prediction on house prices. This opinion has also been mirrored by the Council of Mortgage Lenders, which has also decided that it will not be making any forecast.

The Treasury has predicted that 2009 will see house prices decrease by a further 9.2 percent, and industry officials have said that this could result in many people decided to hold out until the second half of next year before looking at getting a property, as property values will have fallen further by then and may be closer to getting back on the path to recovery. Again, this will be dependant on the state of the mortgage lending sector and whether liquidity has increased and mortgage lending conditions have eased.

There are mixed predictions with regards to how long the housing slump will actually last, with some officials predicting that it will bottom out around the middle of next year and start to make a recovery, and others claiming that it is likely to continue well into 2010.