John Wriglesworth, Hometrack’s housing economist, comments on the performance of the housing market in 2004 and the prospects for 2005:
“2004 has been a roller coaster year for house prices. The first six months saw continued price rises before the market turned in July. By November, Hometrack had reported a 0.6% decrease in house prices, the fifth consecutive monthly fall of the year.
“I expect prices to continue to fall in the first few months of 2005 by up to 3%. But again it will be a year of two halves; as the market stabilises we should see a stronger performance in the last six months, meaning that house prices should finish the year in the same shape they started it. My confidence in a restoration of house prices is based on three key facts: household incomes are increasing by 5% per annum, unemployment is continuing to fall and lenders have increased the multiples of income on which they will lend. There is no reason why any of these factors should dramatically change over the coming 12 months.
“According to the Inland Revenue, there will be 1.75 million property transactions in 2004. With the lull in activity in the first half of 2005 and a decline in the number of buyers, this should fall to 1.6 million next year. As figures take time to filter through, we should see normal activity resume in 2006 when we are forecasting 1.7 million transactions.”