While house sales could well rise in 2012, it looks as if property prices will be struggling to follow suit. The RICS, Royal Institution of Chartered Surveyors, has predicted that the number of UK homes sold will rise to 880,000 this year, roughly the same amount of activity that the market saw in 2010. Even if the property market was to improve slightly, levels would still be less than previous years, as there were 1.67m sales in 2006.
Although RICS believes that prices will fall slightly, there will be no large scale drops due to the low supply levels. It said that the weak current economic outlook was expected to remain the same for at least the next 6 months, as is the prospect of unemployment increasing, which means that the demand to buy properties is unlikely to see any significant increases and looks like remaining relatively stagnant.
It is widely hoped that the Governments indemnity scheme will assist many prospective first time buyers in getting a foot onto the property ladder, even though the initiative is expected to only have a limited impact with is only benefitting those who are buying a new build. Simon Rubinsohn is the chief economist of the RICS and he says its likely that the general economic climate will be the largest influence on the property market in 2012.
He also said that prices could start to edge lower if unemployment continues to rise, but any drops are likely to be insignificant due to the lack of supply currently available. He added that they did expect to see a slight increase in the number of transactions taking place, even though mortgage lending will more than likely remain subdued, limiting the scope for improvement.
Other areas of the housing market, however, are expected to fare a lot better, and demand in the rental sector is expected to stay strong. The RICS has predicted that the rental market will stay firm, meaning that rents are likely to see further increases, albeit they will rise at a slower pace that during 2011. Despite the prospects for increasing unemployment, only a marginal rise in repossessions is expected for 2012.
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