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Prices in England and Wales decline 3% amid uncertainty

LONDON: Asking prices for homes in England and Wales fell 3% over the past month to stand just 0.4% higher than a year ago, due to economic uncertainty and low mortgage approvals, property website Rightmove said.

December's fall follows a 3.2% decline in November, with further drops possible next year when Rightmove predicts a decrease of as much as 5% for the year if property repossessions pick up.

Mortgage lenders Nationwide and Halifax have reported falling house prices for November, too, in a sign that a modest downturn in Britain's property market could become entrenched as looming government spending cuts curb appetite for houses.

"In 2011, we will see larger falls in weaker markets due to oversupply and forced sales," Rightmove director Miles Shipside said. "The net result is likely to see average national asking prices fall slightly. At best, they could be close to flat and at worst down by 5% if repossession numbers jump up from 1 in every 15 sales."

Rightmove said recent price falls and some nervousness about prices in 2011, plus growing arrears, could result in lenders increasing the number of repossessions. "If [the Bank of England] base rates increase then repossession numbers could form a much larger percentage of total sales, and at an extreme this could lead to even greater price falls than we are forecasting," it said.

Most economists do not expect the central bank to raise interest rates until late next year at the earliest because of uncertainty about the economic impact from the start of a four-year programme of government spending cuts. Rightmove said it expected the number of properties coming to the market to fall to around 1.2 million in 2011, down about 10% on this year and 40% below the historically normal figure.

The website said an early sign of the weak supply of properties was the fact that the number of new properties for sale this month was only 0.1% higher than a year ago.

That was despite a reduction in the legal paperwork required to market properties earlier in the year, which Rightmove had expected to result in more speculative sellers in the market.

Estate agents reported that mortgage funds remained difficult to arrange following a further tightening in lending criteria in the middle of the year.

And the time properties spent on the market remained near last month's record high while the unsold stock per estate agency branch was at 74, down from 77 in November but still traditionally high. — Reuters
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