Welcome back! Have you made sure you never miss a new property? Subscribe to updates with your best email address in the sidebar to the right.You see everything new at least 48 hours before the crowd!

LONDON (Reuters) – UK house prices have finally bottomed out but a return to growth will be slow and steady as supply gradually increases, a Reuters poll showed on Wednesday.

Average house prices are seen as ending the year just slightly down from where they started it and will rise by just below half a percent in 2010 and around 2.5 percent in 2011, the poll of over 30 analysts at banks, investment firms and consultancies found. House prices sank 16 percent in 2008.

That is a far rosier picture than the 8 percent fall for this year and a flat outlook for 2010 predicted in a June survey.

Average home prices in Britain had tripled in the ten years to the peak struck in 2007 but came crashing down as a global financial crisis set in and mortgage lending evaporated.

Eighteen of 31 forecasters said house prices had now stabilised, with eight saying they would within a year. Five said it would be a year or more before prices bottomed out.

“Prices do appear to have stabilised, at least for now — and the peak to trough fall of around 20 percent was much smaller than the doomsayers predicted,” said Colin Ellis at Daiwa SMBC.

House builders agree — Bovis Homes confirmed a growing trend of stabilisation last month, while Bellway and Taylor Wimpey posted positive trading statements.

Recent surveys have also suggested house price falls may be starting to level off, although that may be partly due to a lack of supply as homeowners prefer to sit out the downturn rather than accept a lower price for their property.

Property website Rightmove said the number of new sellers entering the market in August was 48 percent below pre-credit crunch numbers as tight mortgage lending criteria continues to restrict transactions and stifle property coming to market.

Average UK house prices will have fallen around a fifth from peak in 2007 to trough, according to the poll, compared to a 25 percent drop seen in June’s poll.

The survey provides scant optimism for anyone who bought their property in the boom years when banks were lending at record levels with few restrictions on how much one could borrow, sometimes as much as 125 percent of a home’s value.

APPROVALS BUILDING UP

Banks have tightened lending criteria but mortgage approvals — loans agreed but not yet made and a good early indicator of where house prices are headed — rose above 35,500 in July, a 17-month high.

The poll found monthly mortgage approvals at 60,000 in six months and 73,000 in a year, above the 55,000 and 65,000 predicted in June’s poll but still a long way from the average of 104,000 seen in 2007.

Economists still think house prices were slightly overvalued, giving a median rating of 6 in the poll, where 10 was extremely overvalued and one extremely undervalued compared to fundamentals. The median rating in June’s poll was also 6.

“I’m not saying they aren’t expensive — they are. But demand, relative to supply — which is too low — means the price is ‘fair’. Expensive, but consistent with demand versus supply,” said Alan Clarke at BNP Paribas.

Meanwhile, the house price to earnings ratio — a key affordability measure — fell to 4.36 in July, after peaking at 5.84 a year ago. But that ratio is still above the 4.0 ratio that economists said was sustainable over the long-term.

The Bank of England has slashed a massive 450 basis points from rates since October, putting them at a record low of just 0.5 percent and the bank has begun an unprecedented programme of basically printing money in an effort to kick-start lending and the battered economy.

But with interest rates at rock bottom the only way they can go is up and economists predict they will begin to climb in the second half of next year.

Britain’s economy entered recession at the end of last year for the first time since the early 1990s and is seen shrinking 4.5 percent this year, but is expected to have begun growing again in the current quarter.

(Polling by Bangalore Polling Unit; Editing by Victoria Main)

Source: Yahoo Finance

Related posts:

1. Average house prices rise in poll of polls
2. Halifax: house prices on the rise
3. Biggest monthly house price rise in years
4. Land Registry records house price rise
5. House price rises continue in June