UK house prices fall 1.9 pct yy in December

The year-on-year fall in house prices in England and Wales eased to 1.9 percent in December, the smallest annual drop since May 2008, property data company Hometrack said on Monday.

However, the monthly pace of house price rises suffered a seasonal slowdown to 0.1 percent in December from November's 0.2 percent, and Hometrack forecast prices would drop a further 1 percent in 2010 as a whole.

Last year Hometrack predicted prices would fall 10 percent. Mortgage lenders Halifax and Nationwide report prices have already risen by around 2 percent in the year to November.

"Unexpectedly buoyant demand and a chronic lack of housing for sale were the key drivers of the housing market in 2009," said Richard Donnell, director of research at Hometrack.

"While a scarcity of housing for sale is set to remain an important feature of the market in 2010 it is the prospects for demand that will dictate the outlook for prices in the next 12 months," he added.

Estate agents surveyed by Hometrack reported a 41 percent increase in registrations from prospective home-buyers in 2009, while the supply of property rose by just 7 percent.

Hometrack said this pattern was likely to continue in 2010, with a pace of home sales equivalent to the average household moving just once every 25 years — leading to volatile prices.

However, a probable rise in unemployment and growing concern about tax rises and spending cuts after an election due by June were likely to limit demand.

"Against the backdrop of low sales volumes, equity-rich households could continue to put upward pressure on prices in localised markets in 2010. Yet a sustainable and broad based recovery in the housing market needs a broader base of buyers," Donnell said.