House prices 'to rise over 2009'

The property market will surpass initial forecasts at the end of this year as house prices start to increase, it has been claimed.

Halifax, Britain's biggest mortgage lender, cut its expectations of a 15% fall in house to prices to 7% for 2009 after new figures were released.

The Royal Institution of Chartered Surveyors (RICS) is now expecting a slight rise in prices from the start of 2009, as opposed to the 10% - 15% fall it had previously predicted.

Prices are now only £1,200 below where they were at the start of the year after a slender 1.1% increase in July.

RICS stressed that this is not the end of the battle for property trading, because prices could still fall back again in 2010.

The group said it had changed its forecast following a "considerable shift in sentiment" in the housing market during the past few months, which had led to prices starting to pick up in some areas.

But it warned that its prediction for positive house price growth did not indicate a quick return to the boom time, as activity remained very weak by historical standards.

The group said that mortgage approvals for house purchase had gradually improved in line with increased interest from potential buyers, and should stay at around 55,000 a month for the rest of the year.

However, it added that this would still leave transaction levels well below the long-run average, as sales were still being hampered by the limited availability of mortgages.

At the same time, further increases in mortgage rates, rising unemployment or a prolonged weakness in the economy could all challenge the emerging recovery in the housing market.

RICS senior economist Brigid O'Leary said: "There has been a clear change in the housing market over the past few months and, as a result, it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year.

"Instead, the return of buyer demand and the limited availability of housing on the market could be enough to support prices so it wouldn't be surprising to actually see prices increase further from here in the short term.

"However, the outlook for 2010 is fairly uncertain and there is a real risk that prices may slip back again. Affordability is still stretched and mortgage finance, while improving, is fairly hard to come by."

Meanwhile, the National Association of Estate Agents said the housing market remained firm during July, despite suffering the traditional summer dip in activity.

The average number of properties sold per estate agent eased slightly to nine, down from 10 in June, while there was also a further fall in the average number of homes agents had on their books, with these dropping to 59 from 64 during the previous month.