Property values to fall 2% by end of 2011

UK house prices will flat line next year ending 2% lower but the number of repossessions will also fall, according to the Royal Institution of Chartered Surveyors (RICS).

The trade body said falling property supply should help stabilise prices in H2 2011 with prices edging up again towards the end of the year.

It says the risk that larger public sector job cuts than expected will depress buyer interest is likely to be offset by lack of supply, resulting in price falls of less than 5%.

RICS estimates the average volume of transactions will amount to little more than 900,000 over the course of 2011. The tight lending conditions are unlikely to loosen next year, it added, producing transactions at a similar level as 2010.

Meanwhile, repossessions are likely to fall back marginally, with claims from lenders falling 26% in Q3 this year from 2009 figures. In total, 36,000 homeowners lost their properties this year, with RICS predicting the figure will drop to 33,000.

Simon Rubinsohn, RICS chief economist, says: "This narrowing gap between supply and demand will see the gentle downward trend in prices currently taking place at least partly reversed as the year wears on.

"Transactions levels will remain flat as mortgage lending remains subdued for another year with many first-time buyers struggling to meet their aspirations of home ownership."