With house prices at a 12 year low, volatile financial markets and buyer confidence sinking, it’s hard to foresee what the property market will do in coming months – and whether or not now is the right time to invest. Read on for our up-to-date round-up of what the experts predict for house prices in the future.

A clear change in sentiment since the late summer has led to the sharp slowing in house price growth, according to Nationwide’s Chief Economist Fionnuala Earley. The price of a typical house in the UK is now £179,110, only £2,027 more than this time last year. However, prices are still 11% higher than two years ago and 47% higher than five years ago - the equivalent of a price rise of more than £30 per day for the last five years. But will prices go up or down from here? Read on to find out what the experts say.

Housing Market Predictions: House Price Forecast

Simon Rubinsohn, Royal Institute of Chartered Surveyors chief economist, said:

“There is little reason to believe that underlying problems facing mortgage lenders will ease anytime soon. As a result house prices are likely to continue to drift lower in the coming months. Buyer enquiries (according to the latest RICS survey) have slipped back to the lows seen in the wake of the Northern Rock crisis and this trend is likely to persist through the spring. The recent sharp rise in Libor rates is indicative of the reluctance of banks to lend to each other and suggests that mortgage finance will remain in short supply for some time to come.”

Fionnuala Earley, Nationwide's Chief Economist, said:

“The outlook for UK house prices is clearly more downbeat. We expect a modest fall in house prices during the year, but such a fall should be seen in context. If prices were to fall in line with consumers’ expectations, they would still be higher than two years ago. A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward.”

Stewart Lilly, National Association of Estate Agents President, said:

“Invariably, the global credit crunch, especially the US situation, has had a knock on effect, which coupled with consumer inflation, is placing continuing pressure onto the property market. However, we still have a long way to go before we see the difficulties of the late 1980’s repeating themselves!

“We are aware that there are vast regional differences that still exist in the market around the UK with areas such as Central London and a few other major cities continuing to keep up a regular pace, whilst some other areas may be patchier and even extremely slow, overall the market remains steady despite many external pressures.

Housing Market Predictions: On Housing Market Sentiment

Fionnuala Earley, Nationwide's Chief Economist, said:

“Confidence is a very important factor in the housing market and much of this confidence is determined by expectations of the future path of house prices. When consumers think prices will rise there is a greater incentive to enter the market, thus supporting demand. On the other hand, if prices are expected to remain static or fall, the urgency disappears and demand will fade. Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years, but with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away.

“The overall impact this will have on the housing market will depend on how much consumers think that prices will change. The latest data suggests that those consumers willing to quantify their expectation, on average, expect an annual fall of around 3% in six months time. Current data suggests that while there has been a big change in sentiment, more than two thirds still believe that prices in six months’ time will be the same or higher and only 3% believe that prices will be much lower.”

Housing Market Predictions: On First Time Buyers

Simon Rubinsohn, Royal Institute of Chartered Surveyors chief economist, said:

"The fifth consecutive monthly drop in house prices is indicative of the shift in sentiment towards the property market. Lenders are continuing to respond to the worsening conditions in the money markets by raising the cost of mortgage loans and tightening up on lending criteria. This is making it even harder for first time buyers to take their first step on to the property market.”

Stewart Lilly, National Association of Estate Agents President, said:

“It is disappointing to see that the percentage of first time buyers took a drop this month however, we are hopeful that this sector of the market will recover and continue to grow as prices reflect the prevailing market conditions. The market is much more favourable to this target market.”

Charcol’s Katie Tucker said:

“First time buyers have little or no choice but to save a 10% deposit now. Very few lenders offer high loan-to-value products, but these products literally have a day-to-day lifespan, so borrowers need to move very quickly: they are going, going, gone. Also, it isn’t just a matter of ‘can we?’ but also ‘should we?’; first-timers should reconsider very carefully if this is the right time to buy, given that properties in many areas are expected to lose value. Unless household income is strong enough for a good amount of capital to be paid off monthly, there is a risk of falling into negative equity if buying without a decent deposit.”

Housing Market Predictions: On Remortgaging

David Black, Principal Consultant for Banking at Defaqto, said:

“The changes in the composition of the mortgage market since this time last year have been dramatic and only a brave person would bet that the position will change in favour of house purchasing in the near future. In many cases people may be turning to secured loans to raise extra funds, rather than remortgaging because their credit rating has deteriorated since their original mortgage was taken out.”

Housing Market Predictions: On Overseas property

James Caldwell, director at Fairinvestment.co.uk, said:

"First time buyers are being driven to sunnier climes for a route onto the property ladder as a result of the credit crisis which has been shaking the foundations of the UK property market. Overseas they can sometimes find cheaper property prices and a lower cost of living, which could make buying their first home more affordable while they continue a high quality of life. This growth in the number of people willing to move abroad is probably not a coincidence, as debt levels are rising and there has been a shortage of property in this country which has pushed prices up in recent years.

"While property prices in Britain have now slowed, people are still unsure where the market is going, and some first time buyers seem reluctant to invest here when the situation could change over the coming months while the full effect of the credit crisis is felt."

Housing Market Predictions: On Long Term Fixed Rate Mortgages

Chancellor Alistair Darling said in his Budget speech:

“Most people in the UK have short-term fixed rate mortgages for two or three years, leaving them exposed to interest rate rises when their mortgage deal ends. This is not the case in other countries, such as Denmark where the majority of homeowners take out long-term fixed rate mortgages. I want to see more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years. It will help more people get on - and stay on - the housing ladder.

Melanie Bien, director of Savills Private Finance, said:

“Like his predecessor, the Chancellor is determined that first-time buyers should take out long-term fixed rate mortgages in order to protect themselves from interest-rate fluctuations. The reality is that a tiny proportion of borrowers are interested in committing themselves to a fixed rate for 10 years or more. This is because they wish to retain flexibility and long-term fixes are not flexible. Only if long-term fixes are competitively priced and allow borrowers to exit early on without having to pay a significant penalty will they really take off.”

Francis Ghiloni, mform.co.uk’s Marketing and Business Development Director, said:

“The risks are clear. Not only could borrowers end up locked at a higher rate when interest rates are falling but could also find themselves having to pay redemption penalties if they want to move house. It is virtually certain that people’s circumstances will change several times over a 25-year period.”

To read more on the experts’ take on the Budget, Click Here.

Housing Market Predictions: On Mortgage Arrears

Teresa Perchard, Director of Policy for Citizens Advice said:

"It is a worrying trend that our bureaux are reporting a very sharp increase in the number of mortgage arrears problems they are dealing with. These latest figures paint a worrying picture, suggesting a significant number of households are struggling to meet their most basic living costs. The combination of big increases in household bills, especially fuel, and rising housing costs is putting additional pressure on people’s finances when they are already stretched to the limit."

Housing Market Predictions: On Stamp Duty

Richard Farr, Director of the Association of Mortgage Intermediaries, said:

"Alistair Darling's decision to abolish stamp duty for first time buyers who own less than 80% of their shared ownership home is a positive first step. As are his plans to introduce a new shared equity scheme for key workers who can only afford 50% of their home. However, neither of these schemes will help the substantial number of ineligible applicants who are also struggling to purchase their first home.

"Halifax published a report showing that the cost of stamp duty for first time buyers had risen by 83%. The Government hasn't increased stamp duty thresholds in line with property prices, and the duty is increasingly becoming a stealth tax. Stamp duty is such a burden that it could cause the Government to fail in its ambition to achieve 75% home ownership."

House price growth is at its lowest rate since March 1996. To find out more, Click Here.

Despite predictions of a falling base rate this year, 31 per cent of home-owners would fix if remortgaging now, a new survey suggests. To read why, Click Here.