One would assume that the New Year would of brought a fresh spell of optimism that the country desperately needs. However, as the holiday cheer fades away and the rather cold reality (excuse the pun) sets in it looks like Britain is in for a rather tough 2011.
The housing market, a pivotal sign of the economic times, is not forecast to get much better as we enter the New Year either. As we look at the year gone by we get a chance to reflect on the overall state of the marketplace, which according to the Halifax dropped by around 3.4% in 2010. This brought the average house price to around the £162k mark in November of last year. But brace yourself it looks like there is more trouble ahead.
According to the latest estimate by some economists, 2011 could be the year that a typical house loses about 25% of its value since 2007. In August 2007, the average house price was just shy of the £200k mark which when compared to the possible fall to around £150k this year really does shine a gloomy picture on the housing market. One of the most fundamental determinants of whether house prices will fall will be whether there is be an interest rate hike in early 2011. If so, it will not only act as a financial barrier but also likely to be a significant psychological barrier to people wanting to get onto the property ladder. However, one must not forget the host of other factors such as employment and fiscal policy that will also have a bearing on the housing market.
What perhaps is a sign of the times is Shelter recently reported that around 2 million individuals are using credit cards as a means of paying a mortgage or rent. This surely indicates to us the state of people’s finances and the harsh reality faced by many across the country.