Rightmove reveals its house prices forecast for 2011

In its recently published December House Prices Index, Rightmove, the UK’s leading property website, has revealed that new sellers dropped their average asking price by 3% in the final month of 2010.

This represents the fifth fall in the last six months, and Rightmove - which is in a unique position to identify immediate changes in the market due to the fact that it advertises property for over 90% of all UK estate agents - is now forecasting that new sellers will have to drop their house prices even further during 2011.

At the very best, house prices will remain steady. However, Rightmove predicts that a drop by as much as 5% could take place in the event that seriously stretched lender forbearance collapses as house prices fall and, as a consequence, repossession figures shoot up.

To put this figure into perspective, a 5% drop on a national average basis is relatively slight - considering that national average asking prices were 6.5% lower in December than they were in June.

Having said that, however, a much more extreme modification of sellers’ house price expectations will be required in areas where supply well outstrips demand and where forced sales are more common. This is most likely to affect areas in the north of the country.

For active buy-to-let landlords and first-time buyers who are deposit-rich, of course, these lower prices will increase property affordability. Furthermore, trader-uppers with plenty of equity will be relatively unscathed, since price drops on their property can theoretically be passed up the chain.