Property website predicts prices could plummet by 5% in 2011

House prices could fall by as much as 5% next year if property repossessions pick up, property website Rightmove warned today.

The gloomy prediction came as Rightmove’s monthly house price index showed that asking prices for homes in England and Wales have fallen 3% over the past month to stand just 0.4% higher than a year ago.

December’s fall – the second largest ever recorded for the month – follows a 3.2% decline in November and points to a weak 2011, according to Rightmove director Miles Shipside.

“In 2011 we will see larger falls in weaker markets due to over-supply and forced sales,” he said.

“The net result is likely to see average national asking prices fall slightly. At best they could be close to flat and at worst down by 5% t if repossession numbers jump up from one in every 15 sales.”

Recent price falls and some nervousness about prices in 2011, combined with growing arrears, could result in lenders increasing the number of repossessions, according to Rightmove.

“If base rates increase then repossession numbers could form a much larger percentage of total sales, and at an extreme this could lead to even greater price falls than we are forecasting,” it said.

Areas such as the north-east and north-west of England could be the most vulnerable, given high unemployment, with property prices taking a larger than average hit, Shipside warned.