Confusing times for the property market

David Kuo, Head of Personal Finance at Fool.co.uk, says: “Conflicting data on the state of the housing market may leave homeowners, property sellers and prospective house buyers feeling confused.

“Within the space of a week, RICS has reported that house prices are unlikely to decline materially and it has also said that house price falls have reached levels not seen since the early nineties.

“The early nineties was one of the worst periods for homeowners when average house prices fell for three successive years. In 1990, it dropped 11%; in 1991 it fell 2% and in 1992 the price of a typical house declined 6% .

“As part of a wider report entitled Your Finances in 2012, Fool.co.uk predicts that the price of an average house in the UK will fall this year before resuming growth at the long-term rate of 8% per annum after that.

“We believe that the average price of a house could fall up to a fifth to £157,290 in 2008 before rising to £185,410 in 2012. However, this would be £13,000 less the price of a typical home now.

“Someone who bought a typical home, valued at £198,898 in 2007, on a 25-year repayment mortgage at 6% will have repaid £76,890 over five years. However, tenant will have paid out £49,724 in rental costs over the same period based on a 5% rental yield on a similar property.

“The tenant will have paid £27,166 less than someone who bought their own home over five years. However, the homebuyer will gain in the longer term through the discipline of paying, through a mortgage, for an asset that is rising in price.”