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Stalled Auctions Herald 2011 House Price Falls

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Stalled auctions herald 2011 house price falls

By Andrew Oxlade

12 January 2011

The prices of properties sold at auction slumped in December heralding falls for the wider market, according to a financial forecaster.

An index, due to be published later today, will show the discount between homes under the hammer and the wider market was 26% last month, widening sharply from 20% in November.

The Zoopla Auction Price Index is compiled with economic forecaster Fathom Consulting, and aims to forewarn of wider market moves by tracking activity at auctions.

Its accuracy in doing so has yet to be proved but it has made some correct calls in recent years, most notably plunging to 40% several months before the wider market hit rock bottom in March 2009.

Fathom now warns that the weak reading is close to when the collapse of the American investment bank Lehman Brothers sent financial markets into turmoil in September 2008.

'The sample size in December was unusually large, giving us a high degree of confidence in this new reading,' said Andrew Brigden, senior economist at Fathom Financial Consulting. 'We have not seen such a large discount, in a month where there was a good number of auction sales, since late 2008-early 2009, in the aftermath of the collapse of Lehmans.

'We expect to see bigger falls in house prices, as measured by the lenders' indices, as we move into the New Year. If the reading on the Fathom/Zoopla API remains close to its current level, then a double-digit fall in house prices through 2011 is on the cards.' Yesterday, an index published by Halifax, the UK's largest mortgage lender, revealed house prices fell 1.3% in December and were down 3.4% over the whole of 2010.

Meanwhile Capital Economics, which has been regularly warning of property busts since 2000, predicted a fall of 10% for 2011.

Splendid. :)

Edited by Pent Up

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