Modest price falls for 2010

House prices will end 2009 2% higher than at the start of the year but the mainstream market will dip again before a more concerted recovery in 2012, believe researchers at Knight Frank. Recent house price rises have hidden the fact that buyers in recent months have been largely affluent and equity rich.

Liam Bailey believes that a weak economy will feed through to lower household wealth and will affect the ability and willingness to bid up house prices. Continuing growth in unemployment, allied to wage freezes and tax rises, and a rise in average mortgage rates will force a number of sales which, in the absence of greater depth of demand, will see prices slipping back.

'However, we believe that price falls will be capped at around 3% in 2010. It would be wrong to expect a continuation of the current rapid recovery in the housing market, the economy is not in a position to permit this in the short-term. Similarly, it would be wrong to expect carnage.

'Real demand is strong, supply in the wider market and the new-build sector is very low and we are unlikely to see a rapid shift away from a low interest rate environment.'

Future improvements in market conditions will continue to be led from London and southern England, particularly from the higher price brackets. Meanwhile, strong demand from international buyers will ensure that the central London property market will continue to outperform next year.

'The key reasons for our confidence with regard to this market are: uniquely in the UK - London will benefit from the global economic recovery, which is likely to considerably outpace that seen in the UK; Sterling is set to remain relatively weak into the medium-term, encouraging international demand; the economic prospects in central London are brightening more rapidly than elsewhere in the UK.'

The market for farmland - which has doubled in value in the past 4 years - is set to remain bullish with prices expected to double to £10,000 per acre by 2015. A lack of farmland for sale coupled with strong demand will continue to push up prices. Demand is already strong from UK farmers looking to expand their businesses, but interest from lifestyle buyers and investors will also start to grow as the economy recovers. As the world's population grows food security will become more of an issue and this will be reflected in global soft commodity and agricultural land markets.

* Country houses for sale