2010 Market Dance: Classic Waltz or Jive Jitterbug?

If Upturn loses steam, homeowners could face a bleak decade.

If prices start to fall again homeowners could face 10 years of stagnation, warn property market insiders.

If last year’s relative recovery doesn’t continue, Britain’s homeowners and property-sellers should ready themselves for up to 10 years of stagnation.

After reports that new mortgages approved in January fell, and prices for new-built houses declined last month on each of the Halifax and the national measures, analysts now believe the uptick in the last half of last year has run its course.

Although some analysts believe the flattening may be simply a pause in the property market’s dance, before taking another graceful whirl.

Danny Gabay, a former Bank of England economist and director of the Fathom consultancy, says “It could be a decade of flat to slightly falling prices." He foresees a 5% fall in home prices this year, and a 10% decline in 2011.

Still, Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, expects prices to increase by just 1 to 2% in 2010, with little better to come. "2011 could be an altogether more challenging year: it wouldn't surprise me if prices slipped back a bit more."

The opportunities for creative marketing, creative financing and positive entrepreneurial effort in the property markets is unmatched this year, and will serve to separate the big winners from the many jumpy, doom-seeing naysayers who let the market dictate to them.

Chief economist for the British Chambers of Commerce David Kern, opined that after so many years of poly-digit price rises triggered profit windfalls, and thousands of people were relying on property to fund their retirement, homeowners will have to develop new mindsets.

"I look at it,” Kern said, “to some extent as a cultural shift. People have to get used to a different situation: it's a healthier housing market," he said.

The quarterly forecast for the wider UK economy, published by BBC, cautions that although no "double dip" is expected, recovery from the deepest recession since the second world war will probably be slow and painful.

Numerous obstacles to recovery are in the path, among them the withdrawal of recovery stimulus, a need for fiscal tightening, the re-capitalizing of the banking sector and a significant reduction of consumer (personal) debt, opines Kern.

According to chief analyst Ray Boulger at mortgage brokerage John Charcol, a virtual Catch-22 of factors is preventing return to property bust-and-boom. He reports that nearly 4 million of the 10 million residential mortgage-holders are now in a position where they are unable to leave their house, sell their house or pay to continue living in their houses, this due to the price collapses of 2007-2008 and lending restrictions now emplaced by cash-poor banks.

According to the Council of Mortgage Lenders an estimated 1 million households last year were in negative equity, and Boulger believes at least another million are unable to buy, lacking the 15% of equity required as basis to fund a transaction in today's tight mortgage market, while 1.5 million homeowners are saddled with self-certified or other unique, once-in-a-lifetime mortgages that could restrict their ability to sell for years to come.

Dance to a dirge or demand a change of music, either way could be too tiring to tango for most investors.