Halifax Reports 'Modest' Drop in UK House Prices in 2011

House prices in the UK fell a "modest" average of 1.3 percent in 2011 amid global economic turmoil and there is no certainty that they will hold up in 2012.

According to Halifax's house price index, the average price of a British home is £160,063.

At its lowest point, in May, the annual house price drop was 4.2 percent before recovering over the rest of the year.

"While there was a modest fall overall in prices during 2011 with an annual decline of 1.3 percent in December, house prices held up well last year in the face of the difficult and deteriorating economic climate and substantial pressure on households' finances," said Martin Ellis, a housing economist for Halifax.

"If the UK can avoid recession, we expect broad stability in house prices in 2012. There is, however, considerable uncertainty regarding the prospects for the UK economy, which will, to a large extent, depend on how events in the eurozone unfold.

"In addition, the extent to which households choose to reduce their debts will also affect growth. As a result, the outlook for house prices is also uncertain."

Recession Likely in 2012

Some forecasters have said that the UK may already be in a slight recession. Some businesses are pessimistic about the economy.

In late 2011, there were several predictions, including from leading thinktanks and financial groups, that Britain would be in recession in the first quarter of 2012.

Continuing instability because of the eurozone crisis and the constant threat of a break-up is leaving markets tetchy.

If the currency collapses, Britain will suffer from the economic fallout as banks and countries default on their debts.

Financial firms in the UK hold substantial European sovereign debt and trade heavily with European banks, leaving them exposed to any meltdown, which could drag Britain's economy down with it.

Demand in the housing market would inevitably fall, causing a plunge in house prices.