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Falling house prices 'to hit half the country'
Last updated at 00:07am on 07.11.07
House prices will fall in half the country
Half the country will see house price falls in the next 18 months driven by the knock-on effects of the worldwide squeeze on credit, according to a study out today.
Mortgage lenders are taking a much tougher line on the amounts they will lend and which customers they will accept.
Both factors take buyers out of the market.
On top of that, nervous buyers are expected to hold back to see what effect the credit crunch has on property.
A report from credit reference agency Experian predicts price falls in half of the regions by the middle of 2009.
It suggests the biggest fall, 4 per cent, will be seen in the West Midlands.
A 3.7 per cent drop is predicted for the East Midlands, 2.8 per cent in the South-West, and 2 per cent in Northern Ireland, which will put only a small dent in the remarkable boom seen in the province in the last two years.
Experian believes prices will fall by 0.7 per cent in the East of England and by 0.4 per cent in the South-East.
Spokesman Andrew Burrell said: "Five UK interest rate hikes since mid-2006 were already hitting consumer demand and global developments tighten the squeeze.
"The UK economy and housing market will become direct casualties of the current worldwide credit crunch."
He said Experian expected economic growth to slow from 3.1 per cent this year to 2.1 per cent in 2008.
"The downturn in consumer demand is more abrupt, with demand growing by less than 2 per cent year-on-year," he said.
"Only significant reductions in interest rates bring an upturn from 2009."
Mr Burrell added: "We expect the UK housing market to suffer over the next two years. House prices are forecast to record the lowest annual increase since the mid-1990s, while repossessions are also set to reach 15 year highs."
Experian believes the City of London bonus culture and property shortages will prop up the market in the capital, with prices expected to rise 6 per cent.
Scotland is also expected to see a big increase, 7.7 per cent, while the figure for Wales will be up by 3 per cent. Smaller increases are pencilled in for the North East, Yorkshire and the North West.
However, Experian warned that these areas could also be dragged down.
A company statement said: "The situation could turn out to be even worse. Lenders may come under further intense pressure to curb lending.
"This could easily spill over into the housing market and result in price falls in all regions."
A number of studies have predicted property market stagnation over the next two years. The International Monetary Fund has gone further and warned of a slump.
Citizens Advice outlined further evidence of the pressure felt by families hit by interest rate rises and increases in other household bills yesterday.
The organisation said it dealt with a record 1.7million debt problems in the past year, an annual rise of 20 per cent.
Reader views (15)
Well Crash, no more boom and bust, only bust without a boom. No more stamp duty, stagnant market, better re-nationalise the bank of England and cut interest rates to pay for all you freebies to labour voters (sorry I mean social economic policies). Best open the door to 10 million more immigrants in next 3 years and make them sign labour pledge, it's your only hope of a victory. The Emperor has no clothes on!
- Andy, England, 07/11/2007 23:34
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Well Crash, no more boom and bust, only bust without a boom. No more stamp duty, stagnant market, better re-nationalise the bank of England and cut interest rates to pay for all you freebies to labour voters (sorry I mean social economic policies). Best open the door to 10 million more immigrants in next 3 years and make them sign labour pledge, it's your only hope of a victory. The Emperor has no clothes on!
- Andy, England, 07/11/2007 23:33
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The fact that Brown's magnificent "New" Labour "government" is building everywhere thousands of free houses for the social cases does not help housing prices. Suppy free - demand rises - prices fall...
- Jacqueline, Hampstead, London, 07/11/2007 20:16
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A crash in the market may be good if you are looking to buy a house in the 18 months, but the problem is this will have inevitably adverse repercussions for our 'creative' economy, especially in the City where much of the wealth is financed by consumer debt and dirty, overvalued capital built on mortgages driven by vastly inflated house prices.
If lenders begin to default on their payments, and shareholders withdraw their shares panicked by the fall in value on their property, then recession could very well set in.
Worse still, what if another high street bank were forced to retreat to the BofE for assistance? This will lead not simply to another run on a high street bank, but to a national stampede of customers withdrawing their hard-earned and sticking their savings behind the cupboards and under their carpets in- something not witnessed since 1929.
- Darren P., Greenhithe, Kent, 07/11/2007 19:26
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What about stamp duty, in this area a £300,000 house is the norm that's £9000 tax before any other costs to move, so it is approx £16000 just to move with removals. Estate agents fees, solicitors and now HIPS. People are just not moving unless absolutely neccessary.
This has a knock on effect on first time buyers because the housing market is not moving. This Labour government has robbed us for far too long, that is of course if your prepared to work for living.
- Mick Dowse, Harlow , Essex, 07/11/2007 16:44
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I guess Gordon Brown's dream of high taxation, free homes for everyone and full employment is not coming out...
- Stevo, London, 07/11/2007 15:32
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In response to Martin from Guildford's comments.
Gordon Brown *sets* the inflation target (2%), the MPC decide interest rates to keep within this target with a margin of error of 1%.
The M4 money supply is currently running at 14% and I firmly believe that this is a realistic measure of inflation, not the ridiculous CPI/RPI figures reported.
Gordon Brown took his eye of the ball many years ago and as a result will go down as the worst Chancellor in UK history in years to come.
We've been 'having jam' for far longer than was sustainable.
- Peter Brown, London, UK, 07/11/2007 15:00
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Just wanted to follow the logic of some views expressed and understand how the Government are responsible for setting house prices?
Interest rates are set by the independent Bank of England and prices set by market demand.
If it rained for a week, some people would see it as evidence of failing Government policy with Gordon Brown specifically to blame.
- Martin, Guildford, 07/11/2007 14:36
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Blimey, I find these figures hugely conservative.
The housing slump we are witnessing in the US is going to be closely followed here in the UK beginning Q1/Q2 2008 and with the biggest falls happening in 2010.
Anyone considering buying a flat/house at the moment, would do well to wait 2 or 3 years and pick one up for 30% - 40% less (in real terms) than what you'd pay in today's over-inflated house price bubble.
Crash Gordon's "miracle economy"? Ha, don't make me laugh. Over 1.3 trillion debt owed by people in the UK. He's played you all like a fool, its YOU that have funded this economy over the past 7 years, on debt!
This crash is gonna make he early 90's one seem like a minor blip!
- Peter Brown, London, UK, 07/11/2007 14:10
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Poor old Gordon Brown, stagnant markets and drops in value mean far less property tax in the coffers. Add to that all the losses being declared in the City and he's going take another hammering with lower tax profits. Dear oh dear, how on earth is a bloke to fund a social benefits society, and all those expensive promises in return for votes?
- Rachelle, London, 07/11/2007 13:54
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Most people only have one house, and they live in it, so as long as they have not mortgaged up to the hilt they shouldn't have much to worry about. Prices may dip, but only the very high end will fall 40% and they will recover soon enough, they always do.
- Paul, London, 07/11/2007 13:51
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But house prices are grossly overvalued, they should fall by about 40%. Even that means our house prices are more than the rest of Europe.
- Grim Reaper, London, 07/11/2007 13:23
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So Gordon Brown had done away with the years of "Boom and Bust" and was "Prudent". Seems like another bit of spin now.
- Nigel, Wimbledon, 07/11/2007 11:26
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The various tax increases and the HIPS reporting bureaucracy do not help I guess.
- Billy, London, 07/11/2007 11:09
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The nickname of our PM Crash Gordon seems to be ringing more true every day...
- Howie, London NW1, 07/11/2007 10:54
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