Economists warn house prices will fall in 2010
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House prices are likely to fall next year, and may not return to 2007 levels until 2014, according to a group of leading economists.
In a special report on the housing market, the Ernst & Young Item Club says the increasing prices that have been seen this year are a ‘false dawn’ driven by a lack of available property.
Senior economic advisor Hetal Mehta said: ‘A small number of cash-rich buyers have supported prices, but the supply of these funds is limited, which means prices are likely to dip again in the first half of next year.’
The group predicts prices will be generally stagnant for the next two years, before starting to pick up again from 2011 as the wider economy strengthens.
Tough lending criteria and a lack of mortgage availability is making it hard for first-time buyers to enter the market, and until this changes a long term recovery is unlikely, it states.
Andrew Goodwin, senior economic advisor to the Item Club, said: ‘In order for the housing market to function properly it is essential that first-time buyers are brought back into the market, else the current status quo of a low number of transactions, dominated by speculative cash buyers, is likely to be maintained.’
Last week mortgage lender Halifax released figures showing house prices rose 0.8 per cent in August. Rival measures for August have also been positive, with Nationwide recording a 1.6 per cent rise, and Hometrack reporting a 0.1 per cent rise, which it said was the first increase since July 2007.
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Readers' comments (2)
ancient Greek | 14/09/2009 8:58 pm
"Lack of available property" seems a good enough reason to keep driving property prices up, although one cannot disagree about the resultant exclusion of a large number of would be housing applications on 'economic rounds'.
It would also be foolish not to agree with the catastrophe senaria that so many eminent academics, bankers, economists and revolutionaries of every kind have so eagerly embraced recently. I am still reading one now, after attending the appropriate LSE seminar on the subject of recommodification of housing; sounds nice, does'nt it? I keep on learning little by little, while maturing disgracefully during a very dangerous age.
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Bernard Townroe | 15/09/2009 7:26 am
Is there ever any risk that we might move away from our obssession about house prices? In what way will a return to unsustainable prices, based upon little more than speculation, be a good thing?
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