House prices to fall by 10pc, economist says

Published 14th Sep 2010

House prices could fall by 10pc by the end of next year, a leading economist has said.


Howard Archer of IHS Global Insight said prices were likely to fall around 3pc over the final months of 2010 and that a further drop of around 5pc in house prices looked "highly possible" in 2011.

"On balance, while we believe that a sharp correction in house prices is unlikely ... we believe that they could be some 10pc lower by end-2011," he said.

Mr Archer's predictions come the day before the Royal Institution of Chartered Surveyors (RICS) releases its latest housing market survey. He said the survey was likely to show that the supply-demand balance in the housing market was continuing to move "more in favour of buyers".

"The July RICS survey showed that the number of new properties coming on to the market had risen at the fastest rate since May 2007," he added. "This is particularly significant as a shortage of properties was a major factor in the recovery in house prices from their early-2009 lows."

Mr Archer added: "Housing market activity is currently low, the economic fundamentals for the sector are far from ideal (notably high unemployment and muted wage growth), a major fiscal squeeze is getting under way, and house price/earnings ratios have moved up overall from their early-2009 lows and are above their long-term averages.

"On top of this, credit conditions remain tight with mortgages still hard to get for many people. Meanwhile, more properties have been coming on to the market for some time now, thereby moving the supply/demand balance in favour of buyers."

The mortgage market remained weak during July despite a slight rise in the number of loans advanced to people buying a home, figures showed.

Around 56,000 mortgages were lent to people purchasing a property during the month, 7pc more than in June, according to the Council of Mortgage Lenders.

The group said that while the increase reflected a seasonal rise in activity, the lending volumes still represented a "very weak market" during a period that is usually a strong part of the year.

Source: ' Telegraph '

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