Will house prices rise or fall?
October 6, 2008
A huge number of industry officials and agencies have been predicting since last year that since the housing bubble burst house prices would continue to fall for the next couple of years in the UK. Some officials have predicted that house prices could plummet over the next couple of years, with a number of professionals sating that the value of properties could fall by 17% over the next year and by up to a third over the next couple of years.
For all of those with pretty hefty mortgages on their homes, such as recent buyers and those that have taken out 100% mortgages, this is bad news, as the more house prices fall the further into negative equity they will be plunged, where they find themselves in a situation where they owe more on their mortgage than the property is actually worth. The evidence all points towards a downward turn in house prices, as they have been falling for many months and are now at the same level as they were in August 2006, according to recent reports.
However, there has been a recent glimmer of hope for homeowners in a new report that was recently released by the Centre for Economics and Business Research. According to officials from the agency the fall in house prices in likely to continue until the middle of next year, but after this time there could be a shift in the pattern, and house prices could actually start to rise again by quite significant levels. In fact, the report suggested that house prices could soar by around 30% over the next three years, and that by 2012 the average house prices could be around £50,000 higher than it is now.
Of course, these predictions will give hope to the many homeowners who have been dreading the doom and gloom of falling into negative equity for years to come, as they may not have to wait as long as they thought they might to see things get back on track. However, the news is not so good for the average first time buyer, with many hoping that they might be able to get onto the property ladder eventually if house prices continues to fall.
Officials from the group said that whilst things would get worse before they got better there was little doubt that things would eventually recover. One of the reasons the Centre for Economics and Business Research is predicting that house prices will eventually rise again is due to the shortage in housing, and this has been fuelled by the number of house building firms that have had to cut staffing levels and stop building properties due to the lack of interest in purchasing.
The level of house sale transactions has plummeted over recent months, with many would be buyers unable to get a mortgage to purchase a property, many others unwilling to commit to a property whilst house prices are still falling, and some deciding to wait and find out whether a government plan to suspend stamp duty for first time buyers will come to fruition.
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