Future of house prices looks bleak
October 30, 2008
Over the past year the housing market in the UK has fallen into a slump, with house prices having fallen month on month, leaving them considerably lower than they were at their peak this time last year. However, the bad news is not over for homeowners, with industry officials warning that property values are set to continue falling. In fact, one firm of economists has warned that by this time next year property prices could have dropped by up to 35%.
If this happens official say that the collapse will be the biggest ever seen in this country. Many homeowners could be plunged into negative equity, leaving them owing more on their mortgage than their property is actually worth. The massive drop could see around £65,000 wiped off the average property price, with the average house price falling from £186,000 last autumn to just £120,000 next autumn.
One official from the firm said: ‘The sheer speed of adjustment is causing alarm.’
However, he did add that it could boost the economy, stating: ‘While a period of falling house prices will inevitably be painful, we believe that the quicker house prices return to fair value, the less damage the housing market correction will do to the wider economy.’
Another financial firm expressed concerns that there could be a rise in repossession, with some lenders failing to pass on Bank of England base rate cuts.
He said: ‘With more base rate cuts on the horizon, which in part are intended to reduce the burden on household finances, we could find ourselves in a situation where the Bank of England’s decisions on a rate cut will have little or no bearing on the majority of families’ mortgage outgoings. It could ultimately result in an increase in repossessions.’
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