Property prices could fall by 35 percent before they rise again
January 25, 2009
A leading economist has warned that house prices in the UK could be set to fall by as much as 35 percent in total before they start to go back up again. The warning comes from George Buckley, chief UK economist of Deutsche Bank.
He said that whilst the UK has experienced a slump in house prices over the course of this year, this is only the tip of the iceberg and house price falls could be only a third of the way through. He suggested that house prices may fall by 35 percent in total before the recovery process begins.
Some industry officials have said that the market is likely to bottom out by next summer, so Buckley’s prediction is in contrast to this. He said that the effects of the housing slump had been underestimated and that ultimately the current housing slump would end up being worse than the housing crash of the early 1990s. He thinks that by 2010 the price of property will have gone back down to 2003 levels, and this means that many homeowners will be plunged into negative equity.
He stated: ‘If you look at what happened in the early Nineties it is arguable that like then we had had a big boom, but this time we’ve also got a credit crunch and a global recession on top. Property was massively overvalued. It was always the elephant in the room that nobody would admit to.’
Another industry official predicted: ‘We are certainly not going to return to the boom times in the near future but we should see a modest increase in property sales levels, mortgage offers and indeed general interest in property in 2009. However, we are unlikely to see a return to a healthy level of activity in the housing market until 2010, or even 2011.’
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