According to a recent report house prices in the UK could be set to fall by around £40,000 by the end of next year, and this would mean average house prices would be back to the same level as they were in 2004. Figures suggest that house prices could fall by 20% on a peak to trough basis by the end of 2009. The figures have been released by the Centre for Economics and Business Research (CEBR), which claims that it will be 2010 before house prices start to stabilise.
On a brighter note the company has predicted that it 2011 and 2012 the housing market will see a new boom, so those nervous about falling into loan negative equity over the next two years could see the problem rectified later on. Whilst the Bank of England has cut interest rates significantly over the last two months the agency still believes that house prices and property sales will continue to decline over the next year or two.
An official from the CEBR said: ‘Confidence in the housing market has been shattered as lack of mortgage availability has left few sellers chasing even fewer buyers, and expectations of falling prices have become embedded. Now that the financial crisis turns into an economic crisis with rising unemployment and falling household incomes, we could see house price falls starting to accelerate again.’
He added: ‘However this will to some extent be offset by aggressive cuts in interest rates, at least some of which will be passed on to homebuyers, combined with a gradual relaxation in mortgage availability as the impact of the banking rescue package kicks in.’