NEW! Investment Companies Centre

Housing recovery 'unlikely' before 2011

Related Companies

Related Indices

Related Sectors

News for Spread Betters

PreviousPrevious
NextNext

There's a new Investor Edition of CMC Markets' spread betting platform... and it's exclusive to DigitalLook.com users...

Get full details about Marketmaker:Investor Edition here. Advertisement

Date: Friday 05 Sep 2008

LONDON (ShareCast) - We’ll have to wait until 2011 before a return to consistent house price growth, upmarket estate agent Savills warned today.

It pointed to the July report by the head of the Financial Services Authority suggesting restrictive mortgage conditions will persist through to the end of 2010.

A lack of liquidity in the credit markets is continuing to keep the cost of finance way above bank base rates, although fixed and tracker rates have fallen recently.

Above-target levels of inflation through next year will also limit the potential for significant interest rate cuts during the next 18 months, it says.

The Bank of England kept borrowing costs on hold at 5% yesterday as policymakers struggle with rising inflation and the possibility of recession before the end of 2008.

“Given the speed at which house prices have fallen so far, the economic outlook and the ongoing constrained mortgage market, our forecast of -25% falls over 2008 and 2009 is looking like an increasingly safe bet,” said Savills.

“Our analysis shows that a fall of this magnitude will allow the market to bottom out and once again present opportunities to those in a position to buy.”

“At this point the market may well become polarised between the equity rich, who will be able to buy and those with negative equity, who will be unable to transact so soon,” it added.

Today’s news came as analysts at Sanford Bernstein predicted that a 35% slump in UK house prices from last year’s peak could plunge 1.3m households into negative equity. Banks might lose up to £38bn as a result.

“These recession levels of both negative equity and loan loss rates are similar to those in the early 1990s,'' said SB senior analyst Bruno Paulson.

“The market has strong negative momentum, down 12% so far this year, and leading indicators suggest that it is going to get worse.”

House prices tumbled 12.7% between August 2007 and last month, according to data released by the Halifax Thursday. They dropped 1.8% in August alone, leaving the cost of the average home at £174,178.

Digital Look have been voted
"Best Research and Information Provider"

4th Floor, Bankside House, 107 Leadenhall Street, London EC3A 4AF.
Registered in England and Wales (registered no. 3678570).