What Do You Think Will Happen to House Prices?
The Bank of England recently, forecast a fall of 10% in UK house prices over the next 12 months. This seems to be a reasonable prediction based on the following:
- Availability of mortgages have plummeted, leading to a severe shortage of buyers.
- The average number of property transactions has fallen to its lowest levels since the recession of 1991
- With rising inflation, there is little prospect of a significant interest rate cut in the near future.
- Rising oil prices are also causing a decline in living standards. There is expected to be a stagnation in real disposable income. Therefore, although prices are falling, there will be no quick readjustment in house price / income ratios.
- Sentiment has changed. With fears of falling prices now firmly entrenched in people’s minds, there is no incentive to buy for property growth.
- Why House prices are falling - more reasons
Some people believe that the above factors mean that house prices could actually fall a long way upto 30% or even 50% in real terms. Economists predict 20% fall
A difficult question is when will house price stop falling and recover?
To some extent it depends on the length of the credit crunch which shows no sign of abating.
Some people feel that property prices are grossly overvalued and it will take many years for house prices to regain current levels.
However, on the other hand, long term factors which influence price suggest that the rising number of households and limited supply could cause house price to earnings to remain high for the foreseeable future. see: long term price forecasts
What do you think? Will property prices continue to plummet, or is this just a short term drop due to the adverse conditions of the property market.
Original post by Tejvan R Pettinger