Ernst & Young Economists Predict United Kingdom Real Estate To Fall

If predictions by ITEM’s economists are correct, patience will be vital for United Kingdom real estate investors in the period ahead. Forecasting a double digit overall decline in …

If predictions by ITEM’s economists are correct, patience will be vital for United Kingdom real estate investors in the period ahead. Forecasting a double digit overall decline in residential prices for the current year, the group cautions that we will not see 2007 levels again for five years at minimum. See the following article from Property Wire for more on this.

Recent rises in property prices in the UK is giving false hope that a recovery is underway and it will take five years for values to return to the peak of 2007, a leading group of economists claim.

All the recent house prices indices point to a small but significant rise in prices by a report published Monday by the Ernst & Young ITEM Club predicts that prices will start falling again at the beginning of 2010 as the market experiences a double dip.

They say that a small number of cash rich buyers are responsible for the recent rises and that core buyers such as first time buyers are not returning to the market in significant numbers because they cannot afford the deposits required and are limited by a poor choice of mortgages.

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Once buyers with access to big deposits dry up there will be nothing left to support growth in the market and it is predicting price falls of 1.6% in the first half of next year.

But there is some good news in that the report does predict prices to start rising again in the second half of next year and increase by 2.8%.

‘A small number of cash-rich buyers have supported prices, but the supply of these funds is limited, which means prices are likely to dip again in the first half of next year,’ said Hetal Mehta, advisor to ITEM.

The reports also cites rising unemployment, which stands at about 2.4 million, and weak earnings growth also threaten to undermine a housing market recovery.

ITEM predicts that unemployment will peak at 2.76 million next spring, equivalent to a rate of 8.8%.
ITEM says that overall in 2009, house prices are likely to fall by 11.4%.

This is in stark contrast to recent predictions from the Nationwide that prices will rise up to 5% this year, following a 16% fall in 2008.

After a rise in the second half of 2010 prices will stagnate for about two years before more substantial growth of more than 5% returns as the wider economy strengthens and credit conditions ease, the report continues.

‘But it will take more than five years for prices to return to their late-2007 peaks,’ it concludes.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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