Leading Analysts Predict Decline For UK Real Estate

Leading analysts predict that UK real estate prices will start declining again in 2010. This forecast is based on major economic indicators like employment and lending, which would …

Leading analysts predict that UK real estate prices will start declining again in 2010. This forecast is based on major economic indicators like employment and lending, which would place downward pressure on prices. For more on this, see the following article from Property Wire.

Residential property prices in the UK face the prospect of a double-dip in the next few years amid high unemployment and constrained lending conditions, a leading ratings agency has warned.

Fitch Ratings is expecting property to come down by nearly a third from the peak seen in 2007.

Recent monthly surveys have shown that prices have bottomed out and are starting to creep higher but economists have also been warning they are set to fall in the New Year.

Just a few days ago Nationwide reported prices had risen for the seven month in a row in November but chief economist Martin Gahbauer warned that unemployment would be a major factor in 2010.

Fitch, which has kept its credit outlook for UK house builders at negative because of its concerns about the sector’s debt levels, said a recovery in the housing market in the near term was unlikely, and it expected to see either no growth or further falls in price as problems came to a head.

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‘A quick and sustainable improvement in UK housing conditions is unlikely and this will restrict the potential for rating upgrades.

The main economic indicators point towards a period of stagnation at best, or at worst a double-dip contraction in house prices,’ said Fitch’s UK house builder analyst Jean-Pierre Husband.

‘Over 66% of UK mortgage borrowers are now on floating rate mortgages, compared with 48% in August 2008, and their ability to service existing mortgage debt would be adversely affected by any hike in interest rates,’ he added.

Other concerns surround the fact that increased property prices are due to a lack of supply.

Capital Economics property economist, Seema Shah said the small increases seen recently made no difference to the underlying outlook and basic argument that prices are still overinflated.

She predicted that if rises continued sellers would become more confident about putting homes on the market, increasing supply and therefore driving down prices.

‘Unemployment is likely to continue rising long after the recession ends.

This will also put heavy downward pressure on average earnings, with the result that pay growth could tip into negative territory next year.

Even if the economic outlook proves better than we expect, the housing market will not benefit. Interest rates would be raised, reducing affordability, while fiscal tightening will eat into households’ disposable income.

The upshot is that with the housing market still overvalued, prices are more likely to fall than to rise next year,’ she added.

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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