House prices due to fall for first time since 1990s
A recent prediction from industry experts shows that house prices are expected to fall on an annual basis for the first time since the 1990s. With the country on the brink of recession and the reduction of mortgage loans, fears of rising unemployment, and the effects of the credit crunch, house prices are expected to take a hit with house price falls on an annual basis delivering a shock to homeowners who have seen the value of their homes rocket over the past seven years or so.
According to a Reuters poll of 30 analysts there is a 78% chance that house prices will fall on an annual basis this year, which is a rise on the 65% chance predicted in January, and a sharp rise on the 30% chance of falls on an annual basis that was predicted in October of last year. Prices are expected to fall by around 0.8% this year, and a further 2% in 2009 according to predictions, and the overall prediction for house prices has deteriorated over recent weeks.
One economist from the Bank of America in London stated: “Tightening credit conditions, weak purchasing power and a softening labor market will all prevent a resurgence in house price inflation.” Another official from the Royal Institute of Chartered Surveyors stated: “A key difference with 2004/05 when monetary easing did stoke up house prices is the reluctance of lenders to lend on mortgages.”
An economist at Capital Economics said: “The recent weakness in demand, evidenced by low levels of new buyer inquiries, will be exacerbated over coming months as the economy slows, unemployment begins to rise and job security is undermined.”
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