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| House prices 'to recover by 2013' | House prices 'to recover by 2013' |
| (10 minutes later) | |
| House prices will not get back to the levels they peaked at in 2007 until 2013, the Centre for Economics and Business Research (CEBR) has predicted. | |
| The group also forecast that prices would fall in value by 25% from their peak to a trough at the end of 2009. | |
| It would mean an estimated 2.5 million homeowners could face negative equity. | It would mean an estimated 2.5 million homeowners could face negative equity. |
| The predictions of UK house price falls are similar to those made by the chief executive of the Nationwide Building Society, Graham Beale, last month. | |
| The price drops have been welcomed by some who argue that many were priced out of the market when prices rocketed. | The price drops have been welcomed by some who argue that many were priced out of the market when prices rocketed. |
| Predictions | Predictions |
| If proved correct, the prediction from the CEBR would mean the value of the average home would have dropped to £157,058 by the end of 2009. | If proved correct, the prediction from the CEBR would mean the value of the average home would have dropped to £157,058 by the end of 2009. |
| Now that the financial crisis turns into an economic crisis with rising unemployment and falling household incomes, we could see house price falls starting to accelerate again Ben Read, CEBR | Now that the financial crisis turns into an economic crisis with rising unemployment and falling household incomes, we could see house price falls starting to accelerate again Ben Read, CEBR |
| That represents a decrease in value of about £50,000 from the peak in the housing market a year ago. | That represents a decrease in value of about £50,000 from the peak in the housing market a year ago. |
| Prices are expected to be broadly flat in 2010, before rising by about 20% during 2011 and 2012, the CEBR forecasts. | |
| In an interview with the BBC last month, Nationwide chief Graham Beale said he was not expecting any signs of a recovery in the market until 2010. He also said the pattern of price falls next year would be similar to this year. | |
| The Council of Mortgage Lenders recently claimed that any short-term prediction of house prices was "futile" before there was clarity after the recent volatility in the market. | The Council of Mortgage Lenders recently claimed that any short-term prediction of house prices was "futile" before there was clarity after the recent volatility in the market. |
| But the lenders' group also joined an emerging market consensus that prices would continue to fall until the end of next year. Other lenders are expected to give their forecasts for the coming year in November and December. | |
| Mortgage drought | Mortgage drought |
| The CEBR suggested that the lack of will among banks to lend to each other, and therefore to homeowners was a key factor in determining house prices. | The CEBR suggested that the lack of will among banks to lend to each other, and therefore to homeowners was a key factor in determining house prices. |
| Mortgage availability has affected the housing market | Mortgage availability has affected the housing market |
| "Confidence in the housing market has been shattered as lack of mortgage availability has left few sellers chasing even fewer buyers, and expectations of falling prices have become embedded," said Ben Read, managing economist at CEBR. | "Confidence in the housing market has been shattered as lack of mortgage availability has left few sellers chasing even fewer buyers, and expectations of falling prices have become embedded," said Ben Read, managing economist at CEBR. |
| "Now that the financial crisis has turned into an economic crisis with rising unemployment and falling household incomes, we could see house price falls starting to accelerate again." | |
| But he argued that this would be offset to some degree by "aggressive cuts in interest rates", at least some of which would be passed on to homebuyers. | But he argued that this would be offset to some degree by "aggressive cuts in interest rates", at least some of which would be passed on to homebuyers. |
| The next decision on interest rates by the Bank of England's Monetary Policy Committee is scheduled for next week, although the possibility of co-ordinated moves by central banks has again been mooted. | |
| The rescue package for the banks would also start to free up lending, and Mr Read suggested that this would help transactions to rise sharply in 2010. | The rescue package for the banks would also start to free up lending, and Mr Read suggested that this would help transactions to rise sharply in 2010. |
| Waiting time | |
| Nearly a third of UK properties for sale have been on the market for more than six months, and 12% have been unsold since the start of the year, according to property search engine Globrix. | |
| This was seen the most in Aberystwyth, where 70% of properties for sale had been on the market for more than six months, followed by Merthyr Tydfil (62%), Rochdale (52%), Shrewsbury (49%) and Oldham (48%). | |
| In the major cities, 41% of properties for sale in Liverpool have been without a buyer for more than six months compared with 25% in Bristol. | |
| "Mortgage finance is a lot tougher to secure and many sellers still are not dropping their prices to realistic levels. They are in 2008 but have a 2005 mindset," said Daniel Lee, of Globrix. |