The latest poll of analysts, carried out by Reuters, does not bring cheer to anyone with an interest in the housing market.
Rising unemployment, government spending cuts and the FSA’s tough stance on mortgage lending companies will all be contributory factors to the predicted fall in house prices. Two-thirds of the survey’s respondents expect to see house prices double dip next year with a median prediction of a drop of 5%. However, the survey also showed that houses in the UK are still overvalued. The respondents gave a score of 7 out of 10 for house prices, where 1 = extremely undervalued and 10 = extremely overvalued.
Figures from the Nationwide Building Society show that house prices have already fallen in three out of the last four months.
John Hawksworth from PwC pointed out that prices are likely to fall further next year as contractor mortgage availability is restricted and consumer confidence levels drop due to the government’s austerity measures.
First-time buyers, who are already struggling to raise high deposits, will be hit by the FSA’s new strict regulations and this could stifle the market. Ray Boulger from mortgage broker John Charcoal believes the FSA’s Mortgage Market Review is the biggest threat to house prices in the immediate future.
Before the housing market crash the average number of monthly mortgage approvals stood at 104,000; last month that figure dropped to 44,000 and gross mortgage lending fell to its lowest October total since 2000.
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