Mortgage lenders' body say house prices will fall |
|
|
Published
:
Thu, 04 Aug 2005 14:05
|
LONDON: Britain's mortgage lenders largely believe that property values will fall at least by 2 per cent this year. The Council of Mortgage Lenders, a representative organisation of mortgage lenders in the country, says the housing market is becoming more difficult and it is pessimistic about house prices.
The Council, which has as its members, several banks, building societies and other lenders, said house prices nationally had remained flat over the months. It had earlier estimated that there will be a 4 per cent increase in house prices, but revised the figure to 2 per cent drop taking into consideration the prevailing market conditions. It also revised its forecast for 2006 saying the prices will remain flat as against its earlier contention that there will be a 2 per cent
growth.
The Council's report says: "We expect the Halifax and Nationwide house price indices to dip into negative territory later this year. While this is more pessimistic than our previous forecast (we had envisaged prices still showing modest positive growth of four per cent), we do not foresee this as the precursor to a period of substantial or sustained house price falls at the national level."
The Council's head of research Bob Pannell said feedback from estate agents and surveyors show that house price weakness is likely to persist for some while.
One disturbing prediction of the Council is that house repossessions and mortgage arrears may increase modestly. It had earlier predicted that 8,350 homes would be repossessed in 2005. This figure has now been revised upward to 10,000, going to 11,000 in 2006 and 12,000 in
2007.
Apart from the price front, the Council said it feared property transactions would fall from about 1.35 million this year to 1.3 million for each of the coming two years. The buy-to-let market too
will see weaker activity as investors are realising the limited scope for capital growth.
Nevertheless, there is room for optimism, it said, as mortgage lending had returned to normal levels after last year's frenetic peak. It would remain stable.
"Broadly speaking, we expect house prices to stabilise for a few years, allowing earnings to catch up and the price-earnings ratio to realign itself within a more sustainable range. This suggests that affordability problems will only unwind slowly and that it will take some time for demand to rebuild. As a result we envisage a subdued housing market for an extended period," the report adds.
|
|
|
|
|
|
Print this Story
