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House prices predicted to drop

House prices predicted to drop

Category: Economy

Updated: 12/08/2010
First Published: 12/08/2010

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UK house prices are thought to be on the cusp of further falls, according to the latest forecast from Savills.

While the impending drop is not expected to see house prices fall back to the lows seen at the height of the recent troubles, much of what the property adviser calls 'the unsustainable price rises of the last 15 months' could be eroded.

By the end of 2011, Savills expects the price growth of 2009 and the first half of 2010 to have been lost, leaving the average house price at levels seen at the end of 2008.

This would be 15% down from their peak.

However, price growth is then expected to resume in the second half of 2012, and return to peak levels in 2014.

The prime markets of London and the South East are expected to lead the recovery and be the first to achieve sustained price growth.

"This will not be a repeat of 2008 as some doomsters have suggested, but a necessary short term correction of recent growth which was driven by abnormal market conditions rather than fundamental demand and wealth," says Yolande Barnes, head of residential research at Savills.

"The market now faces short-term price falls followed by a period of low or zero growth."

Reiterating the belief that the UK residential market has seen the worst of the price falls, Ms Barnes added: "For investors, our mantra is clear: seek out quality and invest for the mid to longer term and you will have little to fear from the market."

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