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cebr: house price crash predictions wide of mark

cebr: house price crash predictions wide of mark

Category: Mortgages

Updated: 29/12/2009
First Published: 29/12/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The centre for economics and business research (cebr) has written off predictions of a collapse in house prices during 2010, saying such a scenario is an 'unlikely outcome.'

A number of analysts and experts have predicted a heavy fall in house prices over the next 12 months, fuelling fears of a double dip in the mortgage market. Some have gone as far as saying that the market could contract by almost a third during the next year, with 30% shaved off the price of an average property.

However, Ben Read, managing economist at the cebr, said: "Even during this – the housing market crash to end all crashes – prices fell by 22 per cent from peak-to-trough, but now stand just 15 per cent lower then the end of the 2007 peak.

"These experts are also telling us that next year house prices will fall back significantly. We think this is an unlikely outcome for a number of reasons, despite our predictions for a weak economic recovery and unemployment rising further."

The group said that mortgage lending would improve steadily as banks rebuild their balance sheets, while the price of mortgages should remain relatively low as a result of the low base rate of interest. A lack of supply would also support house prices.

"Taking all these important factors into account, our central prediction is that house price growth will moderate in 2010, with prices at the end of the year being between two and four per cent higher than today," added Mr Read.

He also forecast a steady climb in prices over the next three years. "Over the long-term, the weak recovery will continue to hold growth back, but we still expect house prices to be around 15 per cent higher at the end of 2012 than they are today."

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