Residential property prices in the UK will fall further this year and not start recovering until the end of 2010, according to various long term predictions.
According to the Centre for Economics and Business Research there will be a further 3% decline this before the real estate market experiences a return to modest growth in property prices through to 2013. Price increases of 2% are predicted by the end of 2010 and 3.6% expected in 2011.
‘The key question now is the extent to which rising unemployment and weak wage growth will lead to a second wave of house price falls, or whether this has already been built into existing expectations,’ said CEBR economist Benjamin Williamson.
The National Housing Federation is also predicting a slow recovery for property prices in England. The body, which represents not-for-profit housing associations, is forecasting that house prices will fall by 12.2% this year and 4.6% next year.
Its latest report says that UK property prices will then stabilise with the organisation expecting house prices to be 20% higher than current values by 2014.
The two reports appear to contradict a more optimistic outlook from lenders. The Nationwide and Halifax, although cautious about recovery, have both indicated that although the market’s recent price gains could translate into further price falls in 2009, overall the outlook is much more positive.
Nationwide and Halifax have revised their forecasts upwards and said that further significant falls are unlikely. Also The Royal Institute of Chartered Surveyors said last week that is expects property prices to end 2009 higher than they were at the start of the year.
But David Orr, chief executive of the NHF, said both views were not necessarily contradictory. ‘Our new research shows that while UK property prices are falling in the short term, they will inevitably increase in the long term because of a fundamental under-supply of housing,’ he said.
He also added that shortages of new homes are expected as only 60% of new homes required to be built each year were being constructed.