Housing affordability barometer predicts period of price correction
by Gill Montia
Lombard Street Research (LSR), the independent economic forecasting consultancy, is predicting a fall in house prices across the UK, in 2008.
LSR believes it has new evidence to show that the property boom has come to an end and that next year could see the first decrease in house prices in over a decade.
According to the latest Lombard Street Research/Daily Telegraph housing affordability barometer, house prices are now reaching the breaking point of unaffordability.
The index has fallen 11.5% in the past 12 months, to 85.3, close to the point where housing becomes so expensive a period of price correction is inevitable.
According to Diana Choyleva, LSR’s deputy director, affordability issues combined with the credit shortage “will be the final straw which tips house price inflation into negative territory”.
The first indications of the end of the boom are likely to be seen this autumn, when house price inflation should start slowing down.
Ms Choyleva believes that through 2008 “it is likely to grind to a halt”.
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