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Thursday 17th of June 2010
January 10, 2008    

Shortage of supply will underpin housing market

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by Gill Montia

News agency, Reuters, has published the results of a poll of property analysts’ predictions for 2008.

The consensus of opinion is that house prices will stagnate during 2008/09, although two out of three of the experts questioned expect prices to fall on an annual basis, at some point during 2008.

The majority see UK housing as too expensive, with some estimating that the market is overvalued by as much as 40%.

However, the problem of affordability is not expected to be solved by a fall in prices because the market is underpinned by a shortage of supply.

The poll predicts that mortgage approvals, a sound gauge of future housing activity, will be rising by 75,000 per month in six months’ time, to end the year at around 85,000 per month (as compared with 83,000 in November 2007).

Despite the fact that the UK housing market is seen as even more overvalued than that of the US, which is now in its deepest housing slump since the 1991 recession, the analysts surveyed only attach only a 15% probability to a similar market correction in the UK.

This view is partly supported by the fact that UK’s “subprime” market is smaller than that of the US.

When it comes to interest rate cuts, 11 experts agreed that there was a risk that cutting too aggressively could re-stoke house price inflation, while 14 said it would not.

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