UK House price rally unsustainable
A new report from Jones Lang LaSalle (JLL) is predicting that UK house prices could fall significantly over the next 18 months.
According to the Nationwide Index, house prices have risen 8% since the beginning of March; however analysts at JLL see the current rally as irrational and are forecasting a W-shaped recovery of the market.
In this scenario the company expects prices to remain flat in 2009, drop by around 7% in 2010, and only begin a sustained recovery in 2012.
Looking ahead to 2014, UK house price growth should be established at over 8%.
Rather than welcoming the price rises of recent months, JLL would have preferred a sharper drop followed by a more solid recovery.
The firm’s head of the residential department, James Thomas, says: “The economic fundamentals that have supported the upturn, most notably the constrained supply of housing for sale, will be eroded as unemployment hits a peak and while mortgage lending remains weak.”
He adds: ‘While the recent improvement in the market is encouraging, it is impossible to ignore the short-term risks posed to the UK residential sector by rising unemployment and poor credit availability.”