UK house price rally called into question again

| September 14, 2009 | 0 Comments

The UK’s housing market rally is being called into question again, this time by Ernst & Young Item Club.

The economic forecasting group warns that price rises seen in recent months are a false dawn and that the average value of a home will not revisit to its 2007 peak for at least another five years.

According to the group, the scant supply of properties for sale along with a small number of “cash-rich” buyers have forced up prices; however, prices are likely to dip again in the first half of 2010.

Expanding further, Item Club points out that homeowners are choosing to stay put, either because of negative equity or because they are fearful of selling at prices well below their market peak.

With unemployment rising, mortgage lending still highly restricted and many potential first-time buyers excluded from the market, a sustained recovery will therefore be some way off.

The body expects 2010 to see price falls, followed by a two year period of stagnation.

In related news, a new report from Jones Lang LaSalle (JLL) is predicting that UK house prices could fall significantly over the next 18 months.

Analysts at the real estate and investment management firm 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%, according to JLL.

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