Assetz believes ‘double dip’ still unlikely

| October 15, 2009
Assetz believes 'double dip' still unlikely

A double dip recovery in the housing market is unlikely according to investment company Assetz.

According to the Halifax and Nationwide, house prices have been rising over the last few months but many experts are predicting that house prices will fall again, resulting in a double dip (or a W-shaped recovery).

Last month, the Ernst & Young Item Club, a respected group of economists, described recent house price rises as a “false dawn”.

The gloomy prediction from the influential group came just a few days after a report from Jones Lang LaSalle (JLL) said UK house prices could fall significantly over the next 18 months.

However, Assetz believes predictions of an imminent second dip in house prices are still unlikely.

According to the group, forecasts of a W-shaped recovery within the housing market are largely focused on the possibility of a new wave of forced sales, resulting from interest rate rises.

However, last week influential think tank, the Centre for Economics and Business Research (CEBR), said interest rates will remain at their current historic level of 0.5% until 2011.

Furthermore, rates will not reach 2% until 2014 as a result of the severe fiscal squeeze on the UK economy which will result in tax rises and spending cuts.

In the meantime, many reports have suggested that rising unemployment will have a negative impact on the housing market but yesterday’s figures from the Office for National Statistics showed that growth in unemployment is slowing.

A lack of lending has also been a major issue in the housing market but Stuart Law, chief executive of Assetz, said: “Lenders are still resisting the market’s natural buoyancy with strict lending criteria ruling out thousands of sensible borrowers, but this will not continue forever.

“As soon as they are confident that the housing market is making a sustained recovery and the risks are diminishing, they will move to offer more attractive products to borrowers. I expect this to happen within three months of the major house price indices moving into positive growth, which means improving lending terms in the first quarter of next year,” adds Mr Law.

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