IMF warns of further correction in UK housing market

| October 7, 2010 | 1 Comment
IMF warns of further correction in UK housing market

The International Monetary Fund (IMF) has suggested the UK property market could experience a double dip.

In its latest World Economic Outlook, the IMF highlighted that despite Government efforts to boost the housing market and encourage first-time buyers, UK house prices could still be in line for “further correction”.

The IMF was referring to the two stamp-duty holidays.

“What remains worrisome (about the UK), however, is that house prices are still high based on traditional valuation yardsticks, and policy support may not be enough to prevent further correction,” the Fund said.

The IMF points out that a slump in activity had been experienced after a first stamp duty holiday ended in December 2009.

In March 2010, the former Labour Government abolished stamp duty on house purchases up to £250,000 for two years. The Government said the change would mean 90% of first-time buyers will not pay the duty.

However, despite efforts by the Government, the fact remains that mortgages are less readily available and approvals have slumped. Demand remains at 50% of the level seen prior to the credit crunch.

Meanwhile, in related news today, the Halifax revealed UK house prices fell by a record 3.6% in September compared with August.

The latest house price fall takes the average cost of a UK home to £162,096, the Halifax said.

According to the lender, the monthly decline was the biggest since records began in 1983. However, it is still too soon to suggest that this is the start of a slump in house prices.

The fall in house prices has been attributed to a high level of instructions on the market but a lack of buyer demand, according to many reports.

The uncertainty surrounding the economy is also having a negative impact on the housing market and therefore the market is likely to remain subdued in the short-term.

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  1. Steve Thompson says:

    There’s a market in America where prices have collapsed. Detroit has an inventory of nearly 10000 homes which the city plans to demolish over the next 3 years and houses that are priced at less than what one would pay for a reasonable used car. Here is more information on the issue:

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