House prices to fall till 2015

| May 6, 2011 | 0 Comments

A new report from a leading think-tank is predicting that UK house prices will fall by 4.5% in 2011, followed by an average 1.5% fall in each of the subsequent four years.

According to the National Institute of Economic and Social Research (NIESR), this year’s decline will reflect the squeeze on household finances resulting from higher taxes and rising inflation, and will be followed by higher borrowing costs coming into play, as monetary policy tightens.

Research by the Institute also claims that higher loan-to-income ratios for new mortgage borrowers were a major reason for the house price boom of the 2000s that turned to bust in the financial crisis.

NIESR suggest that the supply/demand balance was less important to the cycle than has been argued, and wants regulation of the market to focus on limiting loan-to-income ratios.

Earlier this week, Nationwide reported that UK house prices fell by 0.2% in April, leaving the value of the typical home down 1.3% on a year earlier, at £165,609.

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