Confidence wanes as 75% expect house prices to fall

Consumer confidence in the UK housing market has taken a serious battering.

In a poll of over 4,000 people by This is Money, the financial website, 75% of respondents reported that they expect property prices to fall during 2008, with 52% stating that the drop will be 11% or more.

According to the Halifax index, the average price of a house in the UK stands at £194,895, and a decrease of 11% would reduce this by £21,500.

Nineteen per cent of those surveyed believed house prices would rise in 2008 and 6% said that prices will remain flat.

The results of the survey are in stark contrast to a similar poll taken in December 2006, when 55% of respondents believed prices would rise in 2007, and one-third of this group believed the increase would be over 6%.

Housing market confidence has fallen foul of what Citigroup, the world’s largest bank, refers to as a “toxic mix” of factors.

These include a decline in affordability, fears of an economic slowdown, higher interest rates, tighter lending criteria and the Northern Rock crisis.

However, some respondents to the This is Money survey are resistant to the idea of a property price crash: 9% believed prices would rise between 1% and 5%; 5% forecast growth of 6% to 10%.

Data for November from Halifax show house prices rising by 6.3% over the previous 12 months and the Nationwide’s house price index gives an annual rate of inflation for November of 6.9%, taking the cost of the average UK home to £184,099.

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