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Friday 03rd of July 2009
October 27, 2008

UK house prices to fall by an average £40,000


by Gill Montia
UK house prices to fall by an average £40,000

The Centre for Economics and Business Research (CEBR) is predicting that the average cost of a UK home will fall up to £40,000 by the end of 2009.

The independent consultancy expects the market to show signs of stability in 2010, having seen a maximum 20% decline in prices, from the market peak last summer.

Based on this assumption, the average house price, which stood at £196,000 in summer 2007 will fall to £157,000 by Christmas 2009, at which point prices will have reverted to 2004 levels.

The Centre’s managing economist, Ben Read, describes confidence in the UK housing market as having been shattered by a lack of mortgage availability.

He expects the economic crisis, which has developed from the credit crisis, to push prices down further as unemployment rises and household finances come under pressure.

At the same time, the CEBR expects the economic slowdown to prompt cuts in the Bank of England’s base rate, which could fall by 1% before the end of 2008 and be down to 2% (from is current level of 4.5%) by autumn 2009.

Mortgage borrowers should benefit from the rate cuts and mortgage availability should improve, as the banking rescue package takes effect.

The Centre’s analysts expect a shortage of housing to eventually restore sales and prices with the average house price rising to around £172,000 in 2011 and £191,000 in 2012.

Last week, Capital Economics painted a gloomier picture for British homeowners.

The economic forecasting agency predicted that by autumn 2009, UK house prices will have fallen 35% from their peak and that the collapse will take £65,000 off the average price of a home, which could be worth £120,000 this time next year.

A fall on this scale would return prices to the levels last seen in 2003.

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