Press Release Summary: Its official: the hare that was the UK housing market has become a tortoise. That the UK Property housing market has been slowing down in the last few months is well known as survey after survey shows lower house price rises.
Press Release Body: Its official: the hare that was the UK housing market has become a tortoise. That the UK Property housing market has been slowing down in the last few months is well known as survey after survey shows lower house price rises, but figures out today suggest it has finally gone into its shell.
The October survey of the housing market by property website Hometrack.co.uk showed that this month has seen house prices falling by 0.1 per cent, with this pattern repeated right across the regions, even in London. Only the West Midlands, where the figures remained the same as in September, did not show a drop. Meanwhile, the annual inflation rate had fallen to 4.4 per cent.
Describing the London Property Prices fall as \"not unexpected\", Hometrack\'s director of research Richard Donnell said: \"After several months of weaker buyer confidence, falling levels of demand and declining sales volumes, prices were bound to be affected.\" To this he added the prediction that there would be a continued slowdown into next year.
Some have tipped that next year will see zero growth (the view of Nationwide) or even deflation, with Capital Economics now predicting a three per cent decline, FT Adviser reports.
Whether these more pessimistic views turn out to be true remains to be seen, but others are forecasting growth, albeit on a low level, in the market next year. The Council of Mortgage Lenders (CML) is one such organisation.
In its annual forecast, the CML predicted that house price growth would be seven per cent over the whole of 2007, with 2008 seeing one per cent growth. Alongside this, it tipped property sales to drop from 1.17 million this year to 1.01 million next, with a corresponding fall in gross lending from £360 billion to £340 billion.
\"Luckily\", said Michael Coogan, director general of the CML, \"the credit crunch occurred at a time when the UK economy was robust\". Thus, he added: \"We now expect a slower mortgage market next year, although by no means a stagnant one.\"
While Mr Coogan believed this trend would harm some vulnerable people, with repossessions going up unless the government acted, the CML is not tipping a sudden fall in interest rates. It suggests these will be cut once this year to 5.5 per cent and be down to five per cent by the end of 2008, which is still 0.5 per cent more than they were before August 2006.
Of course, interest rates will depend on how inflation affects the whole economy, but if, as the government and economists have predicted, Britain is heading for lower growth but certainly not recession, \"not stagnant\" may aptly describe a housing market which is not facing anything like the harsh conditions of the early 1990s. Interest rates may fall and boost the market incrementally as inflation stabilises in a lower growth situation, while such rate-setting freedom, which did not exist when rates were kept high by the need to boost the value of the pound against the Mark in the Exchange Rate Mechanism, makes this approach possible. Thus, in time, the tortoise should come out of its shell and, albeit slowly, move forward.
Of course, for investors in property, the analogy may be taken a step further. Tortoises live a very long time, so perhaps now is the best time of all to commit to long-term investments rather than haring after a quick buck that the market does not presently offer.
2022
