Housing market to recover quicker than economists first feared

Housing market to recover quicker than economists first feared

The end is in sight for the housing market downturn, according to a leading economic think tank, which has upgraded its previously more pessimistic forecast.

By Harry Wallop, Consumer Affairs Editor
Last Updated: 9:57AM BST 04 May 2009

The housing market is predicted to bottom out later this year Photo: Chris Radburn/PA Wire

House prices only have a little further to fall, and should slowly start to pick up next year, according to the Centre for Economics and Business Research.

The think tank earlier this year predicted that house prices could tumble by as much as 40 per cent from their £196,000 peak in the summer of 2007. But it now thinks it is more likely they will decline by 28 per cent "peak to trough" by the time the housing market finally hits the bottom later this year.


By the end of 2013 house prices should have increased by 23 per cent to £170,000 from their predicted nadir this year of £144,000.

The improved forecast comes on the back of a series of more positive figures to emerge from the housing market.

The Royal Institution of Chartered Surveyors said last month that the number of potential buyers asking estate agents to look around properties had increased for five consecutive months.

RICS said the number of new buyer enquiries increased at the fastest pace since September 2003. Moreover, the number of properties being sold by estate agents during March increased for the first time since November 2007.

Meanwhile, the Land Registry said house prices dropped by just 0.4 per cent during March, the lowest monthly fall for 11 months.

But the CEBR cautioned home owners not to get carried away by the positive data, warning that house prices have a further 8 per cent to fall, as rising unemployment will cause increased number of people to sell their homes in a hurry.

However, it is forecasting a relatively robust recovery by 2012.

Ben Read, managing economist at cebr, added: "Going forward, house prices are likely to remain in the doldrums for some time, as what is likely to be a slow recovery in the real economy translates into weak wage growth and stubbornly high unemployment – factors that will put a fairly heavy lid on house price inflation.

"We may start to see stronger house price growth towards 2012 or 2013 as the huge downturn in new housebuilding over the past 12 to 18 months leads to significant under-supply over the medium term."

The think tank predicts the average cost of a home will increase by just 3.1 per cent between the fourth quarter of this year and the final three months of 2010, followed by a further 2.5 per cent rise the following year.

But the house price growth is expected to pick up again during 2012 or 2013, with the average cost of a property recovering to £170,000 by the final quarter of 2013, up from a predicted £144,000 at the end of this year.

This will still be below the peak price of £196,000 that was hit during 2007.

http://www.telegraph.co.uk/finance/economics/houseprices/5268360/Housing-market-to-recover-quicker-than-economists-first-feared.html