Former government adviser casts gloomy outlook for house prices
April 3, 2008
A former government advisor and senior economist has cast a gloomy outlook for house prices, predicting that the value of the average property in the UK could plummet by 20% over the next two years, leaving some homeowners facing the pitfalls of negative equity, and seeing many others lose thousands of pounds off the value of their properties. Should this situation come to fruition the average house price could fall from £200,000 to £160,000 in the space of two years.
The prediction was made by Professor David Miles, who is the Chief UK Economist at Morgan Stanley, and a former government adviser. There are been many reports relating to house prices movement over recent months, and all have indicated that house prices are going to continue falling over the course of this year. There have already been house price falls over recent months, and experts state that the market has suddenly swung from a seller’s market to a buyer’s one.
David Miles was quick to add that whilst the news was not good for homeowners – particularly those that had recently paid a fortune for a home that could plummet in value so quickly – there were some winners in the situation, namely first time buyers who could previously not afford to buy.
He said: ‘I am at the pessimistic end of the spectrum, but I don’t think it should be seen as the pessimistic end because there are as many gainers as losers.’
However, whilst falling house prices may prove to be good news for first time buyers that are desperate to get onto the property ladder, there may still be problems in store for them, as tighter credit conditions are leading to reduced access to finance and the need to provide a much larger deposit, which many first time buyers simply cannot afford to do.
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