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 Property prices are set to plunge by 14% this year and 10% next year, according to a major new economic forecast.
Yet the latest house price surveys show prices holding firm - so what’s going on? Could we yet avoid a property crash?
The Rightmove house price index published this morning would, on first glance, appear to reveal some green shoots amid the housing market decline. It shows that for the month of October, prices for new homes actually increased by 1% to a new average of £229,691.
However, a closer inspection will reveal that these are asking prices, not final sale prices, and that the annual rate of inflation is now 4.9% lower than this time last year - the largest-ever fall recorded by Rightmove.
Elsewhere a major economic forecast from the Ernst & Young Item Club predicts that house prices will tumble 14% this year and 10% next year before stabilising in 2010. So what’s going on?
Homeowners in denial
Rightmove director Miles Shipside claims that after 10 years of a rising market, sellers are still using the traditional autumn market to try and sell their home for a good price - ignoring the huge changes in the financial climate of recent months.
“In spite of the financial mayhem, some residents are inclined to think that their own residence is more desirable than its competition,” he says. “But these are not the tactics of people in financial hardship and it would appear that the economic downturn has yet to become a reality to them.”
If figures from The Royal Institution of Chartered Surveyors (RICS) are anything to go by, these homes are unlikely to sell at all. They show that estate agents sold an average of just one property a week in September - even less in London - which is the lowest activity since it began tracking transactions in 1978.
This suggests that asking prices are now irrelevant, claims estate agent Dean Sanderson of Manchester-based Sanderson James. “This is why asking prices are irrelevant. In mine and other agents’ experience, business is down between 30% and 40% on this time last year,” he says.
Nationwide and Halifax house price reports - that use mortgage valuation data to assess prices - have not yet been published for October but in September, they revealed falls of 1.7% and 1.3% respectively with both indices pegging annual inflation down 12.4%.
Article from Sky News
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