House prices are predicted to drop 10% this year, following the same path as in the 1990s. But price falls won’t be as large and protracted as the Nineties because the economy is not as weak, says a new report.
Hamptons International’s latest market view suggests that there will be more modest price falls in 2009 that are consistent and continual. Jennet Siebrits, head of residential research argues that communication between lenders and borrowers is essential to prevent repossessions spiraling as redundancies increase.
She adds that the similarities between now and the early 1990s mean house price growth is likely to follow a similar trajectory.
But, there are fundamental economic differences, which should prevent the downturn reaching the depths witnessed in the 90s’ crash. The employment market remains buoyant, with figures in the three months to April 2008 the highest on record.
‘We would expect house prices to fall by around 10% this year with further, but less significant, falls in 2009. We then expect a period of flat growth with the market picking up after 2010,’ the report predicts.
The worst performers in England are in the north and East Midlands. London, despite strong growth last year, is now more in line with broader national trends, recording a 2.3% annual fall in house prices at the end of this quarter.
Only Scotland is experiencing positive growth at 0.6%, largely because homes are more affordable in Scotland than other regions and so the correction could be less marked. However, the region has seen price falls over the last two quarters, so negative annual growth is anticipated next quarter.