Its latest Housing and Mortgage Market Forecasts for 2005-2007 described the immediate outlook for the UK economy as ‘uncertain’ but predicted that house prices would stabilise for a few years allowing earnings to catch up and the price-earnings ratio to realign itself within a more sustainable range.
It also expected relatively modest volumes of activity and minor house price inflation over the next few years.
The CML suggested that affordability problems will only unwind slowly and therefore demand is unlikely to recover quickly. However, it said as the Monetary Policy Committee is prepared to act if a more protracted slowdown threatens, the outlook for the market remains reasonably favourable.
Bob Pannell, head of research at the CML, said: “Indications from estate agents and surveyors are that house price weakness is likely to persist for some while and that annual house price inflation is heading towards a broadly static picture for the second half of the year.”
However, Pannell explained that this was not a precursor to a period of substantial house price falls. He said: “The absence of a clear pattern in recent monthly price changes suggests that a dramatic collapse in prices is unlikely.”
Paul Fincham, senior media relations officer at Halifax, agreed: “We forecasted a fall in house prices of 2 per cent in 2005 – it’s a slight decline that should be set in the context of nine consecutive years of rises. Looking
forward we expect a slower decline and stabilisation of the market as it eases back from 2004’s high levels.”
Fionnuala Earley, Nationwide’s group economist, said the CML forecast was not dissimilar from its own. “It all depends on the economy. We predict a soft landing alongside a slowdown of the general economy while affordability gets back on track.
“There won’t be a sharp correction but some areas and some property types may experience price drops. Indeed we’re not perfectly set on the market and house prices, but a crash is unlikely there.”
