Speaking at The Wriglesworth Consultancy’s third annual Great Housing Market Debate, only one of the 150 delegates believed that house prices will increase in 2008. However despite dark predictions all of the experts agreed that a recession is very unlikely to happen.
David Miles, chief economist of Morgan Stanley, who predicts that house prices could fall by 20 per cent in real terms in the next two years, commented: “Any housing market correction will not impinge on the wider economy. GDP growth is expected to increase by one-two per cent in the next year and although unemployment levels may rise, it would not be by much. I am not anticipating a recession in the UK.”
Commenting on the growing affordability constraints, Miles Shipside, commercial director of Rightmove, said: “There is a large gap between sellers’ expectation and buyers’ ability to pay. The market needs to openly accept a 10 per cent reduction in house prices to achieve an orderly correction to affordability.”
A drop in the number of house sales so far this year was also a concern across the panellists. Richard Donnell, director of research of Hometrack, said: “Transaction levels keep going down and at the current level, homeowners on average would be moving every 20 years.”
Several of the panellists also stressed that any house price correction could be a good thing, as it will help first time buyers back to the market.
Miles commented: “House price falls will have as many gainers as losers. The quick way that first time buyers can be helped onto the market is if house prices fall.”
On Government initiatives to encourage first time buyers, Donnell said: “The Government needs to focus on supply initiatives. There is no first rung, three quarters of the housing stock is not suitable for first time buyers.”
The lone expert that claims that housing prices will increase this year, Stuart Law, Chief Executive of Assetz, who believes prices will increase by 5 per cent, said: “The mere fact that everyone said that house prices will fall this year reaffirms my belief that house prices will now in fact modestly increase. This lack of confidence within the industry is a clear indication that we have hit rock bottom and things are set to improve. The dire shortage of housing stock in the UK will spike up rents and keep prices afloat.”
