Property prices are unlikely to bounce back to their peak August 2007 levels until 2023, it has been claimed.
Conditions in the UK housing market will get "a lot worse" before prices start to pick up again, according to the academic Andrew Clare. The professor of asset management at Cass Business School said negative equity is likely to pose problems for homeowners who bought their properties last summer.
According to the Guardian, Mr Clare believes that by 2010, prices will be 40 percent below where they were in August last year, when they reached their peak. He also believes they are unlikely to return to such levels until at least 2023.
However, while this may be bad news for some existing homeowners, those looking to purchase property will benefit from greater affordability as the gap between house prices and earnings begins to narrow. "By 2010 the price-to-earnings ratio would be much closer to a sustainable level - very close to the old-style mortgage multiples that lenders used," said Mr Clare.
The latest report from Halifax reveals that house prices fell by 1.3 percent in September compared to August, bringing the annual rate of decline to 13.3 percent. The Royal Institution of Chartered Surveyors said the reduced availability of mortgages caused transaction levels to fall last month, with surveyors recording less than one sale per week.
Compare mortgages via money.co.uk
Comments (6)
Any opinions expressed below are solely those held by individual users and are not in any way endorsed by, or representative of those held by Money.co.uk. We accept no responsibility or liability for the accuracy or content of any material submitted and maintain the right to publish, remove or edit it as we see fit.
Annabel
15th Oct 2008 14:06
This is ridiculous.
House prices are not likely to fall to these ridiculous levels unless we have massive deflation in wages. Unemployment is rising but we are good at making jobs for people and it doesn't apply in every city.
We are at the bottom of a stock market crash and it will be easy for alot of people to make alot of money for deposits and start looking for property.
By writing such comments you encourage return of boom and bust.
There are plenty of confident investors who don't care what they pay for property as long as they make a good return.
The government has demanded lending at 2007 levels or at least as close as possible.
Prices are going down because deposits required are too high and interest rates are through the roof.
Lenders have gone too far and contributed to the financial crisis by causing sharp devaluation. We are close to bottom within the next 6 months when we know all the winners and losers. Rates will come down slightly but not too far.
Anja Merret
16th Oct 2008 00:17
That is the biggest load of rubbish I have seen for a while.
Anybody who is going to predict what the property prices are going to be doing, is talking garbage. They have no idea. Just as nobody has any idea as to what the stock exchange is going to do.
LOUISE
16th Oct 2008 10:55
I LIVE IN INVERNESS-SHIRE AND ALTHOUGH THE HOUSING MARKET IS A LOT SLOWER ALL HOUSES THAT ARE SOLD, ARE BEING SO AT THE ASKING PRICE OR OVER. DO YOU KNWO WHY OUR HOUSE HAVE NOT DROP IN VALUE, LIKE THE REST OF THE COUNTRY.
With a forty year real estate cycle this makes sense. The Wave last bottomed in the 80's. How sharp a decline? 40 to 60% doesn't account for the upcoming costs of deleveraging the mortgage mess. Credit demands to finance US guaranted instruments will spiral rates upward. Cutting of mortgage expansion and makeing home ownership cost more. A normal cycle could see sustained equity shrinkage.
you can't talk yourself out of a recession
20th Oct 2008 15:44
This does seem a bit excessive, as the housing cycle normally needs about 4 years for the wages of first time buyers to catch up and for prices to start rising again. The banks are unlikely to lend money again so easily, so I can't see 2007 lending levels being achieved.
I wish I was as confident as previous correspondent about the stock market low, as 5 years ago (in the golden years) it was at a low of just over 3000. It will also take about 4 years for people & governments to realise they can't just fund their lifestyles by borrowing money. Interest rates are not really that high compared to previous recessions.
This is just typical of the Doom & Gloom mentality of us British.We may not be able to talk our way out of a recession but we sure can talk ourselves into a deeper one.
My belief is house prices will rise again and will probably far exceed 2007 prices by 2023 but by how much is any ones guess but the sooner we have confidence in the housing market the sooner the prices will recover, although I fear some people do not want this to happen even though it is an essential part of a growing economy.
