Print

Consensus shows slowdown for 2003

Three major housing market experts predict a slowdown in property prices over the next year.

Economic consultancy Capital Economics reports house prices are expected to fall sharply, perhaps by up to a fifth over the next few years. They warn that houses are substantially overvalued and expect a sharp "correction" which could trigger a recession in the UK.

The December property report from Rightmove.co.uk shows house prices now falling in Greater London, while the North, Yorkshire & Humberside and East Anglia are rising. Other parts of the country are almost static.

Rightmove's figures show prices rose 0.6% in November, or 22.1% year-on-year, in England and Wales. This figure is much lower than those from the Halifax and the Nationwide building society and shows a consensus with the CE report.

Mortgage bank Bradford & Bingley said in a trading statement that there is "clear evidence that house prices have softened in London and that growth is slowing in the south". It expects only single-digit growth next year, compared to the 25 per cent rise this year and B&B's chief executive, Christopher Rodrigues, believes buyers have been "irrationally exuberant" in 2002 and common senses is now creeping back into the market.

Roger Bootle, of Capital Economics does not believe the housing bubble will be punctured by a rise in interest rates. "All it would take is for households to be unwilling to pay the price asked for housing," he said. "This is pretty much what happened when the stock market bubble burst in the US in 2000."

Because there is still considerable momentum in the market, Capital Economics does not expect to see any drastic falls until the end of 2003 but they expect a sharp correction with house prices to dropping by 5% in 2004 and by another 10% in 2005.