Property price growth to halve over next 12 months

Permalink: Property price growth to halve over next 12 months
by Kay Murchie

Alan Greenspan, the former US Federal Reserve Chairman, recently said Britain’s housing market is heading for a fall and he has warned of problems for homeowners as increasing interest rates bring house price growth to a standstill.

In addition, the Nationwide, Britain’s biggest mortgage lender, said house price growth will halve over the next 12 months. The Nationwide said house price growth was running at just under 10% last month but it believes it will have fallen to 7% by the end of the year.

The online estate agent, Rightmove, last week said property rates had fallen by their largest amount in over 5 years, while the Royal Institution of Chartered Surveyors (RICS) published the first decline in monthly property prices for over 2 years.

Furthermore, mortgages are becoming more expensive, which will defer people from buying and if the entire economy slows down and people lose their jobs, this will cause demand to come to a standstill.

Experts say that a full-blown crash like that experienced in the early 1990s is doubtful. Property prices will not decline, they will just not increase at the rate that they have in the past.

A senior economist at RICS highlighted that a sharp slowdown is likely but a crash is not expected. The biggest danger is arising from the current turbulence in the credit markets affecting the broader economy in the short term.