Bank of England’s Governor warns property prices may fall

Permalink: Bank of England’s Governor warns property prices may fall
by Kay Mitchell

Commenting after the release of the Bank of England’s latest quarterly inflation report, Mervyn King has warned that house prices in the UK could fall in value in real terms over the next few years.

Mr King, the Bank of England’s Governor, said homeowners should be prepared for the possibility of falling prices and not expect their homes to increase considerably in the medium term.

Mr King said looking several years ahead, there’s no reason to expect house prices to be markedly above where they are now.

Property values could remain broadly flat for the next 4 years, improving measures of affordability by approximately 20%, continued Mr King.

His prediction followed the announcement by the Royal Institution of Chartered Surveyors that house values fell for the sixth consecutive month last month. Furthermore, Halifax and Nationwide announced price falls in the last 3 months of 2007.

In addition, the Council of Mortgage Lenders revealed that the final quarter of 2007 saw the lowest lending for home purchases in 12 years.

Last month, Neil Woodford, head of investment house Invesco Perpetual, said property prices will fall by 10% during 2008.

Mr Woodford, one of Britain’s most powerful fund managers, said house prices are too high and the average home will fall by £18,500 by the end of the year – the equivalent of £50 a day.

Capital Economics have predicted a drop of 5% during 2008.