Turbulence expected in the first half of 2008 according to Rics

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by Kay Murchie

According to experts at the Royal Institute for Chartered Surveyors (Rics), it is expected that the property market will experience some turbulence in the first 6 months of next year due to the credit squeeze.

Any falls in property prices will be short lived and the Bank of England has declared it intends to reduce rates next year in order to prevent any further threat to the economy. Rics believes that interest rates will be lowered to 5% during the first 6 months of next year.

Mortgage rates have increased following the credit crunch and it is expected that repossessions will increase by 15,000 to 45,000 – the equivalent of 123 a day. However, this is still well under the fallout from the property crash of the 1990s, which saw 80,000 homes repossessed in just one year.

If property prices do weaken, Rics predicts that first-time buyers will take their chance and take their first steps onto the property ladder which has previously been out of reach for them due to unaffordability issues. This would provide the market with a well-needed boost.

Simon Rubinsohn of Rics said 2008 will prove a tough year for the property market, but with falls likely in interest rates, the property market should be provided with a stable platform. The impact of the credit squeeze will disperse slowly meaning that those looking to obtain finance in the first 6 months of next year may struggle.