Analyst warns property market is close to collapse

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by Kay Murchie

A leading analyst has warned that the UK housing market is a ‘house of cards’ that is about to collapse.

In a note to clients issued at the start of British housebuilders’ results season, Alastair Stewart of Dresdner Kleinwort Wasserstein, said the housing market is set to implode after years of reckless mortgage lending, oversupply of new flats and widespread fraud.

Mr Stewart advised shareholders in housebuilding companies to take advantage of the recent bounce in share prices and head for the exit. He said that housebuilders’ results would show the market was ‘hitting a wall’ as forward orders for new homes collapsed.

Mr Stewart added that there was a bubble in the market for new city centre flats, which looked ‘in line for a full-scale crash‘.

The warning followed concerns of fraud in the property market. Earlier this week, the Financial Services Authority (FSA) said it had banned a further 2 mortgage brokers for submitting false applications to lenders.

Philip Robinson, director of the FSA’s financial crime unit, is urging the industry to deal with this problem, in what appears to be a growing trend. He said lots of lenders had contacted the FSA with 200 allegations of mortgage fraud and more were coming in each week.

Apart from such individual cases of mortgage fraud, Mr Robinson said there was a far greater threat of organised rings attempting property fraud.