Capital Economics predict 35% fall in house prices

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by Kay Murchie

Economic forecasting agency, Capital Economics, are predicting that house prices will fall 35% by next autumn, from their peak of last summer.

Previously, the organisation had forecasted that prices would fall 35% by 2010, but in the wake of the economic downturn, the fall will be much quicker.

Prices are then predicted to remain unchanged for 18 months before a tentative recovery in 2011.

The fall means that approximately £65,000 will be wiped off the average property with the average home costing £120,000. At the peak of the property boom last summer, the average home was worth £186,000.

Earlier this week, Knight Frank estate agents said house prices in the UK will fall 30% from their high of summer 2007 and fall to levels of September 2003.

The news will no doubt come as a huge blow to homeowners already in or faced with the prospect of negative equity.

Credit ratings agency, Standard & Poor’s, said tumbling house prices are pushing 60,000 homeowners each month into negative equity.

Meanwhile, Moneyfacts said it expects a rise in repossessions as lenders refuse to cut their mortgage rates.

In related news, figures earlier this week from HM Revenue & Customs (HMRC) revealed that the number of properties changing hands has fallen by 53% in the last 12 months.

According to HMRC, 59,000 homes were sold last month, compared with 126,000 in September 2007.