Housing market vulnerable according to BoE expert

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by Kay Murchie

According to Kate Barker, the Bank of England housing guru, increasing property prices have left the UK in danger of a considerable property downturn.

Ms Barker said property prices have increased beyond a reasonably expected level which will result in a major shift in the market.

Recent studies about the property market have suggested a slowdown following its solid performance in the first half of 2007 but Ms Barker said there has not yet been firm evidence of a major slowing in property price increases.

Ms Barker, the author of the Government’s review of housing and member of the Bank’s Monetary Policy Committee, said, however, the turmoil in the credit markets should not prompt a downfall.

Ms Barker has said that buy-to-let could be a potential weakness for the property market. In the first half of 2007, the buy-to-let accounted for 12% of the mortgage market. Its prominence meant that even if current landlords chose not to sell, a fall in demand could ‘dampen the market’ and pent-up demand from first-time buyers may not take up the slack.

Ms Barker concluded that house price studies were still showing strong annual gains. Halifax show annual house price inflation of 10.6% in September and Nationwide’s report shows 9%.