CEBR: House prices to fall 25% from peak of last summer

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by Kay Murchie

There have been many reports recently predicting house prices. Just last week, Knight Frank estate agents said house prices in the UK will fall 30% from their high of summer 2007 and fall to levels seen in September 2003.

Meanwhile, 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.

Today, however, the Centre for Economics and Business Research (CEBR) has predicted that house prices will fall in value by 25% from their peak. The organisation believes that house prices will not recover to the levels they peaked at in 2007 until 2013.

As a result of its forecast, around 2.5 million homeowners could face negative equity. Last week, credit ratings agency, Standard & Poor’s, said tumbling house prices are pushing 60,000 homeowners each month into negative equity.

Should the CEBR’s predictions ring true, then the value of the average home would have fallen to £157,058 by the end of next year.

Ben Read of the CEBR explains that confidence in the housing market has been dented as a shortage of mortgages has left few sellers chasing even fewer buyers.

Now that the UK is entering a recession and household incomes fall as unemployment is expected to rise, house price falls could accelerate again, Mr Read explains.

In related news, figures earlier last 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.