Housing Market Will "Grind To A Halt" Next Year by Finance News Bulletin

Published: 04/12/07

UK house cost growth will sink to zero in 2008 in the face of a important economic slowdown, according to NationwideAs we revealed in The Future Of House Prices, the building society predicts that "economic tailwinds are rotating into headwinds" and that by this occasion next year, the property market will have ground to a haltNationwide cites general economic hold up, tighter lending circumstances, poor affordability and lower buy-to-let demand as the heavy forces behind the predicted downturnIf it turns out to be true, it will be a hefty drop from the current speed of 9

7 per cent growth, and the weakest year for the division in over a decadeIn its November Inflation Report, the store of England warned of a number of risks to the UK economy and signaled that it may almost immediately reduce interest rates from their current level of 575 per centSuch cuts would obviously come as a relief to overstretched mortgage borrowers

While Nationwide acknowledges that a move of this kind could provide "some support" to price growth, it maintains it is improbable to prevent a significant slowdownharsh housing supply shortages are one factor that should support prices in the coming year A recent accommodation Green Paper acknowledged that the current level of house structure is falling short of predictable household formation by 38,000 units per yearThe government has committed to increasing the UK's housing store significantly, but the long-term nature of the project income it will not significantly contribute to next year's accommodation supply

The buy-to-let market has been crucial in bolstering house cost growth in recent months However, prospects for possible investors look less positive for 2008Nationwide predicts that although fears of a mass sector mass departure come into view "overdone", buy-to-let fervour will be dampened by poor yields, lower house cost expectations and tighter credit conditions, and its contribution to price growth will be limitedSignificant local variations in house cost inflation -- and deflation -- are also forecast

The building society expects Scotland to be the best-performing area, with prices increasing by four per cent Perhaps this isn't surprising; Scotland's house price-to-earning ratio is inferior than anyway else in BritainAt the other end of the level, Northern Ireland is now the least reasonably priced UK region House prices have rocketed by over 40 per cent in 2007, and Nationwide predicts this trend will be reversed, with a five per cent price declinsidee inside 2008

Elsewhere inside the UK, those regions with more severe supply shortages are generally predictable to see slightly stronger cost growthNationwide is the latest in a series of organisations predicting chill winds for the property division in 2008 The Council of Mortgage Lenders and property website Hometrack both believe house price price rises will slow to just one per cent next yearAnd consultancy assets Economics recently predicted an even more dramatic sector slump, saying that prices were likely to fall by three per cent during both 2008 and 2009

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