July 25, 2005

CEBR expacts falling house prices by 2007

by brian_turner

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According to a report from the Centre for Economic and Business Research (CEBR), UK house prices will fall 5% by 2007.

House prices, which have risen for ten years, are expected to stop rising this year, at an average of Â£163,353, and then to fall to Â£155,329 in two years’ time. Annual house price inflation may decline from 18.3% in 2004 to 4.2% this year.

The reports suggest a number of factors have adversely affected the housing market, including higher interest rates, fewer new homes built, rising house prices, stealth taxes, student loans, higher stamp duties and tighter rules on inheritance tax and capital gains tax.

Costs could increase further in 2007, when Home Information Packs are introduced, requiring sellers to provide a survey, searches and inspection reports at an expected cost of Â£1,000.

Nationwide economist Fionnuala Earley said the CEBR report broadly supported the building society’s forecasts. However, Ed Stansfield, an economist at Capital Economics, suggested that that prices could fall by as much as 6-7% by the end of the year.

The CEBR does not, however, expect negative equity to return. It expects prices to begin to overtake levels seen this year, by 2010, and then to begin to grow faster than average earnings, at approximately 4.7% a year.

The reports authors were Mark Pragnall and Thushani Gajasinghe.

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