Economic Outlook Bleak
Yesterday's reported fall in house prices and fall in mortgage approvals followed a report this week from HSBC that house prices faced a substantial correction over the coming year.HSBC argued that house prices were 30 per cent above their true value. Brigid O’Leary, of Capital Economics, said: “the data seems to confirm that our forecast of 3% house price falls is on track, and indeed that the downside risks to that view are growing.”
A sharper downturn is now being forecast by some City traders. The TFS Brokers’ residential forward curve, a financial instrument where traders can bet on the direction of the market, is pointing to a 7 per cent drop in prices over the coming 12 months.
In a sign of the rapid deterioration in confidence now affecting the market, RICS reported earlier this month that new stock on estate agents’ books leapt by nearly 9 per cent in October, prompting talk of a “rush to the exits”, while sales numbers dropped to their lowest level this decade.
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