Houses Prices to Suffer First Annual Fall in 15 Years?
A report in today's Daily Telegraph suggest that house prices are likely to suffer their first annual fall in 15 years in 2008 with the average home losing up to 4% or £8,000 of its value.The study, commissioned by the Telegraph, says Britain's property market slipped into the "danger zone" at the end of last year, and that prices could fall not just in the next 12 months, but in subsequent years.
With disposable incomes squeezed by high inflation and debt costs, house prices have now moved beyond the level at which they can be classified as affordable.
The Daily Telegraph/Lombard Street Research Housing Affordability Index shows houses are at their most overvalued since early 1991 - when prices were plunging, causing hundreds of thousands to have their homes repossessed.
Lombard Street Research predicts house price falls of between 3-4%. Others are more bearish: David Owen, the chief European economist at Dresdner Kleinwort, said there had only been four times since the Second World War when average house prices were more than seven times disposable incomes, as now: 1948, 1979, 1988 and 2007. In each previous case, house prices then dropped by 30 per cent, adjusted for inflation.
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