UK House prices set to fall but not crash, says Nationwide
By Becky Barrow (Filed: 31/12/2004)
The price of the average home in Britain rose by nearly £50 each day this year but homeowners were warned yesterday that property is no longer a quick route to riches.
Nationwide, the country's biggest building society and one of the most influential housing experts, said there has been "a rapid deceleration in price growth" which started in July. It has published a list of the areas it believes are most vulnerable to a fall in house prices next year, which includes affluent areas such as Tunbridge Wells, Woking, Maidstone and the New Forest.
Over the past 12 months, prices have risen by nearly 13pc but most of this growth took place in the first six months. It said it has been "a year of two halves."
The rate of house price inflation has been falling rapidly in many parts of the country since the summer, including former "hotspots" such as Islington, Tony Blair's former neighbourhood in north London. Cannock Chase in the west Midlands was the worst affected, with a fall of 11pc. In December, prices fell by 0.2pc, the second monthly fall recorded by the building society in the past three months.
Alex Bannister, group economist at the Nationwide, refused to rule out the possibility of a house price collapse next year but said economic factors, particularly low unemployment, means a disaster is not expected.
He said: "A sharp downturn in prices cannot be completely ruled out but, while the economic outlook remains positive, it looks unlikely."
A terrorist attack, large-scale job losses, many people deciding to sell their buy-to-let properties or home-owners being forced to sell quickly could all trigger a collapse.
He predicts that prices will rise by just 2pc this year, which would be equal to the same rate of growth achieved in a single month last year.
The trebling of prices since 1995 has forced many young people to buy smaller homes, particularly flats, in "less desirable" locations. The ratio of house prices to earnings has risen from 2.9 in 1995 to 5.9. "The move `downmarket' as a result of the sharp rise in house prices is clear to see," said Mr Bannister.
The building society expects the base rate, now 4.75pc, will not go above 5pc "in the current cycle."
telegraph.co.uk |
