A panel of economists has delivered a worrying prediction about the future of UK house prices…
A survey of the Society of Business Economists (SBE) members conducted by ITV1’s Tonight programme found that 60 per cent of economists do not expect prices to recover to the pre-credit crunch peak for at least four years.
The majority of the poll identified 2009 as the year when house prices will hit rock bottom, with most of the sample predicting that they will have fallen by 20 per cent from the peak of the market by then. However, one in five forecast a falls of 30 per cent – which would see the value of a home cut by £60,000.
Heriot Watt University vice-chancellor Anton Muscatelli told MPs: “There is a risk that people will begin to see current inflation levels as the norm and demand pay increases to match. Unless we see inflation falling later on this year… we will see inflationary expectations stick at the current levels which are around 4%.”
Bronwyn Curtis, chairman of the SBE, said: “It doesn’t look like we’re going to see a fall, which is what we’re in the middle of, and a quick bounce back. It does look as though it’s going to go on, and we’ll have slow growth for some time.
“On top of that, house prices were overvalued, according to most economists, and so you have the situation where they remain undervalued for a long time. As the economy slows we will get unemployment … and there will be much less pressure pushing for wage hikes.”
Roger Bootle, of consultancy Capital Economics, added “If the Bank of England doesn’t cut rates quickly enough as inflation subsides there is a risk the economy will be extremely weak, perhaps in recession and said inflation could fall well below the Bank’s 2% target”.