Tax & Accounting News

House Prices Set To Remain Depressed

23/07/2009

A sustained recovery in the UK housing market is still some way off, according to two surveys released this week, with the sluggish UK economy set to prevent prices from rising significantly.

The June housing market survey from the Royal Institute of Chartered Surveyors (RICS) did report some optimism among surveyors that prices will go up in the short-term, driven by increased demand and low supply.

But it warned there would be no ‘sustained’ upturn until the availability of mortgages improved.

RICS spokesman Jeremy Leaf said: “Although the market is showing signs of improvement, it is unlikely that there will be a sustained recovery while mortgage lenders remain risk adverse.

“While supply remains tight, the market is likely to show tentative signs of recovery but instructions are starting to increase in some regions and will dampen any serious improvement while economic conditions remain uncertain.”

Accountancy firm PriceWaterhouseCoopers was more pessimistic, suggesting further price falls were likely during 2009 and 2010, as subdued lending and rising unemployment continued to take their toll.

It added that even by 2020, house prices could be lower in real terms than they were in 2008.

Overall, average house prices in May were 12.5% lower than the same month in 2008, according to figures from the Department of Communities and Local Government – although this did represent a slower rate of decline than in previous months.

Meanwhile, a committee of MPs has claimed the government’s £50billion Asset-Backed Guarantee Scheme (ABS) – designed to kick-start the UK mortgage market – is not working.

The Communities and Local Government select committee said the scheme to provide guarantees on lenders’ mortgage-backed securities was ‘doomed to fail’, due to restrictions on which institutions can take part and the type of loans it covers.

 

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