Property values are set to fall by up to 10 per cent over the next four years, a leading think tank has said, hours after a report warned that the market “may have turned”.
The Centre for Economics and Business Research said that average UK home would be worth no more in three years’ time than today, after falls in 2006 and 2007 cancelled out rises of 2004 and 2005.
In the North East, Scotland and Wales, among the regions with most buoyant property markets over the last year, prices would be 10 per cent lower in 2008 than today.
However, the CEBR, describing its scenario for the market as a “soft landing”, predicted increases in London and South Eastern markets.
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The CEBR has, in the past, proved one of the more accurate analysts of house price prospects, predicting two years ago that the market would continue to strengthen despite warnings from other commentators of a crash.
House price falls were noted in a report earlier today from Rightmove, the property website, which said that the value of the average home in England and Wales dipped by 0.4 per cent, or £683, in the first week of June.
The group said the figures suggested the market was entering the long-expected slowdown as rises in borrowing costs combined with the hot weather and Euro 2004 distracted people from house buying.
However, in the five weeks to June 12 prices rose by 2.6 per cent to an average of £193,965. At an annual level, house price inflation hit 17.2 per cent.
Miles Shipside, commercial director of Rightmove, said: “Over the month, prices are up again, but close analysis provides evidence that the market may have turned.
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“Right up till the end of May the boom continued unabated but, come June, the market seems to have turned and we’ve seen the first price falls since the usual seasonal slowdown last Christmas.”
Fears of a market slowdown were fuelled a week ago by Mervyn King, the Governor of the Bank of England, warning of the rising chances of house price falls. The Bank has raised rates four times, by a total of 1 percentage point, since November.
Royal Bank of Scotland today became the latest lender to say it was passing on in full the last increase in interest rates, which the Bank announced two weeks ago. The standard variable mortgage rate will rise by a quarter point to 6.54 per cent from July 1 with interest rates for savers also increased.