House prices to keep falling
House prices could fall and keep falling, a top Bank of England economist has said
Monday, 24, Jan 2005 02:53
House prices are likely to fall further, according to a prominent member of the Bank of England's interest-rate setting Monetary Policy Committee.
Kate Barker, in a speech to the Institute of Economic Affairs, said that while it was "foolish" to make predictions about any single asset price, house price falls remain the most likely outcome.
"In view of the evidence on affordability, and the balance of arguments about overvaluation, the likelihood of some decline in house prices, at least relative to earnings, seems now to be much greater than that of a further significant increase," she said.
And any falls in the next three months are likely to be repeated, she added.
"Past experience suggests that house price movements in one direction over a quarter are more often than not followed by a further change in the same direction."
Ms Barker, who was previously chief economic adviser at the CBI, added that the prediction of a modest fall in house prices was "only one of a wide range of possibilities," especially as asset prices can spend large amounts of time well far higher, and lower, than their fundamental values.
She added that house prices were far from the dominant issue for the UK economy, with the fall of the dollar in the last three months at least as significant.
The early signs of the property market in 2005 point to modestly falling, but stabilising, house prices.
Rightmove, the UK's largest online estate agent, has said in the four weeks to January 8th the average price of a home fell by 0.1 per cent to £189,509, after a 0.3 per cent decline in the preceding month.
The Royal Institution of Chartered Surveyors (RICS) said last week that 37 per cent more of its members reported house price falls than did not.
However, this is a strong improvement on last month, when RICS reported 46 per cent more people were reporting falls in house prices than not, the highest negative balance for 12 years.
RICS spokesman Ian Perry suggested that homebuyers believing interest rates have peaked might have caused this stabilisation of house prices.
But Miles Shipside, commercial director of Rightmove, believes that the slowing property market could have an up side.
He said: "We might look back in a few months and say this was the point where the market started to come out of the doldrums.
"Properties marketed at the right price are attracting buyers interest and are being sold.
"I think we can expect to see a pick-up in sales activity. This would undoubtedly give the market a new breath of confidence."
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