Dramatic house price falls in UK

House prices likely to fall by a quarter in two years
Richard Wachman, City editor
The Observer,
Sunday March 30 2008
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This article appeared in the Observer on Sunday March 30 2008 on p1 of the Business news & features section. It was last updated at 09:16 on March 31 2008.

House prices in Britain could crash by 25 per cent before mid-2010, forecasters at Capital Economics have warned. That would wipe £45,000 off the value of an average house, currently worth £180,000.
Ed Stanford, property economist at Capital, said it was 'entirely plausible' that house prices would fall by between 20 per cent and 25 per cent in the next two years, particularly if the economy continued to be buffeted by the credit squeeze, financial markets' turbulence and sliding consumer confidence.
Capital has already published forecasts that flag a 5 per cent fall in house prices in 2008 and 8 per cent in 2009. It also expects unemployment to rise from 5.3 per cent of the working population to 7.5 per cent.
Last week, Nationwide building society revised its forecast of no change in prices this year to a modest fall. It changed its prediction after publishing figures that showed UK house price annual inflation at its lowest rate for 12 years. Prices fell for the fifth month running; March was down 0.6 per cent on February. If the trend continues Britain's housing market will soon record annual falls for the first time since 1996.
Other UK housing bears include David Miles, chief UK economist at Morgan Stanley. He reckons the market is due a 20 per cent correction. If he and Capital are broadly correct, a significant number of people who bought two years ago will find themselves in negative equity by 2010.
Not everyone is as pessimistic: JP Morgan's Malcolm Barr envisages a 6 per cent fall in 2008, but then a slow recovery.
The Royal Institution of Chartered Surveyors reports that new buyer inquiries at estate agencies are sharply down.
The market is being depressed by the credit crunch, with banks hoarding cash and demanding that borrowers put down huge deposits.