House prices: Leading economist predicts further 10% fall

Posted under General by Michael

A leading economist has predicted that house prices are going to take a further dip of 10% before the market touched its bottom.

This was the warning issued by David Miles, a Visiting Professor of Finance of London’s Imperial College Business School, who was addressing an influential committee of MPs. He indicated that the property market would stabilise once house prices went down by 20% of their value from the market peak in summer.

Going by his prediction there would be a further fall of 5% to 10% in property prices. Professor Miles told the Treasury Select Committee that if this happened transactions should pick up again very sharply.

The belief that prices would come down has created stand-offs between those who intend to sell and people who are with mortgage credit. They are not agreeing on price.

Professor Miles is more optimistic in his assessment of the market than many other experts in the UK.

Professor Muellbauer of Nuffield College also addressed the Treasury Select Committee. According to him first-time buyers could be brought back into housing market only if prices dipped by 25% from their peak.

According to Halifax prices were falling at the fastest rate during last 25 years. The Council of Mortgage Lenders was predicting that there would upward pressure on repossessions in 2009. However Nationwide’s chief economist reassured that increases in repossessions would not spread beyond specialist market areas where borrowers were more stretched.