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House prices to fall across half of the UK over two years

House prices to fall across half of the UK over two years

Monday, 12 November 2007 12:00 AM

House prices will fall across almost half of the UK over the next two years, according to analysis from Experian.

While the economic forecaster predicts prices will increase by an average of 1.2 per cent across the UK as a whole over the next two years, there will be sharp falls in some areas.

The Midlands are expected to be the worst hit; with prices down four per cent in the west of the region and 3.7 per cent in the east.

Smaller falls, of 2.8 per cent, are expected in the south-west, while prices are expected to fall 0.4 per cent in the south-east.

"We expect the UK housing market to suffer over the next two years, with some regions experiencing falls," commented Experian.

"Although national house prices have continued to soar against a background of higher interest rates, the current boom has been uneven regionally.

"The latest figures show an exceptionally buoyant market in Northern Ireland and continued strength in Scotland and London, but elsewhere there are already signs of deceleration."

Average house prices are expected to rise by six per cent in London, and by 7.7 per cent in Scotland over the next two years.

"Winners and losers in the housing market do not fit a strict north-south pattern," explained Experian.

"This in part reflects greater evenness in economic performance across the country. The recent upturn had seen activity increasingly shift to the greater south-east.

"The decline in manufacturing left the north more reliant on the (slowing) public sector, while global influences, notably in international finance and the City, stimulated a boom in southern growth."

But this picture has now been reversed.

"But with the credit crunch expected to hurt international demand and with the financial sector hit hardest by this, the south will fare relatively less well in the short-term.

"Growth rates remain higher than in the northern economies, but the divide of 2005-07 is greatly reduced and the north-south gap also remains more modest in the longer term," concluded Experian.