Spicerhaart: 2% house price growth in 2008

Tuesday, 4 December 2007 12:00 AM

House prices are set to increase by just two per cent during 2008, according to the latest predictions from Spicerhaart Financial Services.

This prediction is lower than expected price inflation, making house price growth negative in real terms.

In the year to date the housing market has been adversely affected by the introduction of home information packs (Hips), unforeseen market turbulence in the form of the credit crunch and three interest rates.

These three factors have combined to slow growth to around five per cent, and will continue to act as a break on house price growth in the new year, according to Spicerhaart.

"The credit crunch does seem set to continue into 2008. This will produce a subdued environment characterised by low average price growth of around two per cent, although some areas, such as regeneration hotpots, will prove more buoyant," said Steve Cox, operations director of Spicerhaart.

The estimates follow reports from Nationwide, Experian, and the
Intermediary Mortgage Lenders Association (IMLA) predicting house price inflation will be flat or in decline in 2008.

Moving into 2008, borrowing constraints and fears for the long-term direction of the market will continue to exert a downward pressure on prices.

"Buyers will be a lot more price sensitive than previously, and as such will only purchase if properties are correctly priced," continued Mr Cox.

"Sellers who hope to achieve an extra five per cent on the price of their property will be disappointed."

The falls are likely despite predicted drops in the Bank of England base rate in the first quarter of 2008, according to Spicerhaart.

However these cuts, coupled to a continued shortage of supply, should prevent any dramatic long term falls.

"As affordability constraints are eased and demand continues to outstrip supply, the long term future is set to be bright and we expect the housing market to return to its previously higher levels by 2009," said Mr Cox.

But Capital Economics was more pessimistic in its outlook for the coming year.

"Falling new buyer enquiries, falling mortgage approvals and now house prices," read a briefing note.

"These are increasingly convincing signs that we are in the early stages of a housing market correction. We expect house prices to fall by three per cent in 2008, but the downside risks to our view are growing."

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