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Property prices growing concern for experts

Tuesday, 18 March 2008 12:00 AM

Leading figures representing the whole of the property market believe that house prices will fall in the next year, but the prospect of a recession remains extremely unlikely.

A poll carried out today by the Wriglesworth Consultancy at its third annual Great Housing Market Debate asked 150 industry representatives their views on the future of the market - with only one claiming average prices would increase this year.

However, despite the gloomy predictions for house prices, the experts unanimously agreed a recession in the UK market is very unlikely.

David Miles, chief economist of Morgan Stanley, who predicts that house prices will fall by 20 per cent in real terms in the next two years, commented: "Any housing market correction will not impinge on the wider economy.

"GDP growth is expected to increase by one and two per cent in the next year and, although unemployment levels may rise, it would not be by much. I am not anticipating a recession in the UK."

However, there was concern about the falling volume of sales in the housing market. Regardless of price, if the number of properties being sold falls the property market will experience a sharp decline.

"If transactions levels keep going down and at the current level, homeowners on average would be moving every 20 years," said Richard Donnell, director of research of Hometrack.

Amid all the gloom several of the panellists also stressed any house price correction could be a good thing, as it will help first-time buyers back to the market.

"House price falls will have as many gainers as losers. The quick way that first-time buyers can be helped onto the market is if house prices fall," explained Mr Miles.

The one dissenting voice at the conference was from Assetz chief executive Stewart Law, who argued: "The mere fact everyone said that house prices will fall this year reaffirms my belief that house prices will now in fact modestly increase.

"This lack of confidence within the industry is a clear indication that we have hit rock bottom and things are set to improve. The dire shortage of housing stock in the UK will spike up rents and keep prices afloat," added Mr Law.

Separate research published by Assetz today found annual house price inflation in the UK stood at 5.4 per cent in February, the same figure as for January, but well below the level recorded a year ago.

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