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House prices ‘could fall 40%’
Monday 2nd February 2009, 12:05AM GMT.
House prices will be the same in 2013 as they were in 2003 unless the government takes action, economists have warned.
If the government’s banking bailout does improve mortgage lending, house prices could fall 32 per cent overall, with the market bottoming out in the first quarter of 2010, the Centre for Economics and Business Research (cebr) said in a report.
However, the authors predict house prices could fall by 40 per cent peak-to-trough if the government is unable to stimulate lending.
Benjamin Williamson, one of the report’s authors and economist at cebr, said: “The glimmer of light at the end of the tunnel for the beleaguered housing market is that prices and interest rates are now at levels whereby any improvement in lending is likely to lead to substantially increased activity and at the very least a bottoming out in house prices.
“However, if lending remains close to current very low levels, the spectre of the biggest annual drop in UK GDP since post-war demobilisation in 2009, with concomitant rises in unemployment and collapsing confidence, will likely lead to an acceleration in house price falls.”
The latest figures from Nationwide show prices have now fallen for 15 months running, and value of a home is £35,000 below its peak in October 2007.
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