UK housing market has long wait to recovery: Reuters poll

Tue Sep 18, 2012 11:21am EDT
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By Jonathan Cable

LONDON (Reuters) - British house prices, at least those outside London, won't rise for at least another year as unemployment stays high and bank lending conditions remain restrictive, a Reuters poll forecast on Tuesday.

Average home prices, which fell a fifth in just two years from their peak in 2007, will slip a little over 1 percent this year and stagnate in 2013, according to the consensus from a regular survey of 25 market watchers, taken over the past week.

However prices in the capital, one of the world's busiest financial centers where demand nearly always tends to outstrip supply, are expected to rise 3.0 percent this year and 2.0 percent next, medians from a smaller sample suggested.

With the economy officially in recession, unemployment at 8.1 percent, not far below a 17-year high, and banks imposing tough criteria before lending money, the housing market is struggling.

"Everything will hold prices back," said Michael Saunders at Citi. "It's unemployment, credit availability, affordability - everything."

During a 10-year boom to 2007, average house prices in Britain tripled. But that bubble has partially burst, knocking what has long been a bedrock of consumer wealth.

After hitting a trough in early 2009 during the worst of the financial crisis, average house prices rebounded. But they are now back in a mild downdraft, leaving them down a little more than 10 percent from the top.

A comfortable majority in the poll, 14 of 23 participants, said British house prices have further to fall, with the most pessimistic respondent predicting a 40 percent plunge from here.   Continued...

A woman walks past houses on a street in London March 13, 2012. REUTERS/Luke MacGregor