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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Housing Market Continues to Weaken, Nationwide Now Expects Zero 2008 House Price Growth

Housing-Market / US Housing Nov 16, 2007 - 02:22 AM GMT

By: Nadeem_Walayat

Housing-Market The housing market analysts are belatedly starting to come to terms with the prospects of a falling UK housing market during 2008. Nationwide takes the first step on that road by now forecasting ZERO house price growth during 2008. This still remains some way from the Market Oracles forecast of a fall of 15% over 2 years as of 22nd August 07 and therefore suggests continuing downward revisions in Nationwide's forecasts during 2008 in the face of falling house prices.


Key summary of the Nationwide's UK house price analysis -

Economic tailwinds are turning into headwinds, and house price inflation is expected to drop from the current rate of 9.7% to 0% by this time next year

  • A slower economy, stretched affordability, tighter credit conditions and lower buy-to-let demand will all take a bite out of house price inflation
  • Interest rate cuts and tight supply will provide some support to price growth, but are unlikely to prevent a significant slowdown
  • Scotland is forecast to have the strongest house price growth in 2008, while prices in Northern Ireland are forecast to fall somewhat from dizzying heights

Commenting on the forecast Fionnuala Earley, Nationwide's chief economist, said: “House prices recorded another strong year in 2007, underpinned by significant economic momentum, ongoing housing shortages and strong buy-to-let demand. We forecast house price growth of 5-8% in December last year, and with two months left to go it looks like the middle to upper end of this range will be achieved. That being said, momentum is now fading, and a number of factors suggest that house price inflation will drop from its current rate of 9.7% to 0% by this time next year.

The main reasons for this more subdued outlook lie on the demand side of the market, where a slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity. The supply-side of the market will still be characterised by widespread housing shortages, in spite of government targets to increase house building. These shortages will provide some offsetting support to prices amid the weaker demand environment, particularly in the south of the UK.”

As Septembers article Media Lessons from 1989! suggested, that the banks and estate agents and much of the media won't actually acknowledge the true implications of further price declines until AFTER house prices have fallen. Hence the past 3 months have seen house price forecasts for 2008 drift lower from 7% gain to now suggest stagnation. Wheras by mid 2008 the first forecasts of actual declines for 2008 may start appearing, by which time home owners and investors will find extremly adverse housing market conditions for property transactions.

The time for action is fast runing out, as I stated in the article of 22nd August 07 - "Whatever you do, remember that today's Idyllic pleasant picture in the UK is very shortly in for a rude awakening, much as the US home owners are experiencing in increasing numbers. The bull market in housing is over for now, better to realize this now whilst you have the opportunity to do something about it rather than be forced into a decision later on."

UK Housing Market Forecast for 2008-09 - As of 22nd August 2007
UK House Prices to fall by 15% over two years, falling prices to be accompanied by cuts in UK interest rates. (22nd Aug 07),

 

By Nadeem Walayat
Copyright (c) 2005-07
Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of analysing and trading the financial markets and is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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