Two years of downturn predicted for UK housing

The housing market will face two years of blight stemming from the impact of the global credit squeeze, with prices falling continuously over much of southern England, a report forecasts today.

Prices are set to fall by as much as 4 per cent in the West Midlands by the end of 2009 and there will also be sharp drops in the East Midlands, the South West and Northern Ireland, according to Experian, the economic forecaster.

However, London is tipped to buck the trend with a 6 per cent rise, slightly above inflation, the report says.

Andrew Burrell, of Experian’s business strategies division, said that GDP growth would slow to just 2.1 per cent next year, from 3.1 per cent in 2007, with an even more abrupt downturn in consumer demand. The situation could worsen if market interest rates fail to fall in line with official rates, the report said, because lenders would be forced to cut back on issuing new mortgages, resulting in price falls in all regions.

Redrow, one of Britain’s largest builders of affordable homes, added to the gloom surrounding the housing market yesterday as it gave warning that its sale volumes for the second half of this year would be 10 per cent below those achieved last year.

The housebuilder blamed general uncertainties in the banking sector for the sudden drop in buyer confidence since September.

Redrow’s warning has wider resonances beyond the new homes market because it targets the type of buyer who promotes activity in the broader residential homes market.

The housebuilder’s Debut range of starter homes sell for about £79,000, while its core Signature brand of houses and flats go on the market at approximately £168,000. Buyers of these homes are typically first-time buyers or young homeowners who are looking to move up the property ladder.

Redrow’s warning comes just a day after Bovis Homes, one of the country’s leading specialists for selling mid-market homes in the regions priced at less than £250,000, said that its sales volumes this year would be down on last year.

Last week Taylor Wimpey, Britain’s largest builder of new homes, blamed buyer fears about the health of the wider economy as it gave warning that its 2007 UK sales would be 5 per cent lower than last year.

Source The Times