The outlook for Britain’s housing market has become more gloomy in recent months as economic growth falters and unemployment rises, according to Centre for Economics and Business Research, which lowered its price-growth forecasts.
Home values will rise 1.6 percent in 2012 after falling 1 percent this year, the London-based group said in an e-mailed statement today. The CEBR, which previously forecast that prices would increase 2.4 percent next year, cut its annual projections through 2015.
U.K. home sellers cut asking prices by the most in a year in November as the escalation of the euro-area debt crisis deterred buyers. While faltering growth and weakening consumer confidence will curb demand, prices will rise 15 percent through 2016 as values are supported by a shortage of homes for sale, according to the CEBR.
“The U.K. has a housing shortage,” CEBR Chief Executive Officer Douglas McWilliams said in the statement. “Both the shortage of supply and the growth in mortgage availability will push up house prices, but only slowly.”
Bank of England policy maker David Miles said this week that the housing market is undergoing an “extraordinary period of adjustment” as transactions decline and mortgage lending drops. Miles said that the ways in which home ownership is financed is changing as banks tighten loan conditions. Many of the changes “will be permanent,” he said, citing plans such as shared ownership, or so-called equity loans.
Cameron Plan
U.K. Prime Minister David Cameron said on Nov. 21 that his government will underwrite mortgages for as many as 100,000 new homes, introduce a 400 million-pound ($630 million) fund to reactivate stalled developments and release land for residential use. While the plan may boost values by as much as 2 percent in the first year of operation, its impact after three years will be “broadly neutral,” the CEBR said.
Property prices will climb 2.2 percent in 2013, 2.6 percent in 2014 and 3.2 percent in 2015, the CEBR said. That compares with August forecasts of 3.4 percent, 3.6 percent and 4 percent respectively. The group also sees values rising 4.3 percent in 2016, it said today.
Lombard Street Research said Nov. 22 risks to U.K. values “have shifted to the downside” because of the euro crisis, and that prices may decline for the next few quarters.
“A sharp reversal of prices is not likely, not least because of constraints on the supply-side; but the chance of rising prices by the end of 2012 has become slim,” they said.
U.K. consumer confidence fell to a record low in October as the unemployment outlook worsened and yields of Europe’s most indebted nations rose, heightening concern about the region’s ability to solve the debt turmoil. Data last week showed that the number of unemployed Britons rose to 2.62 million in the third quarter, the most since 1994.
“House building is forecast to grow only slowly over the next four years and consequently, with population growth and falling household size there is likely to be an increasing shortage of accommodation,” the CEBR said today. “This is likely to support rents and property values.”
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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