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CML predicts "extended slowdown"

4th August 2005 | back to article listings BACK    print this article PRINT

The Council of Mortgage Lenders (CML) is predicting an extended slowdown in the UK property market, but maintains that a crash will not take place.

House prices in the UK have remained steady for a number of months, subsequently leading to a drop in year-on-year growth in spite of ongoing stability. According to figures from the Office of the Deputy Prime Minister (ODPM) house prices in May were six per cent higher than for the same period a year earlier, compared to 6.9 per cent higher in April.

Though strong, growth in the market is definitely slowing, on one hand indicating greater stability towards the end of the year and into 2006. The ODPM also reveals that in May, house prices stood at an average of £182,651, a rise attributed largely to increases in the prices of terraced and detached prices. Conversely, prices for flats stayed constant while average prices for bungalow and semi-detached prices fell 0.9 per cent and 0.2 per cent respectively.

The CML is now stating that any stability in the housing market is coming to an end, speculating that the average house price could also be set to fall.

"Over the next couple of years, house price growth is likely to be negligible, but we are not expecting to see widespread or significant falls at the national level," commented the CML in its latest forecast. "We expect the Halifax and Nationwide house price indices to dip into negative territory later this year. While this is more pessimistic than our previous forecast, we do not foresee this as the precursor to a period of substantial or sustained house price falls at the national level."

Previously, the CML predicted modest positive growth of four per cent. It suggests that house prices will become increasingly unstable in the longer term, though not for a number of years yet.

"Broadly speaking, we expect house prices to stabilise for a few years, allowing earnings to catch up and the price-earnings ratio to realign itself within a more sustainable range," states the CML. "This suggests that affordability problems will only unwind slowly and that it will take some time for demand to rebuild. As a result we envisage a subdued housing market for an extended period."

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