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The end of the house price drop?

3rd July 2009 | back to article listings BACK    print this article PRINT

Homeowners in the UK have had good cause for alarm over the last two years, as property values have typically plummeted by around one-fifth. For many the prospect of entering negative equity has become a very real possibility, while for others it is now a reality.

But as worrying as this is, serious property investors have had less cause for concern. That is because they know their investments are generally of a long-term nature, so their view is towards at least a five or ten-year timeframe, rather than 18 months or even two years.

That, of course, does not mean that the state of the market will not have prompted any trepidation, but the focus of this is likely to be different. Rather than worry about how far prices will fall, investors may be thinking about just how far they are going to rise again when they do eventually bounce back.

First, however, comes the question of when they are actually going to increase. The last few months has seen plenty of speculation over when a recovery will take place, or indeed whether it has already begun, with reputable experts taking up positions on both sides.

The latest to wade in to the argument is also the latest member of the Bank of England's Monetary Policy Committee. David Miles, a former Morgan Stanley economist, was appointed this week and wasted little time in making his own forecast.

According to Mr Miles, the worst of the house price drops have come to an end and although he was slightly cautious in his outlook, his opinion could well provide some comfort to homeowners and to those worried about the performance of their investments.

"Expectations are crucial in the housing market and they look a bit better now than a few months ago," he said. "My hunch - and I put it no stronger than that - is that we have seen most of the overall aggregate house price falls."

Combined with recent findings from Nationwide the assessment adds weight to the view that property prices have reached a floor. The building society identified a rise in the average value for the third time in four months in June, with the figure of £156,442 representing a 0.9 per cent increase on May's level.

Should Mr Miles' prediction prove to be correct, those investing in the UK property market may find that not only is their existing portfolio about to bounce back, but now could be a good time to add to it.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/4866.html. Alternatively, please see our full press release archive.

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