House Prices House Prices: Expert Advice

Date Published:

28/05/2008

Council of Mortgage Lenders

'With recent events leading to instability in the global financial markets, the pressures for another interest rate hike to keep inflation down in the UK have reversed,' says Director General Michael Coogan. 'We expect the next move in rates will be down and it may happen in the near future.

Credit: Owen Gale

'In the short term, we already see signs of the expected slowdown in growth in the property market which will bring us to back to more sustainable long term levels in house price increases. The UK property market fundamentals remain positive. Demand for housing continues to outstrip supply and the long term prognosis is for a healthy market both for home owners and buy-to-let investors.

'There are always going to be regional variations due to local market conditions and demand factors. The picture for the London market is perhaps less certain as the recent market turmoil may affect city bonuses which often form property investments and drive prices at the top end of the market. As house prices grow more slowly, some of the stark regional variations we have seen recently may reduce, but it will depend on the local factors driving demand.'

'The five interest rate rises we have seen since last August have hit first-time buyers trying to get a foot on the property ladder. A modest reduction in interest rates and slowing house price growth will help over time. However, for some aspiring owners without a deposit, it will be very difficult to get on the ladder. The various schemes for affordable housing promoted by the government have yet to make any impression on this worsening outlook.'

Royal Institution of Chartered Surveyors (RICS)

The property market won't dive but it will be less active, forecasts National Housing Spokesperson, Jeremy Leaf. 'There's uncertainty over the future and not much on the market. People are taking refuge in the rental market as there's the perception that if they rent for six months they won't be disadvantaged because prices won't go up.

'I've seen a sharp contrast in regional activity and London is still more active than most parts of the country. However, areas that have risen quickest and fastest in price often come down the fastest too.

'I think it's likely that interest rates won't rise, because of uncertainty and lack of confidence in the housing market, which seems to be softening up on its own. Those taking the longer view that the housing market will be stronger next year may be able to move up the ladder by finding vendors who are in a weak bargaining position or desperate to sell, so will negotiate on price. And first-time buyers may be able to get on the ladder by finding vendors more willing to negotiate. In the short term, lenders are tightening up their criteria, particularly for high value loans. But this shouldn't last into the long term as the banks will want to see more activity and more products sold.'