Bleak outlook for housing markets
Updated on 21 April 2008
The outlook for both the UK housing market and high street trading are "bleak", an influential panel of economists have warned.
Ernst & Young's ITEM club said conditions in the retail and housing markets were set to get a "whole lot worse" as the international banking crisis started to bite on the wider economy.
The group has predicted house prices will fall by 10%, with the numbers of people moving home falling by 40% over the next two years. Their forecasts have been made despite the three interest rate cuts made during the past five months.
ITEM chief economic adviser Peter Spencer said: "Although the UK economy has remained relatively buoyant so far this year, our reliance upon international banking markets means it is only a matter of time before it slows.
"This is going to be a rapid, painful adjustment and it will be a rough ride for a substantial proportion of the population. We are facing a massive sea change in the balance of economy."
ITEM warned that unless the Government takes "firm and decisive action", the UK economy was in line for two years of sub-trend economic growth - from 3.1% last year to 1.8% this year followed by 1.5% in 2009.
It said a recession was not on the cards, thanks to employment levels in the UK remaining steady and manufacturing exports in particular benefiting from the weak pound.
But the housing and retail sectors were in line for the biggest impact, the group said.
"With no solutions on either the global or national horizon, we assume that the crisis will continue to grip the markets over the summer," its report said.
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