Government property fears revealed

Last Modified: 13 May 2008
Source: PA News

The Government's fears over the dire state of Britain's property market have been laid bare by an embarrassing gaffe.

A secret Cabinet briefing paper showed that ministers expect house prices to slump by 5%-10% this year "at best".

It also warned starkly: "We can't know how bad it will get."

The bleak assessment - which would knock more than £20,000 off the value of an average house and leave thousands in negative equity - was unwittingly revealed by housing minister Caroline Flint as she arrived at Number 10.

Her typed speaking notes were clearly visible to photographers through a plastic folder, and reinforced the sense of gloom amid a welter of poor economic figures.

The blunder is particularly awkward for Gordon Brown as he and other senior ministers have repeatedly dismissed the danger of a property crash in public, insisting falls would be "containable". The briefing pointed out that leading house price indicators were predicting reductions for the first time in recent years.

"Given present trends, they will clearly show sizeable falls in prices later this year - at best down 5%-10% year on year."

Ms Flint also expressed concerns that construction was "stalling" - indicating that the Government could struggle to hit its flagship target of building three million new homes by 2020.

"New starts are already down 10% compared to a year ago. Housebuilders are predicting further falls," she warned.

"Having seen net additions reach roughly 200,000 in each of the last two years, the figure for 2008/9 is almost certain to be well down on that."

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