Housing market prospects 'grim'
Updated on 05 November 2008
The housing market downturn looks set to accelerate during 2009 unless action to stabilise it is taken quickly, a report has warned.
The crisis affecting the housing market is "without precedent" and there is "no knowing" how far prices will fall without intervention, Michael Ball, Professor of urban and property economics at the University of Reading said.
He said the scale of the reduction in mortgage credit had been so great that few people were now able to buy a property.
He warned that as more homeowners were forced to sell, they would increasingly need to cut their price, and even then many would not find buyers due to the current mortgage lending constraints.
The report, which was complied for the National Federation of Property Professionals (NFOPP), said the whole housing market needed kick starting.
It is calling for substantial cuts in interest rates to help improve affordability and stem the number of homes that are repossessed, as well as a further more extensive stamp duty holiday.
It also wants to see new measures to increase the volume of mortgage lending, including temporary Government guarantees for the "top slice" of mortgages lent on higher-loan-to value ratios.
For instance, if a buyer wanted to borrow 85% of a property's value and the lender only wanted to advance 75%, the Government would temporarily guarantee the 10% difference.
The report said the problems in the housing market were having knock on effects for the rest of the economy and this would help to push up repossession rates, adding further to the market's woes.
But it added that there was substantial suppressed demand for property, and the long-term housing shortage in the UK meant that when the market did recover, prices were likely to rise rapidly as long as the financial markets were in good shape.
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