Increased chance of housing market returning to normal
There is now a one-in-three chance of a fall in house prices by 2010, according to the latest research from Pricewaterhouse Coopers (PwC).
The average house price is currently ten per cent above “equilibruin value” when compared against indicators such as average earnings.
PwC told the BBC: “This does represent a material downside risk for the economy more generally given the likely knock-on effects of lower house prices on consumer confidence and spending.”
This follows Nationwide’s October house price index showing surprise rises in last month’s average house price of 1.1 per cent.
As a result, some experts have suggested interest rate cuts by the Bank of England are unlikely.
According to Howard Archer of financial forecasting company Global Insight the news “reinforces our view that the Bank will not trim rates until February”.
The PwC report states that the chances of prices being lower in nominal terms by 2010 is now one-in-five, but added that prices are “most likely” to rise above inflation.
