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UK Housing Forecast

Wednesday, 14 Jan 2009 by Matt Ayres | 0 Comments

Some interesting forecasts from New Star on the latest UK housing figures, predict a further decline in 2009. The Nationwide house price index for December was 18% below the peak reached in October 2007. When compared with the house price busts in the early 1990s and mid 1970s the current decline continues to track the 1990s bust closely.

An exact replication would involve a further 15% fall in prices from their December level to a trough in the first quarter of 2011. When compared with the slightly milder 1970s bust, it would imply an 11% decline to a low one quarter later. Cuts in interest rates were constrained in the 1970s and 1990s by high inflation and ERM membership respectively. On the other hand, mortgage credit availability may have deteriorated to a greater extent in the current cycle – although inflation-adjusted mortgage lending contracted significantly in the 1970s.

Duncan Carmichael-Jack
14 Cornhill
London EC3V 3NR

What now?

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