UK House Prices to Stagnate or Fall Says Fitch

Ratings agency Fitch has said that UK house prices either face a prolonged period of stagnation at best, or a double dip at worst, as high unemployment and constricted lending take their toll in the coming years.

This has been my own view, and recently Savills and other major investment and realty groups have forecast the same, however, Fitch is one of the biggest and most impartial sources to make such a forecast thus far.

House prices will fall a third from their 2007 Fitch said. Depending on who you listen to they had fallen between 10 and 20 percent at the start of this year, and have since risen by 2-5%, again depending who you listen to. Either way Fitch thinks prices have a fair way to fall yet.

I recently compared them current crash to the last one, and did a comparative analysis based on affordability, which led me to the forecast that prices will fall by between 9.7% and 40% further before homes will be affordable enough for the market to bottom.

Of course vendor realism is another factor. In fact it is a commonly held belief that vendor realism is the most important factor; that the market will not bottom until the gap between what vendors expect to receive, and buyers are willing to pay is closed.

In this some recent news on the Floridian property market is very worrying; apparently vendors of Florida properties are still not being realistic about asking prices, and the crash has been going on longer there than here.

Yet, still prices are continuing to rise, month on month, quarter on quarter, and potentially even year-on-year in the next month or two if the rises continue. However, the recent price rises had been supported by rising mortgage approvals for home purchases. This ended in November when the value of such loans fell from 2.7bn in October to 2.1bn in November.

Meanwhile, unemployment is still a massive problem and mortgages are still available to the few, and affordable to the fewer -- and homes still are not affordable.

Whether it happens in 6, 12 or 18 months, for me there is still absolutely no doubt that there will be a second dip in UK house prices.

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