Economists Warn of Double Dip

The housing market is on the edge of a double dip with prices set to rapidly fall for the second time, economists have warned in the past few days.

These views were highlighted from evidence by the Bank of England that the lack of mortgages is getting worse, with lending last month totaling just £86million, a massive reduction from the £518million the previous month and the £1.6billion lent in February 2010.
 

The fear from experts is the prediction that house prices will slump 5 per cent this year, followed by another 10 per cent in both 2011 and 2012.  The falls are being fuelled by the fact many buyers cannot get a mortgage, while others do not want one as they think the market is set to fall.

From August 2007 to April 2009, the average house price dropped by 23 per cent, from a high of £199,612 to a trough of £154,490, although after a rally in the early stages of 2010, the average home is currently worth £167,425.
 

Economists at Capital Economics are predicting a 5 per cent fall this year, followed by another 10 per cent in both 2011 and 2012.

Senior economic adviser to the accountants Ernst & Young's Item Club, Andrew Goodwin said: 'The Bank's figures provide further confirmation that the housing market is heading for a double dip.

'These figures tend to be well correlated with prices and they point to falling prices over the second half of this year.'

Chief economist at the Royal Institution of Chartered Surveyors, Simon Rubinsohn, said the Bank's figures highlight 'the subdued level of activity in the residential property market'.

He said: 'A lack of mortgage remains a key problem for many borrowers, with the high deposits required still proving to be an obstacle for many.

'Uncertainty over the outlook for the market may also be discouraging would be buyers.'

In July, 48722 people got a home loan, with a comparison of 53126 in the same month last year.