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House Price Uncertainty

Homeowners may find that their bricks-and-mortar investments are not quite as secure as they might have hoped, if predictions for leading economists are to be believed.

The two months of zero growth seen in August and September have been followed by a decline of 0.1 per cent for the month of October, as reduced confidence in the housing market taking its toll on house prices. This fall in house prices was felt across all regions, with the exception of the West Midlands, which saw prices remain static.

Expectations are that this type of small reduction in house prices will continue in the near-term, as prices fall into line with the subdued demand that currently exists. The drive behind this lessening of demand comes from a number of factors, the recent increases made to the base rate has seen mortgage costs increase and consumer confidence in the market has decreased – not helped by the problems faced by Northern Rock.

Another factor that could well impact on house prices, in London at least, is that city bonuses are expected to be much lower than in previous years, meaning there will be less cash floating about the market.

With interest rates looking set to remain unchanged for the coming months at least, it is likely that current trends will continue. General confidence in the housing market is weakening, and with strong interest rates, the desire for people to commit to a mortgage is beginning to slide, and take house prices down along with it. Will we see a crash? Most experts believe not, and feel that this period is merely the market ‘adjusting’ to its rightful level having had over-inflated prices of late.