Forecasts of a Dramatic Downturn in Property Prices?

1st January 2003

T. Wyn Jones

My December article stating that it was my view that house prices in this area would see a small increase in the forthcoming year flies in the face of all “authoritative” forecasts. Some of these forecasts indicate a dramatic downturn in the property market, which will result in negative equity – a byword for the early 1990’s.

My December article stating that it was my view that house prices in this area would see a small increase in the forthcoming year flies in the face of all “authoritative” forecasts. Some of these forecasts indicate a dramatic downturn in the property market, which will result in negative equity – a byword for the early 1990’s.

To be honest I am relatively confident of my forecast especially taking into account the activity in the market in these first 2 weeks or so. However a report on a recent study carried out by the accountants PricewaterhouseCooper indicates that Britain’s soaring house market could scupper plans to join the Euro. Apparently the economy is drifting away from convergence with Euroland just as the Government is preparing to decide whether to join the single currency.

It found that the differences in the housing market between the UK and Europe were the main reason for the growing split as the booming house prices in the UK influenced the Bank of England's decision to keep interest rates steady in the final quarter of last year.

We now see that the cut in interest rates by the European Central Bank in December of last year gives the European Base Rate of 2.75% compared with the current UK rate of 4%.

So now the Government has a few months to decide if economic factors are suitable for joining the Euro. If the Government deems that they are not we could see the further pressure on the Bank of England to revise the current base rate or an additional concerted effort by the Government to slow down the Housing Boom by which ever way possible!

Wyn Jones is a partner of McCartneys, Property Agents and operates from their Ludlow, Tenbury Wells & Cleobury Offices. For further information on Property Matters he can be contacted on Tel 01584 872153 or wyn@mccartneys.co.uk