Liquidity squeeze in the UK housing market brought down home prices to the lowest level in December 2007 since 2003. Experts have predicted that this trend would continue in 2008.
Home prices in the UK fell to the lowest level from 2003 to 2007 in December 2007. The possibility of further decline might cause the housing market to become immobile in 2008, as reported by Nytimes.
According to British Retail Consortium (BRC), recent slashing in interest rates and turn out of large number of shoppers onto Britain’s high streets had no positive effect on the market. On the contrary, many retailers were forced to curtail their prices and subsequently, their profit margins to attract shoppers and the consumers closely monitoring how much they are spending.
According to security experts, rising transaction costs, a weak outlook for prices and uncertainties among vendors are responsible for major setback n the UK housing market. Though this will act as a support to prices and create higher price volatility in those markets which are already facing lack of supply.
As per the news published by UKpress, evidence is indicating towards tough time for the market. The average time taken to sell a house is 8.3 weeks, which is the longest period since 2001. The financial market in the country is facing the problem of liquidity squeeze, as a result, the housing market is standing on the threshold of facing severe liquidity squeeze in the first half of this year.
Moreover, the Bank of England policymakers said that the decline in house price is more pronounced than expected though they cut down their benchmark interest rates for the first time in two years, as per the news published by Bloomberg.
Industry experts believe that further decline in house prices will severely damage the confidence of those who are expecting positive movement in the market. This decline is eroding the gains of hundreds of thousands Britons who have invested in this sector.
According to a Senior Research Analyst at RNCOS, “The UK housing industry is suffering from continuous decline in home prices. The prices of homes are not constant in the country. The main reason for this decline is that the consumers are not getting loans at low rate of interest after seeing the subprime mortgage collapse seize lending between banks in the US. The only ways to deal with the current situation are to lower interest rates and infuse growth in household income. They will together help to ease affordability pressures in the UK housing sector.”
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