Lower house price expectations and tighter credit conditions have led to a major downfall in the housing price inflation from 9.7% in 2007 to 0% in the year 2008.
The Nationwide Building Society (NBS) stated that yearly housing price inflation was anticipated to register a decline from its 2007 level of 9.70% to 0% for next year, as the housing industry experienced a major slowdown, reported The Press Association.
Prices are likely to go down in East London, the North and the Midlands during the year 2008, project the estate agents; however, an acute decline in the prices still seems improbable.
Fionnuala Earley, Chief Economist, Nationwide, said “The main reasons for this more subdued outlook lie on the demand side of the market, where a slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house-price expectations appear likely to reduce the level of activity”, as published by Bloomberg.
Moreover, Nationwide also projects a deceleration within the buy-to-let market. Weak yields, lesser house-price prospects and inflexible credit conditions appear to take out some strength from the buy-to-let market and curb its role in the price growth, Ms Earley clarifies.
The Bank of England, in its periodical Inflation Report released last week, stated that the sluggish economic speed has become a major cause of concern following the disorder in the international credit markets. The credit crisis is also likely to influence lenders to make their rental protection and the criteria for loan-to-value for strict, making the entry of new investors more complex in the sector.
The NBS also anticipates Scotland to emerge as the top performing region in the year 2008, as it continues to be the UK’s most affordable zone, on account of the fact that the average first time price for purchasing property in the UK equals its earnings by four times. South East and London are the other areas that will experience price gains, where the scarcity of property will increase prices by about 1% during the year, in spite of affordability limitations.
As per a Senior Research Analyst at RNCOS, “The future of the housing industry is intrinsically ambiguous and it is not viable to exclude further unexpected events that might cast a positive or negative effect upon the housing prices within the country. However, the new alarm will increase uncertainties regarding the British industry that has witnessed a rush in prices in the recent years, might go after the US, where home prices are declining fast and the economy is facing troubles”.
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