The housing market crash anticipated as a result of an economic slowdown is unlikely to happen, say experts. Three independent surveys have found consumer confidence remains high and that the housing market remains strong in most areas.
Figures from Abbey National show that albeit a marginal reduction in house prices, more people can afford to buy a home than 10 years ago.
Barry Naisbitt, chief economist at Abbey National, said: ‘With house price growth having again reached double figures, people may think it will be more difficult to buy a home. This is not the case, as rising incomes and falling interest rates outweigh the effect of higher house prices, making house purchase more affordable.’
Naisbitt believes that although house price growth is expected to drop from its current average, it does not necessarily spell bad news for the housing market.
‘If prices rise too rapidly for too long, potential buyers risk being priced out of the market and an unsustainable price bubble can build. A healthy housing market is one where buyers can afford properties without overstretching themselves and sellers can sell without undue delay,’ he said.
Demand still appears to be exceeding supply and although London is expected to be worst hit by the economic slowdown, Savills Private Finance expects a recovery late next year.
Simon Jones, associate director at Savills Private Finance, said: ‘Not all is doom and gloom in the UK housing market. Although we expect prime central London residential values to fall by 4% to 5% over the next few months, there will be a recovery skewed towards the second half of 2002.’