Gloomy economists talk about massive price drops, bankers debate interest rate rises, politicians talk about belt tightening. House prices should fall by 20-30 per cent, they say.
There’s not much to smile about in the UK at the moment as the small number of us that try to be positive about life are drowned out by a cacophony of doom-mongers predict national misery.
With the Bank of England's policymakers locked in an acrimonious public row about whether rates should start rising again to choke off inflation, analysts say prices now look too high to be sustainable
."Prices are trending slowly downwards at the moment, but our view is that this is really the start of the second leg of the correction, and we expect prices to fall significantly further," said Paul Diggle , property economist at consultancy Capital Economics.
He calculates that the average home remains up to 20-30 per cent overvalued by historical standards – and with the mortgage market still tight and unemployment rising, 2011 could bring prices crashing back to earth.
The current wave of worry centres on the planned job reductions in the public sector. "Forced sales will be the issue, so it depends on the make-up of your area – the level of unemployment and financial hardship," says Miles Shipside at Rightmove.
Mervyn King , Governor of the Bank of England, says we will see “the worst decline in living standards since the 1970s.”
Rightmove's latest survey finds that house prices rose by 3.1 per cent this month but also reveals a 21 per cent increase in the number of properties coming on to the market in London, while the market in the rest of the country is "frozen over.
"If you don’t work in the public sector, you may be feeling relatively comfortable in that you are not so likely to lose your job, but no – those job losses will affect every homeowner who hopes to sell in the next few years.
The predicted job losses are so massive that in areas of high public sector employment, house sales stand little chance of increasing, and prices will probably drop significantly.
Zoopla’s latest research shows that both the total number of ‘price-reduced’ properties on the market in the UK and the average amount by which they have been reduced have climbed over the past 3 months.
