House Prices To Fall For 4 Years

House Prices To Fall For 4 Years

Following the Bank of England’s quarterly inflation report, Mervyn King, Governor of the Bank of England has warned that UK house prices may fall in real terms for as long as the next four years.  He has said “looking several years ahead, there is no reason to expect house prices to be markedly above where they are now and it is conceivable there might be falls in house prices”.  

The quarterly inflation report predicts that inflation may end up above the 2 per cent target in two years if the Bank goes ahead with cuts to bring rates down to 4.5 per cent, the rate currently stands at 5.25 per cent.

Our view

We suggest this is extremely pessimistic.  Property prices will fall this year and next year but salaries will catch up to enable people to buy again and property will start to move again towards the end of 2009.

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