Latest UK residential real estate forecasts

Housing markets in the South & Midlands to see steepest price correction 

Contact: Andrew Burrell, Associate Director - Macroeconomics
andrew.burrell@uk.experian.com

The UK economy and housing market will become direct casualties of the current world-wide credit crunch, according to the latest Regional Planning report by Experian, the global information services group and leading economic forecaster. Even if official interest rates are cut, consumers will experience little relief while lenders are under intense pressure to curb borrowing.

Following an expansion of 3.1 per cent in 2007, UK GDP growth is forecast to slow sharply to 1.5 per cent in 2008. The downturn in consumer demand is more abrupt, with demand growing by less than 2 per cent, year-on-year. Only significant reductions in interest rates bring an upturn from 2009.

'We expect the UK housing market to suffer over the next two years, with some regions experiencing falls' comments Andrew Burrell of Experian. 'Although national house prices have continued to soar against a background of higher interest rates, the current boom has been uneven regionally. The latest figures show an exceptionally buoyant market in Northern Ireland and continued strength in Scotland and London, but elsewhere there are already signs of deceleration.'

In future, national house prices are forecast to record the lowest annual increase since the mid-1990s, though there is no absolute fall on average (see table). The south of England is more exposed. Modest declines in house prices are predicted in the South East and the East of England, while values fall much more sharply in the South West. By contrast, Greater London, where overvaluation is less severe than in the rest of the south, has the UK’s strongest short-term outlook after Scotland.

Despite better affordability and lower indebtedness, the long housing boom has also pushed some northern regions too far. Notably, the East and West Midlands are expected to see the UK’s most significant falls in house prices over the next 2 years, with property values down about 4 per cent by 2009. Meanwhile Northern Ireland suffers a hangover after the dizzy growth of the recent past.




Experian March 2008