Gloomy economic forecast for housing sector
03/03/09
A former chief economist of Europe's largest bank HSBC, Roger Bootle, is forecasting that the UK will remain in recession until at least 2011 and predicts the housing market will continue to struggle with rising repossessions, growing negative equity and poor access to finance.
Speaking at the Chartered Institute of Housing South East's Annual Conference and Exhibition in Brighton today, Roger, now managing director of Capital Economic, suggested that round 3.5 million households will fall into arrears - twice the level of the early 1990s - and mortgage repossessions could rise as high as 90,000 this year. He forecasted that the economic downturn will be the worst since the post-war economic slump of 1945-48, and is only likely to recover from 2011 at a very slow rate.
He also forecasted that house prices would continue to fall throughout 2009 with an overall housing market correction of between 40-45%. But he indicated the biggest fall would come from residential land values, which he forecasted to fall by around 70%.
On a positive note, the current market correction will have a long-term effect on the growth of house prices and help affordability in relation to average earnings. However, he indicated that this would need to be mitigated against poor access to finance and some of the people for whom home ownership was never suitable in the first place. Roger warned that the country is in the biggest housing bubble ever seen and there was a long way to go before the market stabilised.
In a challenging speech, Roger also suggested that the 'culture of homeownership' was 'part of the problem, not the solution' and Government should stop 'pandering to owner-occupation'. He said, 'We can't all get rich by buying and selling each other's houses.'