House prices will fall over next five years, says Niesr

brit1234

House prices will fall over next five years, says Niesr

House prices will fall in real terms over the next five years as inflation outstrips meagre rises in property values, one of the country’s most respected forecasting bodies has warned.

By Philip Aldrick and Angela Monaghan
Published: 6:41AM BST 28 Jul 2010

The National Institute of Economic and Social Research (NIESR) claims that prices will fall, in real terms, by about eight per cent.

It means that after accounting for inflation, “real” house prices will have collapsed to 2003 levels by 2015

The forecast will add to families’ woes as they face higher taxes and lower wages that even the Treasury predicts will grow more slowly than inflation for the next three years. Capital Economics has estimated that the average household will be £3,000 a year poorer under the measures introduced in last month’s Budget.

NIESR’s figures show that although average house prices are expected to rise from £194,235 last year to £213,091 in 2015, they would need reach £231,000 to keep pace with inflation. As a result, average households will be £28,000 out of pocket.
Simon Kirby, a NIESR research fellow, said: “While we have assumed the housing market remains stable, house prices could decline at a more rapid pace.”

Families have already been hit by falling house prices. They crashed 19.3 per cent during the recession, according to Nationwide and have yet to recover to pre-crisis levels despite a 10 per cent bounce. Mr Kirby said that weak bank lending would restrain house price growth.

NIESR’s housing outlook came as it warned that a double-dip recession is more likely following the coalition’s emergency Budget. The probability of a full year of negative economic growth has risen from 14 per cent to 19 per cent as a result of the extra £40bn of spending cuts and tax rises unveiled by the Chancellor last month, it said.

“The Budget will inevitably reduce growth,” Mr Kirby said. “The major impact will be in 2011, when we believe it will shave off 0.4 percentage points of GDP [roughly £7.5bn].” It is forecasting slightly slower growth than the Treasury’s independent forecaster, the Office for Budget Responsibility, of 1.3pc growth this year, 1.7pc in 2012 and 2.2pc in 2013.

However, Ray Barrell, senior research fellow, said the Chancellor’s plans were “necessary” to get a grip on the country’s £927bn of public debt: “I don’t think we could have grown our way out of this.”

Although the economy is recovering, NIESR does not believe it will get back to pre-recession levels until 2012 – a period of decline matched only by the Great Depression of the 1930s and the recession of 1979-1983.

http://www.telegraph.co.uk/finance/economics/houseprices/7913776/House-prices-will-fall-over-next-five-years-says-Niesr.html

chucky

already posted...
https://forums.moneysavingexpert.com/discussion/2623933

Rinoa

average house prices are expected to rise from £194,235 last year to £213,091 in 2015

So, after 10 years of the biggest free money give away in the world ever, average house prices will increase another £19k by 2015.

Sounds good to me. :j

wolvoman

So houses will still likely outgrow cash as an investment? Sounds like most FTBers will be better off buying property over saving cash.

chucky

unfortunately falls in real terms still means that house prices will rise...

NIESR’s figures show that although average house prices are expected to rise from £194,235 last year to £213,091 in 2015

while peoples disposable income that they will use to create a deposit and also pay all other expenses will be reduced...

The forecast will add to families’ woes as they face higher taxes and lower wages that even the Treasury predicts will grow more slowly than inflation for the next three years

out of the groups of people it looks like it's going to affect the FTB's that delay their purchase more than anyone else...

brit1234

The article doesn't include the expected price falls which economists are predicting. However inflation is becoming more blatant by the day and I fee we are being robbed with these low interest rates.

Graham_Devon

I wonder why the papers don't use the title "house prices will be more expensive in 5 years time as NIESR predicts a fall".

I wonder if it's because not many people look at it this way....apart from a handful on here, who are invested?

chucky

Graham_Devon wrote: »

I wonder why the papers don't use the title "house prices will be more expensive in 5 years time as NIESR predicts a fall".

you're confusing yourself again.

NIESR’s figures show that although average house prices are expected to rise from £194,235 last year to £213,091 in 2015

Graham_Devon wrote: »

I wonder if it's because not many people look at it this way....apart from a handful on here, who are invested?

no - it's just you looking at it this way or even confusing it this way
.
have a look on Amazon - there must be a book explaining nominal prices and real prices for you...

chucky

brit1234 wrote: »

The article doesn't include the expected price falls which economists are predicting. However inflation is becoming more blatant by the day and I fee we are being robbed with these low interest rates.

so only the property price rise part of the the NIESR article is wrong then - the other parts of it are correct?

there will be no nominal rise - is that 100% guaranteed?

System

Awful reading for FTBers, a £19k increase coupled with inflation eating away at savings.

Of course if salaries keep up with inflation then it's all good for them, depends what sector/job you're in to decide if this is good or bad news.

MikeJ74

brit1234 wrote: »

The National Institute of Economic and Social Research (NIESR) claims that prices will fall, in real terms, by about eight per cent.

It means that after accounting for inflation, “real” house prices will have collapsed to 2003 levels by 2015

The forecast will add to families’ woes as they face higher taxes and lower wages that even the Treasury predicts will grow more slowly than inflation for the next three years. Capital Economics has estimated that the average household will be £3,000 a year poorer under the measures introduced in last month’s Budget.

NIESR’s figures show that although average house prices are expected to rise from £194,235 last year to £213,091 in 2015, they would need reach £231,000 to keep pace with inflation. As a result, average households will be £28,000 out of pocket.
Simon Kirby, a NIESR research fellow, said: “While we have assumed the housing market remains stable, house prices could decline at a more rapid pace.”

Families have already been hit by falling house prices. They crashed 19.3 per cent during the recession, according to Nationwide and have yet to recover to pre-crisis levels despite a 10 per cent bounce. Mr Kirby said that weak bank lending would restrain house price growth.

NIESR’s housing outlook came as it warned that a double-dip recession is more likely following the coalition’s emergency Budget. The probability of a full year of negative economic growth has risen from 14 per cent to 19 per cent as a result of the extra £40bn of spending cuts and tax rises unveiled by the Chancellor last month, it said.

“The Budget will inevitably reduce growth,” Mr Kirby said. “The major impact will be in 2011, when we believe it will shave off 0.4 percentage points of GDP [roughly £7.5bn].” It is forecasting slightly slower growth than the Treasury’s independent forecaster, the Office for Budget Responsibility, of 1.3pc growth this year, 1.7pc in 2012 and 2.2pc in 2013.

However, Ray Barrell, senior research fellow, said the Chancellor’s plans were “necessary” to get a grip on the country’s £927bn of public debt: “I don’t think we could have grown our way out of this.”

Although the economy is recovering, NIESR does not believe it will get back to pre-recession levels until 2012 – a period of decline matched only by the Great Depression of the 1930s and the recession of 1979-1983.

L]

Even if falls for 5 years, there will be no hurry to rush back in. Bargains will be there for years.