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House prices in Britain will fall for the next five years in the longest slump for at least half a century, leading economists warn today.
Property values in the UK are set to fall 4.5 per cent this year and 10.5 per cent by the end of 2015, according to the National Institute of Economic and Social Research.
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The five-year slump in real terms – after inflation has been taken into account – is the longest period of decline since records began in the 1960s.
The prospects for the housing market are very weak indeed over the next five years and that will weaken economic growth very significantly,’ said NIESR economist Ray Barrell.
‘It will be the longest period of falling house prices that we have seen,’ he added.
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The bleak report adds to the gloom surrounding the housing market and the wider economy.
The economy has stagnated since last autumn with growth of 0.5 per cent in the first quarter of the year, merely clawing back output lost in the snow at the end of 2010.
Mr Barrell said falling house prices will have a knock-on effect on household spending and hold back the economy over the next few years.
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‘There is very clear evidence that house prices affect savings and consumption,’ he said. ‘People spend more when house prices are going up, and spend less when they are going down.’
The UK will avoid a double-dip but the recovery is set to be ‘sluggish’, according to NIESR, with growth of just 1.4 per cent this year and 2 per cent in 2012.
That is less than the 1.7 per cent and 2.5 per cent expected by the Treasury.
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Investors are increasingly turning to alternative property investments such as farmland and forestry top provide stable, non-correlated rturns normally associated with residential property.
Read more: http://www.dailymail.co.uk/news/article-1383668/House-prices-fall-years-longest-property-slump-lifetime.html#ixzz1LTcOVgfP