Property economist warns of 25-year slump

Posted by discuss | UK Real Estate | Wednesday 13 August 2008 1:20 pm

With a fall in the house prices, it is expected that it may take 25 years to
recover from a 35% downfall. It is also predicted by the Bearish analyst Capital
Economics that if the property market is not stable, it might take upto 2036
to reach upto the 2007 levels. The prices would fall continuously for the next
three years.Specially in london property market suck as clerkenwell property, barbican proeprty, bloomsbury property, bow property, aldgate property and wapping property.

Capital Economics has also commented on the property market’s overappraisal
at the peak of the boom. The cut on the mortgage credit and the downfall in
the economy will slacken the recovery in the sector inspite of the above average
price growth. It is considered as an instance and not a forecast. It will take
another boom for the prices to reach to the 2007 level, as told by Ed Stansfield,
Capital Economics. The 25 year climb requires the house prices to rise steadily
by around 2.4% every year continuously which is considered extraordinary for
the moment.

This situation has also happened earlier. The downfall first happened in the
1970’s, and then in the 1990’s where it took nine and six years
for the market to recover to normal. After the 1990’s crash, there was
a potential for the housing market to grow 8% to 9% annually.

Even the factors such as low unemployment and shortage of property will not
support the house prices. These factors are hammed up massively as an indicator.

Stansfield has also said that these factors do not put an impact on the real demand in the economy, that is whether the people can afford a house or they even want to buy one. These factors can be massively overcome by the short term fluctuations in the economy.

Capital Economics has been criticized in the past for predicting the end of the house boom early. Stansfield quoted that property market had high risk characteristics for a particular period of time.though early in their first prediction,they are not too far out.