House building slump to cause price rise

House Building
House Building

A contraction in house building may cause property prices to rise because of the shortage of homes, according to a recent report.

The Centre for Economics and Business Research said the modest rise would be likely to continue in the following two years.The report states that current slump in house prices will continue for the remainder of 2009, before recovering slowly during 2010.

Property prices are expected to drop by around 3 per cent in the remaining months of 2009, reaching their lowest point at the beginning of 2010. Prices will then have fallen by almost a quarter (24 per cent) from their peak at the end of 2007.

“The key question now is the extent to which rising unemployment and weak wage growth will lead to a second wave of house price falls, or whether this has already been built in to existing expectations,” said Benjamin Williamson, one of the report’s authors and an economist at cebr.

The Royal Institution of Chartered Surveyors predicted house prices to finish the year higher than they started but The Halifax believes that market values will drop by 7 per cent over the course of 2009.

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