The next 12 months will be a year of two halves, says RICS

20 December 2007 / by None
The housing market will remain broadly unchanged next year, but will initially experience some turbulence in the first half of 2008 as a result of the credit crisis, according to experts at the Royal Institute for Chartered Surveyors (RICS).

Any dip in house prices will be short lived, and the Bank of England has stated its intention to cut rates in order to prevent any further threat to the economy – RICS expects the base rate to be lowered to five per cent during the first six months of 2008.

As mortgage rates go up in the wake of the credit squeeze – which originated in the collapse of the sub prime mortgage market in America – repossessions are predicted to rise by 15,000 to 45,000 next year, an average of 123 a day, but this is still well below the fallout from the property crash of the 1990s, which saw 80,000 homes repossessed in one year.

If there is any weakening of house prices, RICS expects first time buyers to cash in on their opportunity to get onto the property ladder which has previously been out of reach for them. This would also give the market a boost when it needs it most if it does start to fall behind.

The credit crunch could impact on buy-to-let investors who will find that the same competitive mortgage products are no longer available since the credit crunch, which in some cases has spooked lenders into withdrawing entire mortgage ranges, but RICS does not believe that this will cause a significant increase in the number of investment properties put on the market.

Simon Rubinsohn, RICS' chief economist, said: "2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform. The effect of the credit crunch will dissipate slowly meaning that those seeking to obtain finance in the first half of 2008 may struggle.

"However, the employment picture should remain firm throughout the year, helping to prevent significant numbers of repossessions and the subsequent influx of supply into the market. This should ensure that house price growth remains broadly flat over the course of the year."

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