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House market crash unlikely

23 June 2004
Fears that the UK housing market is heading for a crash have been exaggerated, a new report claims.

Research conducted by housing economist Michael Ball for the Social Market Foundation found that there is no evidence that the buy-to-let sector is over-mortgaged.

Analysts had become increasingly concerned that the housing bubble was about to burst, fuelled by a surge in the number of people buying property for rental purposes.

However, Professor Ball, from the University of Reading, insists that the buy-to-let market is not likely to lead to a sharp fall in house prices.

In his report, "The Future of Private Renting in the UK", Professor Ball states that the concerns are based on insufficient evidence and claims that the plethora of opinions regarding future house prices has led to the appearance of certainty about future prospects where none existed.

The housing expert told BBC News Online that the private rental sector needed to be encouraged as it played an increasing role in the UK housing market and stated that predictions of a collapse based on falling rents and returns for buy-to-let owners were probably wide of the mark.

According to Prof Ball, less than 30 per cent of the 2.4 million private rented units in the UK have mortgages, and a far smaller percentage are highly leveraged.

The report recommends that the government should move ahead with Property Investment Funds (PIFs) to encourage investment in the housing market and calls for tax incentives to encourage rental property owners to invest in refurbishing their properties.