Housing market "vulnerable"

15 April 2004
Further rises in interest rates could cause house prices to slump by up to 15 per cent, Goldman Sachs warned Wednesday.

Goldman Sachs forecast a fall in prices of 10-15 per cent over two years beginning late 2004.

The investment bank said the housing market was "overvalued" and consequently "vulnerable" to a fall.

The Bank of England's interest rate setting Monetary Policy Committee is expected to increase interest rates next month beyond four per cent to temper consumer spending and the seemingly over-heating property sector.

Separately, London fund manager Tony Dye - dubbed "Dr Doom" for his gloomy forecasts - predicted Tuesday the current housing boom will "all end in tears."

The man, who correctly predicted the dot.com crash, said prices in London would plummet 30 per cent in real terms over the next five years.