House prices to fall '20% in two years'

House prices will slump by 20 per cent over the next two years, experts have warned.

The property market is heading for a ‘double-dip’ as rising unemployment and spending cuts strangle demand, according to the analysis.

Interest rates are likely to be increased in the coming months to keep rising inflation in check and higher mortgage costs seem certain to add momentum to plunging property prices.

Paul Diggle, property specialist at research consultants Capital Economics, said: ‘Prices are trending slowly downwards at the moment, but our view is that this is really the start of the second leg of the correction, and we expect prices to fall significantly further.’

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NetRent Comment
 
Predictions of dramatic house price falls are nothing new and we suppose that if you keep on predicting things you may eventually get some predictions right. But whilst it is clear to everyone that house sales are stagnant there is really no proof that house price will fall by any significant amount, let alone fall by 20%.
 
Of course some house prices will fall as desperate vendors seek a buyer but this does not mean that all house prices will fall. The crucial point is whether or not people still want to live in a home that they own. There appears to be overwhelming evidence that in the UK most people want to own their own home and as long as that continues house prices will hold up over the medium to long term.
 
Of course all this uncertainty would end if the banks started lending, especially if they actually competed with each other. There is little sign of that happening any time soon.