Doom, doom and more doom (but don't worry, it might never happen)
News Category: Industry News
Published: 19-Jul-2010
Doomsters Capital Economics made big headlines at the weekend with their forecast that house prices will crash more than 20% over the next two years as a result of Government spending cuts, tax rises and a surge in unemployment.
Capital Economics expects house prices to fall 5% this year and 10% in each of 2011 and 2012.
In total, the group predicts a collapse in house prices of 23% from the start of 2010, making it a steeper drop than the 19.3% crash during the recession.
The economists (long a favourite of EAT) justified their outlook by noting that the house price-to-earnings ratio is still far above its 4% long-run average at 5.5%, and stressing that mortgage rates will only get more expensive.
So, big, black headlines.
However, they cautioned that the 2012 forecast “is highly uncertain”.
That’s all right, then. It might not happen.
EAT’s advice: always read the small print.
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