Housing market 'not heading for a major crash'

News Category: Industry News

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The UK housing market is not heading for a major crash as a result of the ongoing global credit crunch, a group of economic experts have said.

Ernst & Young's latest Item Club forecast has predicted that the tighter lending conditions for homebuyers will not result in a serious correction in UK house prices.

"The threat of a major credit crunch seems to be receding at a speed which few people would have anticipated a month or so ago," explained Professor Peter Spencer, chief economic advisor to the Ernst & Young Item Club.

In particular, the group said that demand for property in the UK has remained robust despite recent increases in interest rates. This has supported house prices.

However, Professor Spencer said that it was likely that house price growth could stall somewhat in 2008. Should prices stall, the group said that lowering interest rates would probably allow for "renewed real price growth in the long run".

Professor Spencer concluded: "Consumer confidence has been knocked by the credit crunch. However, the labour market remains strong and disposable incomes will improve as mortgage costs fall."

Recent reports have suggested that more people are currently looking to rent property while they wait to see what will happen to house prices.

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