Business news

UK house prices to fall 5pc LONDON — British house prices are likely to fall 5 per cent this year, and many analysts predict they could tumble twice as much, as soaring consumer inflation restricts the scope for further interest rate cuts. A Reuters poll of 30 economists, analysts and fund managers showed they expect property prices to slide further after recording their first year-on-year falls in more than a decade. Forecasts for 2008 house prices on a full-year basis ranged from a 10 per cent fall to a 2.9 per cent rise, with a median prediction of a 5 per cent drop, according to the poll which was taken May 8-14. Nearly a third of the respondents — nine of the 30 — predicted a 10 per cent drop. The median forecast compares with that of a 0.8 per cent fall in a Reuters survey in March, highlighting the deteriorating outlook. The government has a similar view. Briefing notes for housing minister Caroline Flint, seen as she left a Downing Street meeting on Tuesday, said house prices could fall as much as 5 to 10 per cent this year and that the government does not know how bad it will get. Economists also forecast an average five per cent drop next year, according to the poll. The housing market, a bedrock of consumer wealth which has tripled in value over the last decade, has been slowing rapidly in the face of a global credit crunch and despite cuts in official interest rates. “The fundamentals are so weak that it would require a prolonged period of base rate cuts to re-stoke house price inflation,” said Andrew Goodwin at Experian. There is little scope for many more interest rate cuts following new Bank of England forecasts yesterday. These showed inflation shooting up this year, dousing already retreating expectations of an interest rate cut from the current 5 per cent next month. Analysts in the poll also predicted that monthly mortgage approvals will drop to 63,000 in six months, before recovering to 73,000 in 12 months. This compares with a record low level of 64,000 approvals in March and a 2007 average of around 104,000.                                                                                                                                                                                                                                      — Reuters