CB Richard Ellis’s residential research team said today that the housing market is unlikely to recover before the beginning of 2010.
It said its research showed that the average house price in the UK is £165,188, down 10.3% on last year with further falls likely.
It said: 'With a recession of similar severity to the early 90s expected, house prices could fall 25% by the end of 2009. Yet this downturn is different, as repossessions are unlikely to reach the levels seen in the 90s despite forced sellers making up an increasing proportion of the market’.
The research said that financial crisis has constricted the mortgage market, which in turn has weakened the housing market as 75% of purchasers are reliant on mortgage finance. Consumers also had fewer products to choose from and rates are substantially higher.
‘The days of the 100% mortgage are over,’ it said. ‘Hard hit banks have implemented stricter lending criteria with 20% deposits becoming the norm. Only 32,000 mortgages were approved in August, the lowest level since January 1993. The global bail-out has yet to fundamentally strengthen sentiment and the mortgage market, which are vital components to recovery.’
Development of housing has also stopped said CBRE as developers are struggling to sell units and finance remains hard to secure. CBRE said a shortage could have grave implications in the long run, as restricted supply could lead to an overcorrection in price when demand returns which will affordability and will ‘trap the housing market in an extreme boom/bust cycle’.
Jennet Siebrits, head of residential research at CBRE, said: 'We are in a unique period of change; credit restriction will stay in place going forward and banks will remain risk averse in the future. However, encouraging people to save for their house is not necessarily a bad thing. The market will return, albeit slowly and steadily, provided the supply of new homes continues and sentiment improves.’