Housing slump could be over next year, MPs hear

Published 16th Oct 2008

The housing market slump could be over as soon as next year if the cost of home loans falls by a further half-point, a leading housing market expert told MPs yesterday.

David Miles, chief UK economist at Morgan Stanley, said that if mortgage rates stayed at present levels, an educated guess from sophisticated economic estimates was that house prices would fall by another 5 to 10 per cent and wipe a further £17,000 off the value of an average home before the market bottomed out next year.

However, Professor Miles, who previously has advised Gordon Brown, added that if a recent decline in the cost of mortgage funding continued, price falls could soon end.

Speaking to the Treasury Select Committee, he said: “If the cost of funding to lenders were to move down half a point, then the 5 to 10 per cent fall could turn into a much smaller number, or not much at all.”

As the latest figures on the state of the mortgage market were released yesterday, adding to fears of a much more severe housing slump, Professor Miles's comments offered some hope to homeowners of an early end to plummeting prices.

However, he also sounded a note of caution over the uncertainty surrounding market predictions. “There are a lot of risks that it could play out worse than that,” he said.

His forecast is more optimistic than those of many other economists, who forecast that prices will slide by up to 35 per cent before reaching the bottom.

Source: ' times '

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