GLASGOW The housing market is in the midst of new dip that will shave at least another 5 percent off current house prices, according to a quarterly Reuters poll of economists and property analysts.
There was a marked shift in tone from previous polls, as 18 out of 24 respondents said they expected to see a "double-dip" in house prices -- a scenario dismissed by all but six analysts out of 22 in a poll taken less than three months ago.
With severe government budget cuts soon to take effect and around 600,000 public sector jobs expected to go over the next six years, respondents cited homebuyers' lack of confidence about the direction of the economy.
The survey predicted house prices will fall 0.5 percent next year on average after rising 1.0 percent in 2010 -- essentially flat-lining. In July, analysts predicted home prices would climb 3.5 percent this year and nearly 2 percent next year.
Reports from the Nationwide Building Society, Royal Institution of Chartered Surveyors and property website Rightmove all showed house prices already in decline last month.
Too much supply coming on the market and legislation changes were cited by respondents as depressants for house prices.
"We are seeing signs that homeowners who had managed to hold off putting their homes on the market, are finally giving up, causing a pick-up in supply which has depressed sale and asking prices," said Azad Zangana of Schroders.
But Zangana said it was hard to foresee another crash of the sort that wiped around 20 percent off the average value of homes, peak-to-trough, during Britain's worst recession since World War Two.
Most analysts said prices would not see any hints of real recovery until well into next year.
STILL TOO EXPENSIVE
The poll showed houses are still too expensive, assigning a score of 7 on a 10-point scale where 1 is extremely undervalued. That is a rise from 6 predicted in the July poll, despite the average house price having fallen since then.
The Nationwide's house price index shows the average value of homes have fallen 1.4 percent over July and August.
"House prices should eventually recover but it will be a long haul before they return to their mid-2007 peak levels," said John Hawksworth of PricewaterhouseCoopers.
The economy grew 1.2 percent in the second quarter of this year, the fastest in more than nine years, although economists polled earlier this month see this pace slipping markedly in the quarters ahead.
With the impact of the government's fiscal austerity measures yet to be felt, homebuyers' uncertainty about the economy looks likely to persist for some time.
The poll suggested that the tightening of banks' credit standards after the financial crisis would keep mortgage lending far short of pre-crisis levels for at least a year, despite the benefit of record low interest rates.
The number of loans approved for new mortgages fell in August to its lowest since the housing market hit a trough in 2009, according to data from major British banks published on Thursday.
The poll showed monthly mortgage approvals at 50,000 in six months, and 55,000 in 12 months. That compared with 55,000 and 60,000 in July's poll, far below the average of 104,000 seen in 2007 before the market crashed.
Some respondents also identified legal and tax changes as major factors that will push down house prices.
The Financial Services Authority's review of mortgage market regulation is designed to prevent risky lending practices that contributed to the financial crisis, although industry bodies say it will hit first-time buyers and stifle the market.
"Numerous recent policy announcements are inadvertently conspiring to stunt what has been a surprisingly strong bounce back in the UK housing market," said Philip Rush of Nomura.
He said the withdrawal of home information packs had increased the number of listings and therefore the overhang of residential stock, while an increase in capital gains tax and cuts in housing benefit would hurt rental property values.
(Polling by Bangalore Polling Unit, Analysis by Ruby Cherian in Bangalore; Editing by Ross Finley and Toby Chopra)