LONDON (Reuters) - The housing market will bear witness to more falls in prices as rising unemployment, severe government budget cuts and tough new mortgage rules chip away at buyer demand, the latest Reuters poll of analysts found.
The poll, taken over the past week, found over two-thirds of them predicting UK house prices will “double dip”, with the median expectation for a five percent fall from current levels.
That follows drops in prices in three out of the past four months, according to the Nationwide Building Society.
“There are likely to be further falls in house prices over the next year given the dampening effect of the fiscal squeeze, restricted mortgage availability and fragile household confidence levels,” said John Hawksworth at PwC.
The government has committed to slashing its budgets and civil service while the Financial Services Authority’s review of mortgage market regulation is designed to prevent risky lending practices that contributed to the financial crisis.
Mortgage industry bodies say that will hit first-time buyers, who are already now required to stump up large deposits in order to avoid punitive rates, and could stifle the market.
“In the short term the biggest risk to house prices is the FSA’s Mortgage Market Review,” said Ray Boulger at mortgage broker John Charcol.
The poll showed monthly mortgage approvals, a good gauge of future housing market activity, stagnating at around 50,000 in six months, and barely rising to 53,000 in 12 months.
That was little changed from a poll taken in September, and is less than half the average of 104,000 seen in 2007 before the market crash began, taking prices down around 20 percent.
Britain’s second biggest house builder by market value, Persimmon, warned on Monday restricted mortgage lending would drag on output in the sector, restraining any pick-up in the industry, and echoed its peers in reporting a slower Autumn selling season.
The poll of 30 analysts predicted house prices will end the year up a negligible 0.2 percent and remain flat next year. That compares to respective forecasts for 1 percent rise and 0.5 percent fall in a September poll.
The latest UK inflation rate for consumer items was 3.2 percent. House prices rose in double digits during the height of the British property market boom that saw the average price of a home triple in the 10 years to 2007.
A separate poll published on Thursday painted a similar subdued picture for the housing market in the United States, which has fallen by about a third.
Unlike in the U.S., where that fall has brought housing to a measure of fair value, the latest survey showed homes are still overvalued, assigning a score of 7 on a 10-point scale where 1 is extremely undervalued.
They scored 7 in the September and April polls but a 6 in the January and July polls.
According to mortgage lender Halifax, the average price of a home in Britain is 164,919 pounds -- more than six times the average annual 2009 salary.
For existing homeowners, however, the cost of owning a home is affordable given rock-bottom interest rates.
“Housing remains expensive relative to incomes, but the costs of financing an existing mortgage remain low thus on balance the market is still marginally expensive,” said Peter Dixon at Commerzbank in London.
The Bank of England is not expected to raise its benchmark lending rate from 0.50 percent until at least October next year, saving thousands of pounds for homeowners who took out loans that track the base rate.
Low interest rates and a so far resilient labour market mean courts in England and Wales issued 28 percent fewer mortgage repossession orders between July and September this year than a year ago, the government said last week.
A gloomy picture is also seen in commercial property values which barely stayed clear of a double dip last month in a subdued market as growth was held down by persistently weak rental values.
Polling by Bangalore Polling Unit