UK House Prices Situation at 2 11 2007: Fairly static in most areas.

UK House Prices Forecast: Softening more likely than a crash.

Top Group of Economists Don't Expect Housing Crash

The Ernst & Young Item Club, a group of leading economists, expects the housing market to have a soft landing, rather than a major crash.

In its latest report, published this week, the Item Club forecast reduced economic growth for 2008, mostly due to tightening credit conditions. It does not, however, expect to see a US-style housing crash.

The report comments that "Item does not believe that the tighter lending conditions, caused by the worldwide squeeze on credit, will lead to a serious correction in house prices."

However, the short-term forecast for the housing market is still fairly weak. Item Club chief economic advisor Peter Spencer explained that:

"Activity is likely to fall and prices may stall through 2008. But as interest rates come down and new supply remains restricted, the foundations will be laid for renewed real price growth in the long run."

Nationwide Adjust House Price Forecast for 2008 to 0%

Nationwide building society is to downgrade its forecast for house price growth. The lender, Britain's biggest building society, was previously forecasting growth of 3-4% in 2008.

It will now be reducing that forecast to 0% - with "falls on an annual basis in some areas", according to Fionnuala Earley, Nationwide's group economist.

Earley believes there may now be a "few years" of flat growth in the housing market, as a result of tightening credit conditions and slower economic growth.

Mortgage Approvals Down - British Bankers Association

The British Bankers Association (BBA) has reported a decline in mortgage approvals amongst its members. September saw a 14% fall in mortgage approvals from August, and a 27% reduction compared to September 2006.

The BBA commented that this September saw the smallest number of approvals for any September since 2000.

Mortgage approvals are generally considered an important indicator of housing market activity, and a significant decline in approvals usually comes before a fall in house prices.

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