House prices expected to continue falling throughout 2012 - ITEM Club
Nida Ali, economic advisor to the EY ITEM Club comments on today’s lending figures:
- Today's data reveals underlying weakness in the housing market
- Credit conditions are set to tighten further in Q2
- House prices are expected to continue falling through 2012
“February's decline in mortgage approvals is clearly driven by the expiration of the stamp duty holiday for first-time buyers. Looking at both January and February combined, approvals have remained essentially flat and are at similar levels to late-2011. We are still a long way short of the historical norms, demonstrating the underlying weakness in the housing market.
“The Bank of England's Credit Conditions Survey released today reveals that wholesale funding conditions have tightened and lenders expect the availability of secured credit to fall in Q2. This is a worrying development and has the potential of escalating further if the Eurozone crisis deteriorates.
“The wider economy also remains unsupportive of the housing market. The labour market is very weak and consumers are eager to lower their debt burden. It will be a while before conditions in the housing market normalise. We expect house prices to continue falling throughout 2012 before starting to recovery gradually.”