Possible 20% plunge in house prices

An industry expert has predicted that house prices in parts of the UK could plunge by 20% over the next two years – a situation that could leave many homeowners in negative equity if they have recent bought the property for a high price and have borrowed most of the value of the property.

The Chief UK Economic Advisor for Morgan Stanley, Professor David Miles – who was also an advisor for the government – made the prediction recently.

Miles said that whilst the outlook was a gloomy one for homeowners as a result of the tumbling property prices there were also people that would be able to gain from the situation, such as those on low incomes and first time buyers, who have previously been unable to get onto the property ladder.

He said: ‘I am at the pessimistic end of the spectrum, but I don’t think it should be seen as the pessimistic end because there are as many gainers as losers.’

There have been various prediction relating to house price falls over recent months, and whilst some officials have predicted that house prices will remain flat for the reminder of this year there are predictions that house prices could fall by between 10% and 20% over the next two years.

However, although first time buyers will be able to benefit from lower house prices should the predictions come true difficulties in getting finance in the current financial climate can hamper their chances.