Housing Market: Euro Crisis to Push Down Prices

The eurozone crisis makes mortgages harder to secure

The eurozone crisis makes mortgages harder to secure

A recent poll of analysts has found that most experts expect house prices to fall modestly next year on the back of the slumping economy and eurozone uncertainty.

However, experts warn that this could modest drop could prove overly optimistic if the eurozone crisis worsen even slightly.

Growth prospects

This outlook is consistent with the outlook for economic growth, as analysts predict the meagre economic growth to slow further in 2012. This will hurt the average national property prices, leaving millions of Britons poorer in assets despite positive recent growth in some housing markets.

The poll of 23 economists showed that house prices are predicted to slip by a median 1.7% in 2012, a considerable drop compared to September’s flat outlook.

A few months ago, the 0% growth predictions were considered grim tidings, but are now the best Britain can hope for, experts say.

The drop in growth outlooks since September is largely due to the eurozone crisis, which led to an ebb in affordable funding for big and heavily indebted European economies like Spain and Italy.

As the yields on their government bonds rose, fear spread throughout markets and banks became more reluctant to grant mortgages.

The smaller demand for new property purchases, spurred on by large required deposits and stricter lending criteria, is doing its part to keep the housing market in recession.

50-50 chance

Economists suspect that the eurozone may already be in recession, though official figures for December will not be available in weeks.

The poll among economists found that Britain has a 50-50 chance of also already being in a recession.

These two factors are linked, as economists have said that the biggest risk to the UK housing market and general economy is the eurozone. A credit crunch would bring about even more difficulty when securing a mortgage and hit house prices throughout the UK.

However, the European Central back has recently lent banks 489 billion euros in an unprecedented attempt to give banks ultra-cheap cash to shore up their assets.

Experts expect that this has gone a long way towards avoiding a credit crunch in Europe, but are suspicious of the move’s power to lift the eurozone out of crisis.



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