The UK property market is set to crash over the coming years with prices falling by up to 20pc from their peak, according to economic consultancy Capital Economics In a note published today, the think-tank warned that the widely shared expectation of a gentle slowdown in the housing market "now looks like a best case scenario". The central forecast of the Bank of England and the expectations of the Nationwide and the Halifax, the UK's two largest mortgage lenders, are for house price inflation to slow to zero over the coming years.
According to Capital Economics, house prices are currently 28pc above their predicted level, compared to 24pc at the end of the late 1980s boom. "We believe that houses are so over-valued that outright falls in prices are now required to bring them back into line with fundamentals," said Capital Economics' Sabina Kalyan. Because of the market's current momentum, Capital does not expect to see prices falling until the end of 2003. //www.fxcentre.com