Housing Price Drops in 2011 are Needed for Further Correcting According to Analysts
News from economists continues to issue the notice that house prices will continue to fall in 2011. Despite a slight rebound in pricing in 2009 a decline currently in the market is expected to continue. The reasons for the value losses are being blamed on tight lending conditions, high prices in relation to expected earnings in the next year and a lack of consumer confidence.
A poll by Financial Times of 56 economists revealed that 50 expect that house prices will continue falling. The Office of Budget Responsibility has followed the same path of expectation and has officially predicted that house pricing will fall over the next 12 months by 1.4 per cent.
The decline in prices isn’t causing many alarms to go off by analysts. The lack of concern in the declines is because many believe property pricing still needs correcting and current house prices are still too high. The drops are considered a normalization in the housing market.
There is a problem when the market remains out of reach of many and causes social problems. Willem Buiter, chief economist of Citi Group and also a former Monetary Policy Committee member, said: “Anything that reduces UK house prices has to be a good thing on balance.”
The dropping prices in 2011 are expected to slip versus plummet. Andrew Goodwin, of Oxford Economics, added: “Last year’s supply shortage has been corrected, which has taken away the major support to prices, but while the market fundamentals remain weak they are more favourable than they were in the house price crash of 2008.”