GMP Independent Financial Advisors LLP

Tue, 15 Sep 2009 15:30:57 GMT

The ITEM Club from Ernst and Young has said it will be five years before house prices return to their 2007 peak.

It also reckons the recent run on the property market has been down to a small number of cash-rich buyers, and that demand from this quarter is limited.

Hetal Mehta, an economist from the ITEM club said: “The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first time buyers to enter the market.

“Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place.”

To be honest, the views expressed by the ITEM club are little different from the views expressed here on many occasions.

Demand for properties is currently extremely low. It is just that supply is even lower. That is why prices are currently going up. When volume is low, the relationship between demand and supply can change on a sixpence.

The ITEM Club reckons house prices will fall back next year, and warned, quite correctly, that with unemployment set to rise, the prognosis for the market remains poor. ITEM may have got its psychology wrong, however. The British public are so convinced that house prices will recover, that it is possible this attitude alone may be enough to push prices upwards. Although, in the long term, psychology is not enough, and there is a real danger this attitude could create another bubble, and serious problems down the line, when reality finally strikes home.

Article author: Michael Baxter from Defaqto,to see more articles by the author go to: http://defaqtoblog.com/iabn/

For financial advice call Mark or Clare at GMP Independent Financial Advisers LLP on 0207 2886400

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