(LONDON) UK house prices will decline 10 per cent next year as a shortage of mortgage finance limits new sales, according to Hometrack Ltd.
Fewer deals: Sales volumes of houses in the UK will fall 12 per cent next year after dropping 45 per cent in 2008, according to HometrackValues will drop a further 3 per cent in 2010 after dropping 9 per cent this year, the London- based property researcher said in a report yesterday.
Home lending will increase by just £15 billion (S$32 billion), down from £39 billion in 2008 and a peak of £107 billion last year.
Bank of England deputy governor John Gieve said in a BBC interview that the bank knew the rate of house-price growth was unsustainable and underestimated the severity of the problem.
After prices tripled in a decade, policymakers now are struggling to revive the market for home finance, with Prime Minister Gordon Brown pushing banks to revive lending.
'Prices will remain under downward pressure for the foreseeable future,' Richard Donnell, Hometrack's director of research, said in the statement.
'The onset of recession and rising unemployment is set to act as a major constraint on demand compounding the level of price falls in the near term,' he added.
Sales volumes will fall 12 per cent next year after dropping 45 per cent in 2008, while repossessions will climb to 70,000 from 45,000, Hometrack said.
The global credit squeeze has pushed the UK into its first recession since the early 1990s.
Unemployment rose at the fastest pace since 1991 in November, with the number of people claiming jobless benefits climbing above one million.
Mr Gieve said using interest rates to tame asset prices may have limited growth in other areas of the economy.
He made the remarks in a BBC interview which was to be broadcast on its Panorama programme last night.
Mr Brown has partly suspended a tax on house purchases, and the government has created a £50 billion rescue package for UK lenders stung by credit losses. -- Bloomberg
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