UBS predicts UK property market will continue to falter
The property prices in the UK will fall a further 10% on top of the 20% already recorded since peak of the property market in 2007, according to a new report from UBS Wealth Management.
The report said that contrary to recent signs that conditions are improving, houses prices will remain under pressure for some time, with another 10% price fall likely.
Authors Caroline Winckles and Brian O'Reilly said: "While affordability has improved, house prices remain elevated relative to income at 4.4 times average income. With wages unlikely to rise near term, better long-term affordability will need to come via lower house prices."
They said: "While we believe the worst may be behind us, and acknowledge some structural issues that should support house prices, we highlight that, in the absence of higher wages house prices will need to move lower. If we assume a return to 4 times average income for house price affordability this would suggest a further 10% decline is possible."
The report said the rate of adjustment since the peak has been faster than the previous housing recession in the early 1990s, which took just under four years to find a floor. It then took house prices another five years before they reached the previous peak.
UBS added that rate cuts have not been fully passed on, particularly to first-time buyers. While the base rate has been cut to 0.5% by the Bank of England, the level of housing borrowing on fixed rates, which currently accounts for 70% of all transactions, has actually increased to 5.8%.
UBS expects repossessions to increase, while tighter regulation could limit the level of mortgage borrowing in the future.
Regions which have experienced the greatest declines on an annual basis, are Northern Ireland down 22.2%, Greater London down 20.9%, and the South East, down 20.1%.
The exclusive London neighbourhood of Kensington & Chelsea fared better and was down 14.3% since the peak in 2007.
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