Shock as flat prices forecast to plunge by 50 per cent

UK flat prices are expected to fall by as much as 50% from than their current values, according to Ed Stansfield, specialist property economist at Capital Economics. The new build sector will is likely to be hit particularly hard despite the increased use of sales incentives to tempt buyers back into the market. ‘There are obviously a lot of gradations in this forecast, but the flat market in general will see greater risk than the wider property market,’ said Stansfield. Prices for new build flats already appear to be falling based on anecdotal evidence from auction sites and bulk buyers can achieve discounts of up to 45% on new build properties. Lenders are already being more cautious (continues page 7) (from page 1) on lending criteria towards new build flats. Cheltenham and Gloucester, for example, now require a maximum of 80% loan-to-value for residential mortgages and 65% for buy-to-let investments.

‘Until recently, I was more optimistic for the prospects for a better rental market as first time buyers sit it out out but I am now more nervous about this and we will be doing well now to see rents stay in line with income growth’, Stansfield explained.