Doomsters Capital Economics made big headlines at the weekend with their forecast that house prices will crash more than 20% over the next two years as a result of Government spending cuts, tax rises and a surge in unemployment.
Capital Economics expects house prices to fall 5% this year and 10% in each of 2011 and 2012.
In total, the group predicts a collapse in house prices of 23% from the start of 2010, making it a steeper drop than the 19.3% crash during the recession.
Analysts have justified their outlook by monitoring the house price-to-earnings ratio which is still far above its 4% long-run average at 5.5%, and stressing that mortgage rates will only get more expensive.
So, the outlook looks doomly
However, they cautioned that the 2012 forecast “is highly uncertain”.
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