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Simon Rubinsohn, a leading economist at the Royal Institution of Chartered Surveyors says there's only a 10% chance of a property crash like the one of the early 1990s. He claims that whilst speculation of a crash is not irresponsible, it is very unlikely to happen in the manner of the earlier price slump that left tens of thousands in negative equity.
However, he said that he had revised an earlier forecast that originally predicted a modest 3% growth: instead he now predicts an overall leveling-off of prices nationwide. Also, in London he predicts a one in five chance of house prices falling by 20% over the next year or so. These revisions are a result of the recent interest rate rises, rather than the Northern Rock problems of the past few days, he says.
The Bank of England has raised interest rates five times since last August, thus making mortgage payments more expensive for homeowners who don't have a fixed rate mortgage deal. And some are speculating one final rise this year (of a quarter of a percent) to 6 per cent. But Simon Rubinsohn predicts that such a rise is not inevitable, and that the Bank of England would be in the position to cut rates if the housing market appears to be on the brink of crashing.
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