House prices could fall 20 per cent

A decrease in the rate of growth in house prices has prompted speculation that market could be in line for a major correction.

10:58 12 October 2004

A decrease in the rate of growth in house prices prompted speculation on Tuesday that the vibrant housing market could be in line for a major correction in coming years.

Interviewed in the Guardian newspaper, economist Ed Stansfield predicted that the slowdown in growth would herald a full-scale decline in prices, by up to 20 per cent by 2007.

The House Price Index issued by the Office of the Deputy Prime Minister showed a drop in house price inflation in August to 1.2 per cent.

The average cost of a house in the UK climbed to 179,486, up from 177,474 in July, but representing a smaller increase than the previous year, when prices jumped by 1.8 per cent.

The rate saw the increase in house price inflation for the year fall to 13.6 per cent.

The slow growth was carried across all property types and regions, though prices in Wales will have continued to climb at a giddy 27.6 per cent over the course of the year.

The reportedly overheating housing market has been subject to speculation of an imminent crash many times over recent years.

While some analysts are already predicting that September will have seen a revival of prices.