Insurance News Archive
House price inflation set to soften
House price inflation is set to soften over the next few years, according to a leading economist and former government advisor.
Professor David Miles, chief UK economist at the investment bank Morgan Stanley, believes house prices may begin to fall in the near future because property is currently overvalued.
Property prices have been rising at a tremendous pace over the last few years. Indeed the latest figures from the Royal Institute of Chartered Surveyors show that house prices rose at their fastest in more than four years last month.
Professor Miles believes these soaring prices can mostly be attributed to speculation that they will continue to rise rather than to economic factors such as supply and demand, and as such once this speculation falls away, so too will prices.
Speaking on BBC Radio 4's 'Today' programme, he said: "This is a market with cycles and swings, and it's quite likely having gone through a period of very sharp increases that we may have a period where house prices fall relative to the price of other goods, and that's something that could happen within the next few years."
However not everyone agrees with Professor Miles' predictions. Richard Donnell, director of research at the property website Hometrack, told the Independent that it is hard to see how a housing market crash will materialise without an economic shock, which is highly unlikely at present.
23 Nov 2006
