Fears of a house price tumble have risen for the third consecutive period despite the perceived likelihood of an economic shock reaching record lows, the Bank of England’s bi-annual risk survey shows.
The six-monthly survey of banks, insurers, asset managers and other market participants began in 2008. It acts as a barometer of perceived systemic risks following the financial crisis.
Nearly two-thirds (64 per cent) of respondents said they see the risk of a high-impact event as low or very low in the next year, up from 55 per cent at the end of 2013. Over the next three years, 28 per cent see a low chance of a shock event, up from 16 per cent in the previous survey.
Asked to rank the events that would have the most significant impact, the risk of property prices falling was cited by 40 per cent of respondents.
It is the third consecutive time those fears have increased among respondents to the survey. At the end of 2013, 36 per cent noted house price falls as a major risk, while a year ago just a quarter of respondents told the BoE they saw house price falls as a significant risk.
Respondents were asked to list the five risks they thought would have the greatest impact on the UK financial system if they were to materialise.
Risk of economic downturn was viewed as the biggest threat (61 per cent), while geopolitical risk was highlighted by 57 per cent and sovereign risk was listed by 40 per cent. Interest rates, regulation and taxes and operational risk were also citedas posing a serious threat.
The survey took responses from 66 firms.