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Halifax rebuff for forecast of market slump

Halifax has dismissed claims that the housing market is set for a sharp fall in the next few years.

Chief economist Martin Ellis says a strong economy, insufficient supply of housing and low interest rates point to a healthy outlook.

Last week, Morgan Stanley chief UK economist David Miles predicted significant falls in house prices and said the doubling of house prices in the past decade is due to the expectation that rapid price rises would continue.

Halifax points to the fact that the UK economy has grown for 56 consecutive quarters, the longest recorded unbroken period of economic growth as a reason for its optimistic projection.

It also says that despite this month’s increase in bank base rate to 5 per cent, this compares with a 20-year average of 7.3 per cent and an average rate during the 1990s housing market downturn of 9.4 per cent.

Ellis says: “House price growth over the past 10 years has been driven by sound fundamentals. not speculation. The three key drivers are a strong economy, low interest rates and insufficient supply. These sound fundamentals are likely to remain over the foreseeable future, supporting a continuing healthy housing market.

“The rate of price increases seen in the past decade is unlikely to be repeated in coming years because of affordability constraints. House price growth closer to earnings’ growth seems a more likely trend.”

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