Major building company warns of falling house prices

Filed Under Finance

Barratt Developments, one of the largest house builders in the UK, is warning that house prices may fall in the short term as a result of the recent interest rate rises and a squeeze on credit resulting from the recent problems with Northern Rock.

This is a quote from the Barratt Chief Executive:

“The recent credit squeeze has further affected customer sentiment and pressure on lending institutions has led to a tightening of lending criteria and mortgage availability.

“It is not yet clear how quickly the market will recover but we have to assume that there will be downward pressure on [house] volumes and price inflation in the short-term.”

I guess that this is to be expected after the recent turmoil in the financial markets, however it is interesting to note that Barratt are not mentioning home information packs (HIPs) as a factor that might depress market demand.

It is too early to see how the credit crunch is affecting consumers, however the Bank of England seems to think that it is corporate, rather than consumer lending, that will be squeezed the most.

So if one of the largest house builders is preparing for falling house prices in the near future - though they remain confident that housing demand will outstrip supply - then we, too, should prepare for a fall in the value of our homes.