A financial industry expert, who also worked as an advisor to the government, has predicted that house prices in the UK could plummet by 20% over the next couple of years, providing a gloomy outlook for homeowners. The average property price could plummet from £200,000 to just £160,000 if the predictions of Professor David Miles are correct, and homeowner that have recently purchased properties and paid the current high prices could soon find that their properties are worth far less than they paid for them.

David Miles stated that whilst the news was not good for homeowners it was not bad news for everyone, as first time buyers may be able to benefit from the falling house prices, providing them with increased affordability.

He said: ‘I am at the pessimistic end of the spectrum, but I don’t think it should be seen as the pessimistic end because there are as many gainers as losers.’

He also added that those on lower incomes could benefit from the house prices falls, as this group, as well as first time buyers have struggled to get onto the property ladder in the past few years. However, mortgage lenders have been making their criteria for first time buyers and those with poor credit much tighter to minimise risk to themselves, and this means that those wishing to get onto the property ladder may have to find a much larger deposit in order to qualify for the more affordable rates.

The prediction from Miles, who is Chief Economist at Morgan Stanley, is one of a line of recent predictions relating to house prices falls in the UK, which are expected to fall by a significant level over the course of this year and into next year.

Recent additions:

• Crippling mortgage rates for first time buyers with no deposit
• Impressive figures on buy to let mortgages
• Trial shows HIPs not as successful as hoped
• Many first time buyers facing soaring mortgage rates

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