Housing chiefs say slump to continue

May 31 2008 by Adrian Pearson, The Journal

THE North’s top housing experts have told homeowners that the credit crunch will continue to knock down house prices for at least two years.

As property prices suffer their largest drop in more than 15 years, families hoping to sell their home this year have been told the situation could get worse before it gets better.

The region’s top economists and planners have warned that house prices could take until 2010 to improve, but added that the long-term plans for the region are not yet under threat from the credit crunch.

Malcolm Bowes, the North East Assembly’s deputy chief executive, has told The Journal that his staff are watching the economy to see if they will have to adjust their predictions for the region’s growth.

The assembly expects 128,900 new homes to be built by 2021 and has planned for the future of the region’s economy based on these figures.

If these housing figures change, the region’s growth targets could have to be revisited. Many planning officers already refer to the housing targets when considering large developments.

Mr Bowes’s cautious view of the housing situation comes after Paul Mooney, chief economist at One NorthEast, warned that some credit experts were not expecting the housing market to improve in the North East until at least 2010.

And even the Government’s housing supremo Bob Kerslake has admitted that plans to build three million new homes by 2020 could be affected by the slowdown in the economy. He agreed that the next two years would be challenging.

For Mr Bowes the credit crunch has left the assembly with a difficult wait-and- see problem.

He said: “Our overall strategy is robust enough to deal with what is going on, but we are certainly not complacent.

“It clearly will mean that the level of housebuilding expected even six months ago now looks optimistic and we will need to very carefully monitor this for at least the next few years. If these conditions continue longer than that, we will then revise the strategy.”

The assembly is to send a delegation to see Housing Minister Caroline Flint next week to discuss the levels of affordable housing in the North East.

The drop in prices should make it easier for people to enter the housing market, but the increased difficulties in securing a mortgage are instead making life harder for many first-time buyers.

Mr Bowes said: “Clearly what the credit crunch is doing is changing people’s ability to buy and to some extent it might affect the number of households in the long term.

“We have made various assumptions about how the economy will grow and a significant change in this will have some impact to the extent that a slower-growing economy attracts fewer migrant workers and you need fewer houses.

“The impact of this in the short term will obviously be that there are fewer homes to be built than we thought.

“And as that could have some impact on the long-term targets, there is a chance we might have to look at things.

“Sadly it is too early for us to say and we can not start changing targets just because of the credit crunch.”