House prices are set to fall further, according to economists, and the plunge may continue despite lower interest rates and the extended first home owner grant boost.
A study of house prices since the beginning of the last century by RBS found that house prices tend to move regardless of supply and demand, and that factors such as confidence and expected capital gains create the momentum instead.
"With this downward momentum now in place, as well as the prospect of further large rises in unemployment, house prices could potentially fall further over coming months," the report says.
National house prices are 7 per cent below their peak and have been less responsive than commonly thought to the level of joblessness, housing supply, and interest rates, RBS economists Kieran Davies and Felicity Emmett say.
Drawing on official figures since the 1980s and real estate and academic estimates from before then, the report finds price falls of the current level are "extremely unusual".
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