According to the Organisation for Economic Co-operation Department (OECD), property prices are at risk of major price falls across the market.
Due to the steep climbs in property prices in a number of leading economies, the market is precariously balanced and could potentially overheat- causing a nationwide price drop. OECD’s chief economist, Catherine Mann, has already said that their organisation is tracking “vulnerabilities in asset markets”, including Canada and Sweden which have had “very high” property prices and proved to be unsustainable.
The OECD’s latest report warned that in overvalued property markets, initial price correction “could be magnified by fire-sales” if investors had been “betting on continued price gains due to monetary policy support”.
Catherine states: “We’ve already started to see some changes in real estate prices in the UK, particularly in the London market”. She continues, “What’s interesting in terms of the implications for the UK economy is who bears the burden – who bears the adjustment cost. If it’s a non-resident, then lower house prices could actually be good for the UK.”
Last month, The Bank of England also cautioned that the market improvement since the 2008 financial crisis “may have come to an end”.
This warning correlates with the head of Countrywide, Johnny Morris’s, statement. He said that “There isn’t the same level of competition in the market now”, adding “We expect prices to fall next year as this slowdown works through the system. Generally, the first thing to change will be the number of transactions, and then after the gap between what people will pay and how much people will accept opens up quickly and takes a while to close. Sales slow, and then there is a price adjustment.”
Figures from The Telegraph show that in January 2016, 41.5% of homes in London sold above asking price, compared to just 23% in November 2016- a 18.5% drop. Nationally, the statistics show a fall from 29.8% in March 2016, to 23.1% in November 2016.