Thursday, December 27, 2007
Mortgage approvals are considered an early indicator of what is likely to happen to property prices in the months ahead, so the 44% slump in approvals in November is worrying. But the signs point to a gentle correction rather than major crash. House prices are notoriously sticky on the way down because vendors are reluctant to accept less than they perceive their homes to be worth. As long as the economy holds up and unemployment doesn’t rise significantly there is unlikely to be enough forced sellers to trigger a full-scale slump. The number of home repossessions is set to rise 50% next year, but this is still low historically. In most areas there is also a shortage of housing supply.