Activity in the housing market is slowing sharply as the credit crunch continues to hamper demand. This has led to house prices falling; so far there have been eight consecutive months of declining house prices with a total fall of 7.3%.

The combination of falling house prices and a weakening economy has led to confidence falling to an 18 year low.
Repossessions are yet to increase significantly. Communication between lenders and borrowers is essential to prevent repossessions spiralling as redundancies begin to increase.

The similarities between now and the early 1990s mean house price growth is likely to follow a similar trajectory. But, there remain fundamental economic differences, which should prevent the downturn reaching the depths seen in the 90s crash.

We would expect house prices to fall by around 10% this year with further, but less significant, falls in 2009. We then expect a period of flat growth with the market picking up post 2010.

There are a number of options available to the government to stabilise the situation.  For example, the re-introduction of income support for mortgage payments for home owners could weaken the link between repossessions and redundancies.

House builders are being squeezed at both ends of the development process; we expect housing starts to fall to lows not seen since 1980.

Read the full market report below including early 1990s comparison:

CBRE UK Residential Property Market - Q2 2008 PDF

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