UK house prices still 25% overvalued, says Fitch - Citywire Money

UK house prices still 25% overvalued, says Fitch - Citywire Money

House prices are still overvalued by around 25%, according to Fitch Ratings.

A new housing price model created by the international ratings agency indicates that house prices in the UK were significantly overvalued during the first half of the 2000s, reaching an overvaluation peak of 33% in 2007.

And though the gap between current prices and levels considered 'sustainable' then began to narrow, Fitch estimates that prices were still 25% overvalued at the end of 2010. Taking into account Fitch’s inflation forecasts until 2013, the ratings agency claims this works out as a gap of around 15%.

'As of mid-2011 the weak economic outlook and restricted credit availability lead Fitch to consider a further decline of UK house prices of 5%-10% annually over the next two years as likely,' the report says.

Fitch also highlighted big regional differences – with London unsurprisingly much further away from sustainable levels of pricing than the North, for example.