October price drop of 0.1% followed stagnation in September. Last month, average real estate prices fell in almost all regions except the central counties of Great Britain, where they stagnated. But some experts consider this just a correction after the frenzy of recent years. According to optimistic forecasts, price growth will slow down and continue to decelerate. As the online magazine Point.Ru reports, demand for new buildings in central London has fallen sharply, and realtors expect price declines in the southwest, East Anglia, and the Cotswolds, Norfolk, Suffolk, and Kent. People who purchased steadily growing real estate to ensure a quiet retirement are now worried. Warnings that Foggy Albion will not escape the fate of the USA are becoming more persistent.
The inflow of funds into the primary market of London is forecast to fall by 60% over the year, to £2 billion. The sector of expensive real estate will suffer the most from the current situation.
True, economists are confident that the price decline will last until early 2008, and then the market will recover and start growing again: by 2010, annual growth should be about 7%.
The US real estate market continues to be volatile, but economists note that there is no talk of a serious downturn yet. According to the National Association of Realtors, sales of single-family homes on the secondary market fell by 8% in September. At the end of September, 523,000 homes in the US had not found a buyer. At the current sluggish pace of trade, all of them will be sold only in 8.3 months.
Demand for housing and, accordingly, prices are not falling everywhere. As BBC reports, houses and apartments in elite categories and apartments in new buildings are being bought up with the same enthusiasm as before. The average cost of a home in America is currently $238,000. Apartments in Manhattan are now selling for an average of $1.369 million, slightly higher than last quarter. A one-bedroom apartment, called a 'studio' here, costs an average of $443,000, and apartments with four or more bedrooms cost $8.5 million.
The US Department of Commerce reported that sales of new homes in September jumped by almost 5%. However, as the Washington Post notes, this has not reduced pessimism about the outlook for the real estate market next year. A recent report by CNN stated: "Almost half of Americans believe that the US has entered an economic recession." Seeing such headlines, most economists shrug their shoulders. According to the definition of the National Bureau of Economic Research, a recession occurs when economic activity has slowed substantially and broadly for several months. The slowdown should manifest itself in a reduction of gross product, real incomes, employment, industrial production, and retail and wholesale trade volumes. None of these indicators have contracted yet. GDP, for example, has been growing for 23 consecutive quarters. Employment has been increasing for 49 consecutive months.
No one disputes that, as always happens, the current upturn will be followed by a downturn. Instability in the real estate market may accelerate its arrival. But it is too early to talk about it.
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