UK house prices are predicted to drop by a massive 35% this year, according to the latest forecasts from a leading mortgage body.
The Council of Mortgage Lenders [CML] say that property market in England and Wales has already recorded a 7% fall this year.
In its latest forecast, suggests that this year, the property transactions will fall to 770,000 in both England and Wales down from 1.18 million in 2007.
Last week, CML hailed plans by the British government to purchase newly built properties from housing developers whose sales are plummeting.
The move was aimed at rescuing the failing property market with a £200 million scheme that could provide 1,000 homes to be rented out by social landlords or offered to first-time buyers.
It brought renewed hope to first-time buyers who can purchase the properties through the existing Homebuy scheme.
In 2007, A&L took 4.4% of net new mortgage lending although forecast suggests that the figure will be less this year.
But earlier in October, CML had had predicted a 1% rise in house prices and a 14% drop in transactions.
CML says gross mortgage lending will total around 285 billion pounds ($560 billion) this year, down 21% on 2007.
It said its expectations for mortgage arrears and repossessions remained unchanged because many borrowers coming off fixed rates on to higher rates appeared so far to have managed the "adjustment well".
CML director general Michael Coogan said the forecasts also assumed that actions taken by the Bank of England to improve liquidity would begin to have an effect in the mortgage market in the later part of the year.
He added, “Over the next few months, lending volumes will get worse before they get better.
“The market is still very uncertain, but lenders are working hard to ensure that borrowers coming off fixed rates remain on track, that arrears and repossessions are minimised, and that pricing is as attractive as they can make it in a market where they must manage the demand for lending with caution.”
The slump could see tens of thousands of builders could lose their jobs.
Already, Taylor Wimpey, the country's biggest builder, revealed it is to lay off 600 staff while Redrow is to let 200 workers go and Crest Nicholson said it has parted company with 80 staff. Barratt Developments has also warned it will be laying off housebuilders.
Home Builders Federation says that the crunch in property market could lead to massive job losses in the UK’s industry’s 300,000 workers.
Home Builders Federation chairman Stewart Baseley said: “There isn't a builder in the land who isn't considering overheads and job losses. I've never seen a downturn escalate as quickly as this.”
Wolseley, the British-based builders' merchant, said trade is worsening in the UK, and that will lead to as-yet-unspecified job cuts.
The company however, stated that currently, there would be no job cuts in the UK and Europe.
Wolseley, also world’s largest merchant employs 13,500 people and trades in the UK under brands including Plumb Center, Build Center and bathstore.com.
In a in a trading statement it said, “There has been a more pronounced slowdown in the UK over recent weeks. Wolseley UK experienced a more challenging April as the market slowed significantly.”
Finance director Steve Webster said: “We had warned earlier in the year that we expected a softening of the market, but there really has been a marked change in the UK in the last six weeks.
“I do not think we have reached the bottom yet, and it could yet get worse. We do not know when that will change. It is plainly a result of the overhang of the global liquidity crisis and the lack of mortgage capacity in the UK market.
“There is basic demand but the consumer's finances are not in place. The only thing I would say is that we are a long way off the devastation in the US.
Wednesday, the company reported a 6% slump in profits over the past three months and disclosed that it has already begun £50 million costs and headcount reduction in the US. It said there would be more to come, especially in its UK and European businesses, over the summer months.
