A slump in the housing market this year will have a serious impact on the wider economy as the credit crunch continues to bite, the Royal Institution of Chartered Surveyors (RICS) has warned.
A fall in sales of at least 40% is predicted as hopeful buyers struggle to find mortgage deals from increasingly cautious lenders, according to RICS' latest housing forecasts.
And the drastic fall-off in deals could hit consumer spending by more than 8% compared with last year, the organisation suggests.
RICS chief economist Simon Rubinsohn said: "This could have important ramifications for the wider economy - not only hitting the property industry directly but also impacting on a broad range of related sectors, whether high street purveyors of home furnishings and white goods or financial intermediaries involved in providing mortgage advice."
RICS predicts house prices will fall around 5% this year, a more modest decline than some forecasts. It says the market will escape the slump of the early 1990s because of a lower number of distressed sellers compared with 15 years ago, when homeowners were struggling with soaring interest rates.
RICS added: "Homeowners are less vulnerable to repossessions than during the early 1990s housing market crash. There is little evidence in RICS analysis that distressed sales, which characterised the 1990s, are picking up."
The organisation predicts repossessions will rise to 43,000 in 2008, although these peaked at nearly 76,000 during 1991.
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