Construction dip 'will help property market recovery' Published: 05/08/2008

The short-term dip in the construction of new properties will actually help to bring about a long-term recovery for the housing market as a whole, according to a new report.

Experts at the Centre for Economics and Business Research said the dip in construction will help the property market recover from 2010.

Despite government new-build targets set at around 185,000 new properties a year, figures show that there are currently around 100,000 new properties being built.

The Centre for Economics and Business Research predicts that completions could fall by a fifth this year, which will help the housing market as there will be more people looking for property to buy from a more limited supply.

Recent figures from Nationwide show that property values are falling at their fastest level since 1991.

With added pressure on supply, the construction slowdown could therefore spark a recovery of the housing market.

Commenting, Richard Snook, an economist at the Centre for Economics and Business Research, said: "The credit crunch has caused a shock in the housing market much bigger than most people expected, and we are now seeing the second round effects of falling confidence and a slowing economy.

"When prices have fallen in the past we have seen house building slow quite rapidly but take a lot longer to come back, which leads to demand outstripping supply.

"With the fundamentals of the housing market still relatively tight, the credit crunch might already have sown the seeds of the next house price boom."

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