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Fitch expects UK house prices to fall by 20%

In a rather startling report, ratings agency Fitch has today issued a suggestion that UK house prices will fall by 20% once the current "false dawn" has worked through the system. While this is definitely the most downbeat report about the UK property sector for some time, there has been a feeling in some quarters that the UK property sector was not performing half as well as some would have you believe.

If the 20% reduction in UK house prices does occur in 2010 this will result in a peak to trough difference of 30% and bring the average property value down to around £130,000. There is now talk of a W-shaped recovery in the UK property market which will see prices bounce in the short term and then take a further lurch downwards. Whether this prediction will materialise remains to be seen but it has made many investors think again!

As we look towards the UK banking sector to release more liquidity into the UK property sector these types of report are unlikely to give them confidence and indeed allow them to increase their exposure to the market. On one hand the government is asking them to be cautious while on the other it will prefer a significant increase in liquidity in the short term.

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