House Prices To Fall By 10% Says Fund Manager

One of Britain’s most powerful fund managers says that house prices could fall by up 10% in 2008.

Investment House Invesco Perpetual’s Neil Woodford, says that property prices are simply too high and the average price of a home will fall by £18,500 by the end of the year – that’s £50 a day.

Indeed, in an even more gloomy outlook, Mr Woodford said that in some parts of the country it will be much worse that that. The biggest losers, he says, will be the owners of new-build flats in city centres bought by buy-to-let investors. He says that might prove to be ‘almost unsellable’.

The predictions from the 47-year-old investment guru are more pessimistic than even the sourest outlook. Capital Economics have forecast a 5% fall in 2008. Invesco issued its warning to professional clients and is ‘not for consumer use’.

As a fund manager Mr Woodford controls nearly £20bn of money for investors, and he said that he expected homeowners were in for a torrid year. He said: “Although my forecast is for house prices across the UK to fall eight to 10% in 2008, the decline may be much worse in certain areas.”

Meanwhile it seems that investors are pulling their money out of the stock market in larger numbers than ever. The most recent figures indicate that money is being withdrawn from investment funds in record numbers.

According to figures from the Investment Management Association, net retail sales - the difference between money invested and money withdrawn – were down by £377m in December. The figures show a dramatic turnaround from December 2006, when there was a net inflow of £1.7bn. It seems that investors were in a state of panic with uncertainty about the future.

Indeed, if that was December, the figures are likely to be much worse for January as stock markets have entered an increased state of turmoil in the last couple of weeks.