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Housing starts will fall under 80,000 next year, say RICS

New housing starts are expected to plunge below 80,000 next year, according to figures released by the Royal Institution of Chartered Surveyors today.

The drop, driven by the economic crisis and credit crunch, has been described as a “major concern” by the body.

RICS said the total new housing starts for 2008 were also unlikely to be much above 110,000 – a figure far lower than recorded during the recession of the 1990s.

Chief economist Simon Rubinsohn said: “A major concern is the massive reduction in the number of new homes now being built. It is likely that there will be even fewer new starts in 2009 leading to a very real risk that a serious housing shortage will fuel another bout of volatility once the current crisis eases.”

House prices are likely to fall by about 10 per cent next year, he added.

RICS said the drop would result in a peak to trough price decline of at least 25 percent.

It attributed the future plunge to the on-going caution of lenders and the worsening economic climate.

Mr Rubinsohn said: “Lenders are likely to remain cautious in the near term in the absence of any ‘guarantees’ on mortgage backed securities. This, coupled with an increasingly gloomy economic picture, suggests that house prices will continue to decline in 2009.”

However, recent housing market surveys indicate transaction activity may have reached the bottom and there may in fact be a rise in sales of more than 10 percent during 2009.

New buyer enquiries are currently at their best level since October 2006.