Up to 1,800 estate agents may go bust by the end of the year unless lenders ease up their squeeze on new mortgages, as fears grow that the UK is heading for a full-scale housing crash, with price falls of up to a fifth.
The warning comes from Nick Salmon, a board member of the National Federation of Property Professionals, who said last week that banks had "over-reacted" to the credit crunch and were in effect strangling the life out of the property market.
Mr Salmon said: "Lenders do not seem to be in the business of lending any more. They are the ones who lent irresponsibly and now the public and our industry are paying the price."
But senior bankers are not likely to rush back into the home loans market, with many forecasting that it will be several years before mortgages are readily available again. Even Mervyn King, Governor of the Bank of England, is understood to believe that it will be up to a decade before the mortgage lending and housing market fully recovers.
Sterling's weakness and fears of rising inflation were the main reasons the Bank held rates at 5 per cent last week. This week it publishes its quarterly growth and inflation forecast, which is likely to show that inflation may go above 3 per cent.
More evidence of a marked slowdown in economic activity is provided today, with the release of the latest quarterly survey from the British Chambers of Commerce.
The BCC economist David Kern warned that this year and next would be tougher than previously thought and predicted that the Government could break its own fiscal rules within two to three years.
Mr Kern said: "The Government must adopt pro-active policy measures aimed at countering the threats to growth. Public finances remain stretched. There are large current deficits and excessive levels of total borrowing."
He added that priority must be given to reducing the risk of a major economic downturn, and urged the authorities to make sure loans remained available to UK businesses, particularly small firms, which are vulnerable when banks are under pressure.
"Recent tax changes have undermined business confidence and they will face a difficult and risky climate over the next year," said Mr Kern. He added that demands to increase the minimum wage, to make up for the scrapping of the 10 per cent income tax band, could be dangerous with such a sharp downturn in growth.
The BCC survey reports that average UK GDP growth is forecast to collapse from 3 per cent last year to 1.7 per cent this year, and then 1.6 per cent next year. The combination of falling house prices and higher fuel and food costs is leading to a squeeze on personal spending; this year is likely to see household consumption growth fall to 1.1 per cent.
The BCC's warning comes after new figures revealing a sharp deterioration in housebuilding since the beginning of the year and a 17 per cent rise in home repossessions.
Figures from the National House-Building Council, disclosed yesterday, showed that the number of applications from builders to start new homes in the UK fell by almost a third year on year, with Northern Ireland worst affected. According to the Ministry of Justice, the number of repossessions rose to 27,530, up from 23,438 last year.Reuse content