Nationwide raises fears of housing crash in 2005

Nationwide, the UK's largest building society, will warn this week that there is a 20 to 30 per cent chance of a house price crash happening next year.

Nationwide, the UK's largest building society, will warn this week that there is a 20 to 30 per cent chance of a house price crash happening next year.

The forecast for 2005, published on Tuesday, will add to the growing fears of a "hard landing" for the housing market.

The society's chief economist, Alex Bannister, said he still believed that "slight increases" in prices were the most likely scenario next year, giving this a probability of 60 per cent.

But the chance of prices falling by, on average, between 10 and 20 per cent in 2005 was now almost one in three, he said. The chance of prices growing more strongly, in line with recent rises, was one in 10.

"The market is highly valued at the moment," he said. "Our view is that people won't panic. But anyone telling you that [a crash] is not going to happen is talking rubbish."

Nationwide will also publish house price figures for November on Tuesday, which are expected to show a drop of around 0.5 per cent.

Kate Barker, the Bank of England Monetary Policy Committee member who wrote an influential report for the Treasury on housing supply, said there needed to be a "culture change" in the way town planners operated to speed application approvals so that more homes could be built.

"The Treasury is used to thinking in a market-driven way. Many planners are not used to looking out for market signals and considering the costs and benefits to the wider economy."