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The UK housing market faces a lost decade, according to research by Collins Stewart. The firm has said that the government's efforts to boost mortgage lending could do more harm than good, plunging first time buyers into negative equity when prices continue to fall.
Analyst Alastair Stewart, who was the public face of the report, warned of "at least two or three years of steady house price erosion".
Apparently the Collins Stewart research has found that the "decades old near-mantra" that there is a structural shortage of housing in the UK is based on "flimsy evidence".
According to politicians and industry leaders only half of the 240,000 homes needed in the UK each year are being built.
Based on their research Collins Stewart claim that the UK has actually been building double the rate of population growth for the last 20 years, and that home construction is in line with that of the other main European countries.
According to the firm 11,000 "hidden" homes are built every year; homes that are picked up in tax records but not in the construction figures.
"We believe that periods of rampant house price inflation have more often been caused by over-supply of capital rather than under-supply of housing – the northern buy-to-let boom of the last decade being a prime example," Mr Stewart added.
The claims have been refuted by house builders. Redrow Chairman Steve Morgan called the research "a load of b**locks".
"What is he smoking? It is a bit like saying it is not going to get dark tonight," said Morgan, adding that Redrow has had over 6,000 enquiries about the new government scheme, NewBuy, which will encourage lenders to offer 95pc loan-to-value mortgages by underwriting potential losses.
In a new rebuttal Stewart said that the NewBuy scheme "may well fall short of the hype" because there is a reluctance among banks to offer 95pc mortgages and they could charge high interest rates.
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