City warns of price meltdown

City pundits warned last week that the housing market is heading for meltdown with forecasts of a drop in house prices ranging between 15% and 30%.

The first to pitch in was fund manager Tony Dye, chief executive of Dye Asset Management. Nicknamed &#39Dr Doom&#39 for his accurate prediction of the end of the dotcom bubble, Dye says he expects a fall of 30% and dismisses claims that the market will experience a soft landing.

Dye says: “Homes are expensive relative to people&#39s incomes. People at the bottom of the ladder are almost precluded from buying.”

Goldman Sachs also forecasts a downturn of between 10% and 15%, saying the over- valued market is vulnerable to a fall.

The net result has been a drop in the share values of many housebuilding firms.

But the comments have met with widespread scepticism from professionals with many believing they are publicity-seeking.

Tom Bland, associate at Savills, says: “If anyone is drawing a parallel between the market now and that before the crash in 1989, they are way out of sync.”

And Brian Thorn, economic consultant at The Wriglesworth Consultancy, says:

“There is such a strong desire among the public to buy homes that the long-term trend will remain upward.”