CEBR sees bad year ahead for housing market

The Centre for Economics and Business Research predicts a bad year for the UK housing market in 2003 as the consumer boom fades away.

The gloomy forecast is among 10 predictions the CEBR makes for the economy next year &#45 although it admits that some punts are longer shots than others.

It is not all bad news for the housing market. The CEBR says low interest rates will provide a safety net and expects housing shortages to stimulate demand.

But a housing market slump will be unlucky for retailers selling high ticket items bought with mortgage equity withdrawal such as cars, furniture, home improvements and electrical goods.

On the global stage, the CEBR expects the crises in Iraq, North Korea and Venezuela to be diffused to result in less economic damage than currently seems likely.

The CEBR says the economic year will be one of &#39two halves&#39, with the second half starting as early as April or May, when the Iraq crisis has been resolved. Before then, it is likely that the mood will be pessimistic and stock markets could well slide.

On the home front, the centre expects the results of Gordon Brown&#39s assessment of his five economic tests, released by June 2003, to show that the UK is still not ready for the euro.

Further afield, the CEBR expects a tight contest as Sweden votes on the Euro. The &#39yes&#39 vote is currently leading in the opinion polls, but the centre says a flutter on the &#39no&#39 side could be worthwhile.

The centre sees Europe in the doldrums, with questions about the euro&#39s survival &#45 the CEBR thinks it will &#45 and euro interest rates below 2% by the year end.

Internationally, the centre sees the US economy recovering on the back of a tax package announced in late January.

It expects China to take over from Japan as the key trading economy in Asia . In 2002 it estimates that Chinese exports had risen to 79.8% of Japanese exports from just 21.6% in 1990.

In the UK capital, congestion charging is set to be a major irritation. The CEBR calls the system &#45 set to start in February – “user unfriendly” and estimates it will only cut congestion in central London by 4%.

Finally, the CEBR has good news for UK employers but bad tidings for sports fans &#45 it says the British cricket team is “not likely to contest” the final stages of the cricket World Cup, thereby saving employers many hours in lost productivity.

The CEBR says: “The rugby World Cup is more interesting – England are currently top of the international rankings and even in Australia have a chance of doing well. England will only play mid-week if they reach the third place play-off, which is on a Thursday, while of the other home nations, only Scotland has a group match during the working week.

“So we don&#39t think that productivity will be affected in the same way as it was during the soccer World Cup. But if England, or one of the other home nations, does well, we could see a boost to takings in pubs, bars and clubs.”