Is Britain Facing 1930s Style Depression in House Prices

A former Treasury adviser, Roger Bootle warned yesterday that Britain is possibly staring into a 1930s style economic slump which is likely to send many companies and their employees into financial hardship over the coming months.

Talking to Boomberg Television, Bootle who was on the panel of economic forecasters for Tory Chancellor of the Exchequer Kenneth Clarke, also known as one of Chancellor's "Wise Men", said, “It’s looking more and more like the 1930s all over again."  When asked if the U.K. will sink into a depression, he said, “it’s in danger of being that, yes.”

Bootle also predicted that Britain's gross domestic product (GDP) will drop 1 percent in 2010 after shrinking 4 percent this year. This is double International Monetary Fund's forecast of 0.4 percent.

And this forecast is in sharp contrast with Chancellor of the Exchequer Alistair Darling's prediction last week that the economy will rebound in 2010 with growth of 1.25 percent.

Housing Slump:
Bootle predicted that the house prices, which have already fallen by almost 15 percent in 2008 will fall a further 19.8 percent this year and a further 2.3 percent in 2010. This means that the buyers are unlikely to return to the housing market for a very long time. And those sellers wanting to sell rather than having to wait for ever, many will be turning to companies able to buy properties fast. 

It should be noted that Roger Bootle is currently an economic adviser at Deloitte & Touche LLP is also famous for a book he wrote called “The Death of Inflation” in the 1990s.