Soothsayer predicts property bust

HOUSE prices are set to crash, according to Tony Dye, the fund manager dubbed 'Dr Doom' after he predicted a collapse in global stock markets in the Nineties.

Dye is reportedly expecting a 30% drop in London house prices in real terms over the next five years. He says a similar drop in prices across the nation 'would not surprise'.

Dye was criticised in the late Nineties when he shunned technology stocks and predicted a biting bear market. The performance of his pension funds at Phillips & Drew lagged rival funds that were tracking the meteoric rise as dotcom stocks.

Dye quit in February 2000. A month later the long deflation of the dotcom bubble began vindicating his stance.

'I have thought this for some time but I think we really are probably somewhere near the end of it [the boom],' Dye said in an interview with the Financial Times.

He said runaway prices were a result of low interest rates, greed and the 'herd instinct', with people snapping up property for fear of missing out.

Dye has hinted previously about his property market concerns. In November 2002, he wrote a letter to the FT accusing Mervyn King, the soon-to-be appointed next Governor of the Bank of England, of being unwilling to speak out on the cost of housing in the UK and of only recognising 'a bubble after it has burst'.

Lender Halifax says prices have doubled to £150,000 in less than five years, prompting most property market experts to predict at a slowing in house price inflation.

But Halifax's most recent figures revealed inflation was gathering pace, with a rise of 18.5% for the year to March, up from 16% in January.

Thousands of people have rushed to cash in on the boom. The Council of Mortgage Lenders says the number of people with buy-to-let mortgages rose last year by 48% from 275,000 to 408,300.

For more property news and analysis, go to Mortgages & Homes.

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