1/07/2010 The Independent: How long can the ho. 118500 Thenumbers DCm THES INDEPENDENT June 30,2010 How long can the housing market avoid a crash? By Sean O'Grady. Economics Editor A potentially lethal combination of stagnant living standards and dectining mortgage approvals is threatening to send the housing market into a precipitous slump. In separate warnings yesterday, it emerged that British consumers face a four-year wait for an improvement in their living standards, while a "double dip" recession in the housing market is now "more likely than not", according to City economists. Bank of England data released yesterday suggests that the revival in property sales seen during the second haif of last year has gone firmly into reverse, with every indication that prices will fall by next year, as lending remains so sluggish. ‘The Bank reported that mortgage approvals by banks and building societies are running at about 50,000 a month - half pre-crisis levels, and stil lower than they were during the early 1990s housing downturn. The ews comes as Hay Group, a leading business consultancy, predicted stagnant living standards for the next four years - meaning families will find it harder to service existing home loans, especially if interest rates start to rise next year. ‘Steve Paola, a spokesman for Hay Group, said: "After a decade of real pay boom, recession and continuing uncertainty are having a negative impact on real pay for the UK workforce. it may be a number of years before we see living standards rising at pre-crisis levels." ‘The run-up to the toughest Budget since the Second World War, the Greek and eurozone crises and general nervousness in financial markets also seem to be undermining consumer confidence, essential to ‘@ more buoyant housing scene and the wider recovery. The FTSE-100 index of leading shares fell to a nine-month low yesterday, while the European Union’s barometer of consumer sentiment in the UK fell for the fourth month in a row, to a 10-month lowin May. In the longer term, taxrrises and minimal pay awards also seem certain to restrain the ability of consumers to service large mortgage debts, even when they can persuade banks and building societies to advance a home loan. Continuing fragilty in the financial system means a continuing shortage of mortgages, especially for first-time buyers: Lenders routinely require deposits of £33,000 now, against £13,000 in the boom. Some 85 per cent of first-time buyers rely on parental help. (On Monday, the Land Registry revealed that house prices in England and Wales fell by 0.2 per cent between April and May; the general trends in other house price indices have also been slowing, suggesting that some further correction in house prices wil be needed to restore the historical relationship between mortgage lending and house prices, given that there seems lttle chance of a radical improvement in the supply of mortgages from cash-strapped banks and building societies. Recent Royal Institute of Chartered Surveyors surveys have pointed to an increase in sale instructions in the past few months; the stamp duty holiday on properties costing less than £250,000 announced in Alistair Darling's last Budget in March appears to have had little impact. licenseicopyright.nety...viewFreeUse.a.. 1B