The House Price Crash Thread

[trekka]

House prices will stop falling next year and will soar 30 per cent over the following three years, a leading economics consultancy said yesterday.

The rare optimism will delight homeowners who have been worried by gloomy predictions in recent months.

The Centre for Economics and Business Research predicts the housing meltdown will stop in the middle of next year and believes that by the end of 2012 average house prices will be up by more than £50,000 to a record £226,000.

Homeowners who have bought in recent years and feared their home would never be worth the price they paid for it will be particularly relieved.

There have been predictions that within a year around 1.7million homeowners will be in negative equity, where the size of their loan exceeds the value of their home.

The CEBR says the lack of new homes in England is one of the key factors that will fuel the house price recovery.

Housebuilding has almost come to a halt. Construction firms say there is no point putting up new homes during a mortgage drought and when confidence is so low. Yet the demand for new housing continues from groups such as divorcees and immigrants.

Other factors, such as mortgage lending picking up and the Bank of England cutting interest rates from 5 per cent to 4.25 per cent next year, could also cause prices to pick up.

The CEBR's positive prediction about house prices is the second in recent days. Last week, the National Housing Federation-said it expects prices will keep on falling in 2009 but start to recover in 2010 and 'rapidly increase' in 2011.

Its research paper, compiled by Oxford Economics, also said the lack of new homes being built will push up prices.

However forecasts of another housing boom are a blow for first-time buyers who are hoping that prices will drop to a level where they can finally afford to step on to the property ladder.

* One in five homeowners who have a Northern Rock mortgage will be in negative equity within a year, figures from the bank revealed yesterday.

It raises the politically explosive prospect of a Goverment-owned bank evicting thousands of families from their homes.

Latest figures show 22 per cent of the bank's total residential mortgage lending was handed out to those who put down a deposit of 15 per cent or less.

Many will already be in negative equity - when the size of their loan is bigger than the value of their home --because they took out loans for 100 per cent or more of the property's value.

Northern Rock pioneered this controversial type of lending, handing out mortgages worth up to 125 per cent before its collapse. Still more homeowners will be hit if house prices continue to fall, as is widely predicted.

More than one in ten home-buyers are in negative equity or close to it, the HSBC said yesterday.

The revelation came as the bank unveiled half-year profit figures down 28 per cent on last year, from £7.1billion to £5.2billion.

Stop worrying, house prices may rise 30 per cent, says forecast :bonk:

EDIT: Yes, It's similar to Gringo's link but hey ho it's Sooty and Co. Everybody say hello.

[Awol]

Don't worry folks, Gordo is going to give us a stamp duty holiday to kick start the housing market. How? He's going to borrow even more money!!

Something about being another day older and deeper in debt... Useless fecking tool of a man.

[snowychap]

A stamp duty holiday? Not that mistake again

Suspending stamp duty won't stimulate the housing market, as the events of 1991 tell us

Much as I hate to oppose a tax cut, in the case of stamp duty on house sales it is necessary to make an exception. Yesterday, various rumours were doing the rounds: one version has it that the Government will allow homebuyers to defer the payment of stamp duty, another that the tax will be suspended altogether in an attempt to stimulate the housing market.

Invited to comment on the Today programme, the Chancellor, Alistair Darling, certainly didn't deny the Government was considering these options - from which it is safe to deduce that this is yet one more case of the Government floating a proposal through a controlled leak, then analysing the reaction before committing itself to action. It isn't hard to see why the Government is desperate to revive the housing market. Gordon Brown is acutely sensitive to the role played by house prices in the mood of voters.

When house price inflation was at its peak in 2003, he changed the Government's preferred measure of inflation from the retail prices index, which includes an element of house prices, to the consumer prices index, which excludes all housing costs. The effect was to move the goalposts for the Bank of England, keeping interest rates lower than they otherwise would have been and allowing the boom to continue. Whenever the housing boom appeared to be flagging thereafter, he pumped money into shared equity schemes, adding to inflationary pressures in the housing market.

Now that the boom is over, the Government has been fishing around for ways of trying to arrest the collapse. In April, Mr Darling attempted to persuade the banks to increase mortgage lending by swapping £50 billion of mortgages for government bonds - effectively transferring risk to the taxpayer. In the event, the mortgage-for-bonds swap proved a miserable failure. The banks said thank you very much - and then carried on tightening their lending criteria and raising their fixed rates.

If the Government thinks it can buck the housing market by granting homebuyers a temporary reprieve on stamp duty, it is doomed to a second miserable failure. How can I judge this? Because it is what happened when Norman Lamont, the Conservative Chancellor, introduced a stamp duty holiday in the depths of the last housing crash in December 1991. Housing transactions slumped from 1.306 million in 1991 to 1.136 million in 1992, which remains the lowest figure recorded in the past 30 years. Prices, according to the Nationwide, carried on falling, by 2.6 per cent during the eight months in which stamp duty was suspended.

In August 1992 Anthony Nelson, then Economic Secretary to the Treasury, announced the end of the holiday, saying it had cost the public purse £400 million at a time of rising debt. “In the longer term,” he said, “it is the reduction of interest rates that will bring about the firmest and surest revival of the property market.” In this, he was quite right: the beginning of the end of the last housing slump began a month later, on Black Wednesday, when the Government stopped trying to peg the pound to the mark and interest rates fell as a result.

A stamp duty holiday this time around will cost far more than £400 million. In 2006-07, stamp duty on sales of residential property raised £6.5 billion. Even without a stamp duty holiday this will fall by more than half in the current fiscal year because the number of house sales has plummeted. At the same time, the Government's borrowing requirement is soaring as recession eats away at tax revenues. In the Budget, the Chancellor predicted a public sector net borrowing requirement of £43 billion for the year 2008-09. Yet in June alone he had to borrow £9.25 billion. Now, with the economy flagging, would be a great time to reduce taxes - if the Government had the money. But it doesn't, because of its irresponsible spending spree during the good years.

Why try to pump up the housing market anyway? House prices are falling because they reached absurd heights: even after an 8 per cent fall over the past 12 months they are trading at around seven times average earnings. When banks were keen to lend mortgages of six times a borrower's salary, these prices were just about affordable. Now that banks have reverted to more traditional lending practices - a decade ago most were prepared to lend a maximum of three times a borrower's earnings - there is a huge gap between asking prices and what buyers can actually afford. Freeing buyers from having to pay stamp duty - which is levied at rates varying from 1 per cent on a £125,000 home and 4 per cent on a £500,000 property - will make scant difference in a market that is still probably overvalued by a third.

There is just one effect that the Government will have achieved by leaking the suggestion of a stamp duty holiday: the few people who are in a position to buy will now be tempted to put off their purchases until the Government makes a proper announcement on stamp duty, perhaps in September. Expect house sales figures for August to be the gloomiest yet.

[ianrobo1]

well as usual it appears things are levelling out, the BBC are reporting that Abbey have cut mortgage rates and there is a loosening up after the credit crunch

however until governments reign in the free market and restrict what can be lent then this will happen again.

surely the banks have learnt that lesson ?

[snowychap]

well as usual it appears things are levelling out, the BBC are reporting that Abbey have cut mortgage rates and there is a loosening up after the credit crunch

So it's all over now? :shock:

[ianrobo1]

no but maybe the worse is over at least that is what the positive report on the BBc says

my Mrs is seeing large signs of this and it is not mortgage defaulters that are the problem but people being kicked out of rental property as buy to let owners bail out.

Now I hope snowy you would agree witht he proposition of self declaring mortgages being banned, also any mortgage over say a factor of 4 times income ...

[Amsterdam_Neil_D]

I have a house in Holland and what I do not understand is since the credit crunch the house prices in the town where I live have been totally unaffected by this and the steady increase in price has not changed.

Does this mean that the UK/US governmernts made a right mess of it or is it because we have the Euro or something, I just don't get it ! Holland (as far as i am aware) is not having the same problems as the UK, food/heating costs etc.

Usually I can get my head round things like this but I am nowhere near at the moment, maybe the European banks just don't lend to anyone (but they lent to me ffs)

[snowychap]

no but maybe the worse is over at least that is what the positive report on the BBc says

I'd actually question why is this a 'positive' report?

And I don't see where the report on the Beeb says the worst is over, in fact the article still says:

It is generally expected that house prices may fall by between 15% and 20% in the course of this year and next.

This is a case of lenders further reducing their rates.

The reductions which have taken place so far have hardly had much 'positive' effect upon the market.

FWIW, I question whether this attempt to prop up the housing market is, indeed, positive.

[ianrobo1]

is it just a case that your housing market over the years has been a bit more sensible ?

[Gringo]

No Neil, it's a global problem (please see page 1)

ian - levelling out? We have reports saying that prices are going to drop another 10% before booming 25%. That's not very level, that looks like bust and boom again. And...

my Mrs is seeing large signs of this and it is not mortgage defaulters that are the problem but people being kicked out of rental property as buy to let owners bail out..

If the landlord has the place rented out, then he won't be default on his mortgage, and they won't be getting kicked out. Would love to see some stats to back up your supposition as it seems rather illogical to me. Of course some landlords will go bankrupt and be pocketing the rent payments instead of paying the mortgage, but this is a small, marginal part of the market. As per northern wrecks results yesterday, teh majority of repos and arrears were in the residential lending, not BTL lending

[ianrobo1]

no stats but as my Mrs.s works in council housing and they have seen a large increase in the numbers in ex rentals who have been given 2 months then something is afoot

as to levelling out the credit crunch is what I refer to and the fact that maybe the bottom has been reached ...

[snowychap]

as to levelling out the credit crunch is what I refer to and the fact that maybe the bottom has been reached ...

The bottom of what, though?

[Gringo]

A few weeks ago the line was house price falls had stabilised, now the credit crunch has bottomed out? House prices are still going to fall another 10-15%, so I wouldn't be calling the bottom of anything just yet.

[leviramsey]

If the landlord has the place rented out, then he won't be default on his mortgage, and they won't be getting kicked out. Would love to see some stats to back up your supposition as it seems rather illogical to me. Of course some landlords will go bankrupt and be pocketing the rent payments instead of paying the mortgage, but this is a small, marginal part of the market. As per northern wrecks results yesterday, teh majority of repos and arrears were in the residential lending, not BTL lending

It's also fairly possible that the landlord's mortgage payment far exceeds what he's bringing in from rent...

[bickster]

If the landlord has the place rented out, then he won't be default on his mortgage, and they won't be getting kicked out. Would love to see some stats to back up your supposition as it seems rather illogical to me. Of course some landlords will go bankrupt and be pocketing the rent payments instead of paying the mortgage, but this is a small, marginal part of the market. As per northern wrecks results yesterday, teh majority of repos and arrears were in the residential lending, not BTL lending

It's also fairly possible that the landlord's mortgage payment far exceeds what he's bringing in from rent...

My Landlord certainly is, he's paying £1100 a month in mortgage and charging me £750 a month. He did rob the back half of the house to knock into his house though (he lives next door)

[dundeevilla]

Finally sold our flat this week at a £7K redution.

Now in a good position to bargain down some poor bastard who's been trying to sell their house for months. Gonna make some right cheeky offers to test the water.

[snowychap]

Capitalist oppressor. :winkold:

[snowychap]

House prices 'fell 1.7% in July'

The house price slump continued in July according to the latest monthly report from the Halifax.

The lender said prices fell another 1.7% last month, taking the annual rate of decline down from 6.1% to 8.8%.

The Halifax calculates that the average house in the UK is now worth £177,351, back to the value seen in June 2006.

The bank said demand from home buyers had been "significantly curbed" by the lack of mortgage funds, high prices and the squeeze on household finances.

"Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market," said the Halifax's economist Suren Thiru.

"This is resulting in both lower prices and activity levels," he added.

The Halifax's survey chimes with that of rival mortgage lender Nationwide, which recently calculated that UK property prices had fallen by 8.1% in the year to July.

In June, the Halifax forecast that house prices would probably fall by about 9% over the course of this year.

Falling fast

With mortgage approvals already down by 69% in the past 12 months, activity in the property market looks likely to fall even further.

Many commentators suggest prices could easily fall by about 20% in the course of this year and next.

The credit ratings agency Standard & Poor's (S&P) suggested recently that a fall of this magnitude might push 1.7 million households into negative equity.

Negative equity describes a situation where the size of borrower's mortgage debt exceeds the value of their property.

[snowychap]

Home repossessions rise by 41%

The number of properties repossessed by mortgage lenders in the UK rose by 41% in the first half of 2008, to 18,900.

The sharp rise had been widely expected because the economic slowdown has made it harder for some home owners to repay their mortgages.

Repossessions have been rising since the second half of 2004 but have now begun to accelerate.

The number of mortgages in arrears has also risen, up by 20% in the first half of the year, to 155,600.

The data was published by the Council of Mortgage Lenders.

[snowychap]

London house prices fall 5.3% in a month

Londoners selling their homes have cut thousands of pounds off their asking prices as the downturn finally arrived in the capital.

Asking prices in London fell 5.3% in August, according to the Rightmove house price survey - equivalent to a £21,000 drop in a single month. Prices in some of the most sought-after suburbs are falling much lower. The average asking price in Wandsworth fell from £522,000 to £481,000 in a single month - or 7.9%. Homes in Brent, Kingston-upon-Thames, Richmond-upon-Thames and Greenwich were down more than 6.5%.

London house prices fell on average £21,000 in a month. Nationwide, asking prices tumbled by a record 2.3% in August. The property website said the decline took the average asking price to £229,816 in August, from £235,219 in July, the biggest fall on record for this month. Over the year prices are down 4.8%.

This drop in value is down to the lack of mortgages available on the market and the increasing number of unsold houses, according to the report.

Miles Shipside, commercial director of Rightmove, said: "The lack of mortgage finance is central to the problem, and perhaps that is where policymakers' attention should be focused, as the banks can't or won't sort out the mess they were instrumental in creating."

The average asking price in London is now £379,162, down 3.8% from this time last year.

"London's asking prices have finally begun to come in line with the rest of the country," said the report. "Sellers have recognised the need to price aggressively in the capital."

London's falling prices were closely followed by the north-west, which suffered a 3.3% monthly fall, and East Anglia, which faced a 3.2% decline in asking prices.

The only region in the UK where house prices rose was in the East Midlands, where prices increased by 1.6%. In London the smallest decline was in Hackney.

Rightmove said: "Areas with Olympic-linked pending transport links are forecast to be the best hedge against price falls."

The new survey adds to the mounting pile of gloomy housing market data. The Ministry of Justice said last week that the number of homeowners in England and Wales facing repossession rose to 28,568 in the three months to the end of June as an increasing number of people struggle to meet their mortgage repayments. That is 24% more than in the same period a year ago and the highest since the third quarter of 1992, when 30,587 orders were made.

Property sales by Britain's estate agents are also down 40% on a year ago, the Royal Institution of Chartered Surveyors said last week. Rightmove said the average unsold stock of property per estate agency rose for the seventh consecutive month, to a new record of 78 - up from 77 last month.

Shipside said: "The number of transactions this year is in danger of being the lowest since 1959."

The best-performing region in August after the East Midlands was the south-west, where property prices saw a 0.4% decline. Among the worst-performing regions this month were Greater London, with prices dropping 5.3%, followed by the north-west, where prices fell 3.3%, and East Anglia, where prices were down 3.2%.

London's best performers (monthly change in asking price)

[table]

[row][col]Hackney [col]-0.6%

[row][col]Southwark [col]-2.2%

[row][col]Hammersmith & Fulham [col]-2.6%

[row][col]Hounslow [col]-3.1%

[row][col]Islington [col]-3.2%

[/table]

London's worst performers (monthly change in asking price)

[table]

[row][col]Wandsworth [col]-7.9%

[row][col]Brent [col]-7.5%

[row][col]Kingston-upon-Thames [col]-7.2%

[row][col]Richmond-upon-Thames [col]-6.8%

[row][col]Greenwich [col]-6.6%

[/table]