House prices have a lot further to fall

Alex R

Wider point here about quite how stagnant the housing market is set to become.

First time buyers can't get on the ladder because the deposit requirements are too high.

Those who purchased recently can't move because they would crystalise their loss. If they are still above water, the costs associated with home purchases and moving would eat into what's left of their equity and mean that, they to, would have insufficient equity to fund a deposit.

Finally, those who are now on SVR or tracker mortgages are hardly likely to want to move if it means losing their existing deal.

What this means is that people will end up staying put in increasingly inappropriate houses. which is not good news for families who need more space or the elderly who need to trade down.

GJTory

Fraser, maybe you shouldn't make quite such a sweeping generalisation. The headline figure of -20% is obviously made up various constituents. Blocks of flats in some towns (Leeds springs to mind) have seen falls in price of well over 20% while other areas / house types have seen substantially smaller price falls.

I have no doubt you know that.

In that context, you're last point about 'feel good factor' is interesting because the negative equity and 'feel bad factor' that comes with it will be very unevenly spread. Knowing where it will fall and how long it might last should be of considerable political interest.

bergen

And in a month's time they are compelling HIPs to be completed before any marketing,depressing the housing market further.

These people know better and never listen.What have we done to deserve such an incompetent government?

Matt

@bergen
We voted for them, didn't we? Four years ago - back when the Blessed Tony was still at the helm, having promised in advance to step down. It's a funny old game, Saint. Even after the Iraq debacle, the majority judged NuLabour to be preferable to Michael Howard's Conservatives. Well, what with house prices and everything, I think it's safe to say the public won't be making that mistake again.

Mr. Green

I hope they fall and fall - at least then I'll be able to move.
The way things are at the moment I would have to add an additional £100,000 to my mortgage in order to move 1-rung up the housing ladder.
Not only that, but currently none of my children have any chance of owning a house before their 30th birthday.

If prices fall significantly then the difference between the new, lower value of my property and the new, lower price of the superior property will shrink; making a move more possible.

I hope prices tumble to something which resembles normality.

Lance Grundy

That’s right. There won’t be any more credit binging until the debts racked up during the last binge are paid down – and, as you rightly say, when you factor in the effects of a recession to the calculation, that will be years and years and years.

As far as the real economy is concerned this has always been a debt crisis. Not a credit crisis. The British people are weighed down by £1.457 trillion of personal debt. Debt, debt, debt. It is everywhere.

Near-zero interest rates, Quantitative Easing and whatever other quack cures the government and their friends in the City come up with are not going to reduce that household debt burden by one iota. There never will be a return to 2007 levels of borrowing.

At the end of January 2009 average UK household debt stood at £9,550 [excluding mortgages] and this figure increases to £21,750 [excluding mortgages] if the average is based on the number of households who actually have some form of unsecured loan. According to the Credit Action website, 323 people today will be declared bankrupt or insolvent. 2430 Consumer County Court Judgements will be issued. 205 properties will be repossessed. 1600 people will lose their jobs. Citizen’s Advice Bureaux will deal with 7240 new debt problems…

Perhaps that stupid Texan cowboy was right after all…”this sucker is going down” - in Britain’s case, like a lead balloon.

PT

My mam's neighbour is a great example of the sort of culture Brown encouraged and the people he's now trying to save.

She confided yesterday that her original mortgage of £33,000 (bought mid 90's) is now £90,000, and this money has been splashed on three new cars and numerous exotic holidays. Once that admission was out the way, she presented a loan witness form for my mam to sign, as they're struggling to pay off thousands in unsecured credit card debt spent on computers, TV's and clothes etc and need to take out a further loan to keep their head above water.

Un-f*cking believable.

David Lindsay

Let joy be unconfined.

The explosion in house prices has meant that most younger middle or upper-working-class people stand no chance of living out the middle-aged peak of their powers in properties remotely resembling the ones in which they grew up.

"Bricks and mortar" do not, at least ordinarily, constitute an "investment". They constitute a place to live. If we are now being forced back to acknowledging that truth, then about time, too.

Daffyd K Jones

Using a .bmp bitmap file in a webpage? Seriously, fire your web designer.

THX1138

Lance- Great post , everyone should use the reduction in mortgages to pay down as much debt as possible.

It's not all the Government's fault the nation didn't have to go a debt fulled spending binge based on a feelgood factor from a property bubble. Individuals did this egged on by a compliant & complisit media to pin this all on governments is ridiculous, everyone is to blame!

I do agree with Fraser and I'm a huge bear of property that Jan rise was a classic dead cat bounce and the market is as flat as piss with another 15% to fall.

Fergus Pickering

Of course if you own property and actually live in it (as I do, heh-heh!) then none of this matters a row of beans. Let property prices tumble a bloody sight more, say I, and then daughter A and daughter B can buy houses five years down the line.

Jon Griffey

I personally (and I concede I am no economist) think that inflation will soon get out of control now that the printing presses are out. Inflation will rapidly erode the debt and basically rob the savers to save the borrowers and so nominal houseprices will recover much sooner. I can't see any other way that the debt issue is going to be resolved.

Jon Griffey

I personally (and I concede I am no economist) think that inflation will soon get out of control now that the printing presses are out. Inflation will rapidly erode the debt and basically rob the savers to save the borrowers and so nominal houseprices will recover much sooner. I can't see any other way that the debt issue is going to be resolved.

Dave Page

Indeed so, but that unelected b*stard Brown is trying everything to stop it happening. After years of saving (not borrowing) money to buy a house that was getting further and further out of reach, the interest from my savings is taken to pay the mortgages of those who overextended themselves. 'Quantitative easing' is now the icing on the Brown Cake, as this will decrease the homeowners debt while devalue my capital in the process through inflation.

Gordon Brown has ruined my life, along with the lives of millions of others. I have a nice example for you: my neighbour and colleague has seen the interest on his £160,000 interest-only mortgage fall from £1000 to < £200 a month (a mortgage he confesses he never had any intention of paying, letting house price inflation pay for it). My flat has seen no corresponding decrease in the rent though, while my savings are plundered to keep him in his house.

Well done NuLabour -- if I could get a visa, I would leave this wretched country tomorrow

A. Upton-Ogood.

THX1138: Yes, but the Government was quite willing to let it happen as they knew they'd benefit from VAT on extravagant debt-funded purchases and increasing IHT while the qualifying level remained the same in numerical terms.

Alf Tupper

Ugly reading? I think not.

Fergus Pickering and David Lindsay have got it precisely right. Let's get back to doing our living in houses and our earning at work.

L McKay

Some people have become so accustomed to house buying mania that they just cannot accept that prices could fall back to historic norms. Now the mania has ended and speculators gone we are left with an oversupply of dwellings.

Given the scale of economic trauma, common sense suggests a fall below the long-term average. Brown will use our taxes to artificially support prices but the market is too big for his politically motivated interference to have much affect.

Citi is optimistic, I think a fall of +50% in REAL terms is unavoidable but very welcome by those who did not jump onto the ladder.

L McKay

One noteworthy point for those debtors who think inflation will come to the rescue...the primary defence agaist inflation is high interest rates. Unless you have been sensible to get a long term fixed loan this will have a far bigger impact on borrowers than the credit crunch

Paul B

I`m with Fergus & David, its a Godsend for the future generations,including my two eldest, that house prices are falling to realistic levels. Long may they remain so. Its about the only good thing thats happening in the economy right, except you can now employ a decent builder at something less than the extortionate rates they were charging of yesteryear

Chris

The housing boom has ruined the economy, the last 10 years has seen people putting everything they have, in to climbing the ladder, at the expense of entrepreneurship.

I had been out the country for 8 years, only to return, and find the population crushed

T Miller

I like many others want prices to fall for the good of our future generations. What is more I don't have my own kids and I am a property investor!

What we have is the culmination of total economic madness and political ineptness. That's not just this government either.

There is despite people denying it a shortage of housing in the south East. I love the greenbelt, but some of this land must go to housing, sorry, but that will bring prices down further. Why do so many people expect houses to pay for retirement, we are not manufacturing wealth the way we should be. We should invest in other than property.

Peter

Dave,
fear not - you have done the right thing.

Printing presses (quantitative easing) did not work during the deflationary Gt Depression nor did they work after the real-estate and stockmarket bust and resultant deflation in Japan in the 90's and they will not work here either. Why? Because for one employment is on the rise, companies profits are falling, Oil is cheap (major component of inflation) and consumer sentiment has changed. All of this affects the velocity of money slowing it down which cancels out any capital injections.

The last thing you want to do is be a holder of debt during a deflationary period. House prices are going to fall another 20% from this point at least and there will be millions of people trapped in negative equity.

Bide your time and buy something in a couple of years time at the bottom of the market.

Also rents are actually falling - ask your landlord for a reduction and if he won't give you one - I suggest you shop around.

But yes do get out of the UK if you can as this country is really going to the pot and has been for a long time!

Rex Burr

I remember hearing a radio report in the early nineties, when the country was recovering from the previous property crash, suggesting that from then on we would value houses as places to live in and not cash machines.
That reporter was wrong then and similar reports will, I regret, be wrong again. People have an unbelievable capacity, not to learn. (I understand it’s to do with dopamine)
A large percentage of the population do not exhibit the ‘Wisdom of Crowds’ they display ‘Collective Insanity’.
And NO Matt, I didn’t vote for them, or the Tories.

quadratus

Fraser,
Where did that graph surface from? It suggests that house prices in August 2007 were at the same level as May 1989. Something does not seem to add up.
GTTory(15.34) is correct,there is no such thing as "a"housing market;instead there is a hugely variable kaleidoscope of markets,varying according to a number of factors.

quadratus

One very valid reason for the Bank's reluctance to lend is their awareness of the mountain of debt stacked on credit cards,some of it more than a year old. When those people cannot pay, that falls back on the Banks as a bad debt. No wonder they are locking the vaults. There could be a good case for ceasing to have credit cards and having debit cards only,which can also be seen to be protective to persons unable or unwilling to manage their money. This is
standard practice in other countries and it works.

jim

Recovering capital for those in negative equity that bought in 2007 is unlikely to happen in real terms. Nominally they might find their house is worth "more" in terms of the number they bought at vs. the number they sell at, but the real value of the monetary amount they bought at will be far inexcess of the equivalent nominally higher value they sell at. People don't seem to understand inflation and that nominal amounts between years aren't comparable. At the turn of the century, 25k would buy you rather a lot, now it won't.

Dave Page

Thanks for your words Peter, but they are little consolation -- it has been a long time since doing 'the right thing' got you anywhere in the country. My fear is that this printing of money will get out of hand (particularly if it seems to be working to our idiot govt.), and all that I have worked and saved for over the past 10 years will be wiped out. I can't invest in gold without notification to the govt (who can confiscate it or throw me in jail), I can't turn my £ into $ since their policy has crushed the exchange rate, I can't put my savings into a home since I'm still far from the required sum. How can anyone safeguard the product of their own labour under this regime?

I would not be surprised if increasingly desperate people in this country start resorting to desperate measures to right the wrongs of Gordon Brown.

The lack of good, informed, honest gevernance in this country is enough to reduce a person to tears.

Jonathan

I agree with the Citibank analysis - but your graph is pretty disingenuous - it fails to take inflation into account - in real terms the early 90s crash was far steeper than your graph suggests

Melvyn Smith

House prices HAVE NOT fallen by 20 percent from their peak. At least not any house I am interested in buying here in the southwest. Houses that have been difficult to sell may have fallen while many other houses were either taken off the market or stubbornly remain at a similar cost.

Also, falling house process is a good not bad thing! Assuming you purchase a house to live in then there is no advantage in having inflated house prices – which is certainly what we have had. If you want to move up market then you will have to pay less if process fall.

Jane Brooks

So many people applauding the parlous state of the housing market. To welcome the population as they are trapped in negative equity is less than charitable. It creates resentment, as people feel trapped and unable to change their lives, it also produces stagnation, in money terms (certainly in marriage or divorce terms,) and movement of labour, it also means that all the markets connected to moving home, changing address etc sink, so more woes, more people out of work and more people fed up. If this is the kind of Britain you are cheering for I feel sorry for you.

M Smith

We are in this mess largely because of ridiculously over inflated house prices. How can it possibly be good to spend most of your life paying off a huge debt in order to purchase a dramatically overpriced house? The only people who truly benefit from artificially high prices are those who aim to make money at the expense of others, i.e. the likes of developers, money lenders, etc. Negative equity does not trap you. I am a home owner and I certainly want to see house prices fall so that I might stand a chance of owning a better house. What creates resentment is that those savers who were trying to do the right thing, i.e. put money away for the future, are now being penalised.