Tuesday, Sep 01, 2009
House price falls coming soon
ADVFN: UK Property to halve between now and July 29th 2010
ADVFN financial website beleives prices to halve in the next 6 months, with lots to back it up.
"UK houses are still massively unaffordable" Well we knew that didn't we?
READ THIS BEFORE YOU BUY.
Posted by will @ 10:48 AM (3652 views) Add Comment
29 Comments
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1. Ra02127a said...
Point one could also mention the Basel II agreement, which is a key reason why banks are now unwilling to lend to anyone with less than a 25% deposit.
2. Surfgat said...
Looks like an advertorial to me
3. Somethingfishy said...
ADVFN have kindly highlighted self-interested property ramping from various sources. Good of them also to state there will be 545% returns from buying gold (...that's "up to" btw). Pot, kettle.
4. Mark said...
Although there are some truths in here, the report loses all credibility as it is a rant decending into an argument to ramp gold prices and sell dubious financial information.
5. P. Doff said...
Moneyweek ramping mostly all the way through the article (don't forget to sign up for your 3 free issues).......... but gold ramping starts near the end.
6. p. doff said...
Oops - forgot to add password.
7. uncle tom said...
Clumsy logic, prediction and timeline seemingly plucked from the air...
~~~
If you want to know why house prices will fall severely, try turning the argument on its head. Instead of explaining why prices must fall, try constructing an argument to justify prices staying high.
70% of UK houses are owner occupied and around a third of those that are tenanted are unsubsidised.
Is letting a route to affordable housing for those priced out? No. The void periods, management costs, and higher maintenance costs in the tenanted sector, when balanced against the need for invested cash to generate an income, makes unsubsidised private lets no more affordable (in the long term) than an interest only mortgage.
It follows that property must either be affordable for 80% of households, or the percentage of households receiving housing subsidy must increase. At present, property comes nowhere near being that affordable - 40% is nearer the mark.
Given the extent to which the government is cash-strapped, there is no prospect of housing benefit being extended in scope, and a very high prospect of the crtiteria for qualification being tightened in order to save cash.
The government could extend affordable housing schemes, so that huge numbers of houses are built for let on land that was secured without giving the landowner a windfall, thereby making them much more affordable; but this would undermine demand for existing property.
There is no clever way through this. The UK property bubble saw prices rise by 183% over ten years. In the same period of time, the US property bubble saw prices rise by just 138%, yet has now fallen back by 33%.
You have to be a bit starry-eyed to believe it will not be worse here..
8. mark wadsworth said...
UT, "The government could extend affordable housing schemes, so that huge numbers of houses are built for let on land that was secured without giving the landowner a windfall, thereby making them much more affordable; but this would undermine demand for existing property."
That's my new mantra. Social housing for all, with tenants paying a fixed per centage of their income (somewhere between ten and twenty per cent) in rent/council tax.
What can possibly go wrong?
9. titaniccaptain said...
@Uncle Tom
"Clumsy logic, prediction and timeline seemingly plucked from the air..."
No I think he must have been reading some of the bolllox I write.
"You have to be a bit starry-eyed to believe it will not be worse here.."
Don't know about that one..... our personal debt is the crippling factor on this side of the pond...oh yes and we produce very little industrially.
An ex girlfriend of mine once described me as "A life support system for a testicle" I think that would quite nicely describe the British Isles in relation to London.
10. bluebeach said...
To be realistic, another 10% will do me just fine. I will be able to go into the market for a mortgage free home to bring my 2 boys up in, without being a slave to this make believe existance that we all live in.... Debt Debt Debt.... we have all been suckered in to live a Zombie debt filled existance... and I don't want to be a part of that anymore 8O)
11. Needle said...
This is an ad for a subscription magazine.
Why post it?
12. mrflibble said...
All valid points but lets get serious here, houses are not going to half in just ten months.
The housing market moves at a tortoise pace, but move it will, and downwards it will be...
13. titaniccaptain said...
Is that Kirsty Allslop in the "Go Compare" Ads on the main page?
14. 51ck-6-51x said...
I agree with mrflibble, property, especially residential does not tend to adjust so fast.
The website posted hurts my eyes with it's use of text formatting and makes me feel like it's trying ( badly ) to sell me something. It is certainly no news website, that's for sure.
15. Neil B said...
This is obvious. Currently average house prices are running at around 7.3 x average (single) salary. As most mortgages will only go to the maximum of 5 x salary there has to be a correction.
16. mrflibble said...
It is getting hard to know what to root for these days. Hoping for a full on property crash is all well and good, but if it leaves one unemployment then what is saved on housing may well be lost on income.
As we have all seen, the housing market isn't The Lone Ranger, it effects everything and everybody, mainly because it is so massively overvalued and our economy is so heavily dependant on it.
It feels like we've had a mini crash so far but the main event is still waiting to pounce. Brown and Co. have burnt up a lot of money and wasted a lot time trying to prevent the crash, the crash we so desperately need to bring prices back to a sustainable level, the sort of level where a real economic recovery can be had.
The UK now faces a long hard journey with an empty tank...
17. alan said...
I can't see property halving in such a short space of time. It would take something pretty catastrophic.
If inflation starts an upward move prompting IR increases in the next few months, then yes, property will become less affordable and prices will drop accordingly. Hyperinflation and bank default seems to have been factored into the article's analysis. Yes, IF we get a serious wave of defaults, then we could see a crisis.
With the big personal debt bills I see a gradual decline in house prices over the next 2 or 3 years. Lack of available credit and high percentage deposits will provide a large obstacle for many.
18. mander said...
It is all doom and gloom. The problems come from the fact that the people, especially American people are refusing to play the Wall Street game anymore. Intelligent credit worthy people will not take on debt because there is no money to be made. Companies profits are way too low to justify investing and creating jobs, stocks and property are insanely priced and the result is depression. Printing money to artificially create inflation it is dangerous because it continues to destroy confidence in the system. Solution: Allow a genuine correction in the market place and stop engineering profits.
19. uncle tom said...
The inflation/interest rates/QE issue is a bit surreal at the moment - it's as though the markets are behaving like a rabbit caught in the headlights - frozen in terror, but not knowing which way to run..
Western governments have borrowing requirements that far exceed the funds available to be loaned, so they are creating more money instead. Increasing the sum total of money when an economy is in contraction is a potent recipe for inflation, but so far; the deflationary forces of recession have neutralised that influence.
So far. The rabbit usually bolts at the last moment..
20. will said...
The idea that prices will halve by next june may seem impossible for many, but the Banks may re-value houses at half their 2007 peak prices - for mortgage purposes. Actual asking prices may take years to fall.
21. the number cruncher said...
UT - at last we have firm agreement
The balance of interest rates, inflation and the shenanigans of the Government(governments across the globe) fiddling with the money supply are the root of house prices gravity defiance.
I used to fiddle with stats and computer modelling at uni andwe call the bolting rabbit concepts chaos theory. At some stage we will have our shift in economic realities that will topple the house price bubble. That is when whatever forces of global events means people just cannot service their debt.
Have you noticed how little money supply is talked about in the media these days. 30 years ago it was often discussed even in mainstream news?
22. uncle tom said...
tnc,
Yes, money supply gets very little press now - remember also how balance of payments stats were once a guaranteed news item..
Can anyone explain why, in an increasingly plastic age, the sum total of notes and coin in this country has doubled since the millennium - an increase that is four times greater than that expected from inflation..?
23. will said...
Yes this is an advertorial - but Investors Chronicle, Moneyweek, Financial Times etc also have advertorial in tune with the current economic conditions. The BBC won't publish such an article because they are state run. So who do you believe?
24. Mr G said...
"A life support system for a testicle, I think that would quite nicely describe the British Isles in relation to London"
An excellent analogy TC which is, sadly, true.
25. mr g said...
Whoops, forgot the password!
"A life support system for a testicle" I think that would quite nicely describe the British Isles in relation to London
An excellent analogy TC which is, sadly, true.
26. tenyearstogetmymoneyback said...
Agree with all the comments about timescales.
Change 2010 in the title to 2015 and the whole thing would have fra more credibility.
27. dohousescrashinthewoods said...
Er, not ADVFN, this is fsponline-recommends, the spamvert arm of MoneyWeek.
28. nomad said...
Yes, a great deal of comment on paper spam - creditably, most argue against the bearishness.
29. Woollyback said...
I thought that the "Gold-Rush" was all but over... not seen any scabby white vans with huge Bill-boards touting for scrap yellow in ages !!
Joking aside (I am holding VI's in African gold miners) would anyone honestly support the notion that we could see a strong return to precious metal ??