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Five Reasons Why House Prices Will Plunge Further

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Five Reasons Why House Prices will Plugne Further

1. They may have ticked higher, but mortgage approvals are still 22% down on April 2008 and 60% below their 'pre-correction' levels, says Seema Shah of Capital Economics. That's "a long way off the 80,000 level that has historically been consistent with stable house prices", let alone values rising again.

2 Home loan conditions are still very tight two-thirds of all current mortgage offers require a 25% deposit. And they aren't showing any sign of easing up. Gross mortgage lending was down 52% year-on-year in April, while **net lending reached its lowest for eight years, says the British Bankers' Association. This week's Bank of England numbers also show 'secured' loans growing by a miniscule 0.1% each month this year. Recent "increased interest was largely confined to cash-rich buyers", says Capital Economics' Roger Bootle – and there aren't enough of them around to sustain a new house-price boom.

( Building society statistics April 2009

Building society gross lending amounted to £1,551 million in April 2009 compared to £3,921 million in April 2008.

Net lending by building societies in April 2009 was -£722 million compared to £704 million in April 2008.

Mortgage approvals in April 2009 were £1,599 million compared to £3,357 million in April 2008.

Building societies had a net withdrawal of £811 million in April 2009 compared to net receipts of £1,823 million in April 2008.

Including interest credited, savings balances held by building societies increased by £80 million in April 2009, compared to £2,918 million in April 2008.

Building societies had a net receipt of £201 million from Cash ISAs in April 2009, compared to net receipts of £2,052 million in April 2008. )

3 Many borrowers' mortgage bills have tumbled as the Bank cut interest rates. But this could be coming to an end. Fears that our government may have trouble funding the national debt are causing rising 'swap' rates, on which fixed-rate mortgages are priced. Standard variable rates (SVRs) are rising too. Nationwide has just upped its SVR for new customers to 3.49% over the Bank's base rate. "Any material rise in government funding costs will have a knock-on effect on secured borrowing, putting significant pressure on households," says RBC Capital Markets' John Wraith. "This could have a serious impact on any UK economic recovery."

4 Job losses keep rising. "Unemployment is predicted to soar from its current 7% to over 10%", says George Hay on Breakingviews. That's likely to create a wave of forced selling as the newly unemployed lose their homes. This would hit prices hard (see the chart above for an idea of how unemployment and house prices tend to be inversely correlated).

And another timebomb's ticking, too. Almost a third of British non-conforming mortgages – where borrowers with weak credit scores were given loans on the back of minimal, or no, documentation – taken out in 2005 are now 90 or more days behind on their payments, says David Watts at CreditSights. He calls these "alarming numbers, uglier than expected". It could all add up to another surge in repossessions, and more houses hitting the market when it's least able to absorb them.

5 Finally, affordability. "From 1983 to 2001, the ratio of mortgage advances to earnings remained within a range of two to 2.5 times", says Jon Bell at Shore Capital. "By 2007, it had risen to above four times. This party is now over."

The conclusion? "Although affordability has improved, it remains stretched. If real [inflation adjusted] wages fall, affordability may not be restored for the best part of a decade."

The bad news is that incomes are already falling by some measures: UK average weekly earnings fell 3% year-on-year in March. During past downturns in Britain, Japan and the Nordic countries, Bell says, gains made during the bubble periods were entirely lost in real terms. If history repeats itself, "house prices could more than halve from here".

Some more articles worth reading from Money Week:

What we Can Learn From the Last Housing Crash

How to Preserve Your Wealth in Uncertain Times

STAY AWAY FROM PROPERTY IT HAS MUCH FURTHER TO FALL

Edited by Sybil13

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Sybil Sybil Sybil. You're gonna have to up your game (or change your user name) if you want to attract attention to all this re-post drivel.

Accelerating monthly mortgage approvals say to me that affordability and deposit arn't really an issue to these 1000's of employed buyers now are they? :rolleyes:

Edited by BTL_and_milking_it

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Life is pretty damn uncertain, right? Will the housing prices plunge further or will they come back up? I don't know - no one does. We will just have to see because the while thing is simply unstable.

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Sybil Sybil Sybil. You're gonna have to up your game (or change your user name) if you want to attract attention to all this re-post drivel...

agreed, ludicrous to post such rubbish when so many highly respected commentators with excellent credentials are saying the opposite. aren't they?

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I can't believe everyone's jumping on the bull bandwagon lol

There are so many fundamental reasons why property has much further to fall.

People are falling into the same trap that occurred last time and are getting carried away with VI spin.

There has never been a property boom in the depths of a recesion and I don't see why this wont continue. Unemployment is set to increase, huge deposits are still required and housing is still inherently unaffordable.

Why can't people stand back and see what's happening objectively?

Ah well who cares?!?! Spunk your money away and let me clean up when we hit the bottom lol!

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Ah well who cares?!?! Spunk your money away and let me clean up when we hit the bottom lol!

You're gonna need a lot of tissues! 2187_sick.gif

Edited by mikthe20

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Sybil Sybil Sybil. You're gonna have to up your game (or change your user name) if you want to attract attention to all this re-post drivel.

Accelerating monthly mortgage approvals say to me that affordability and deposit arn't really an issue to these 1000's of employed buyers now are they? :rolleyes:

lol

What's with the bears on here getting jitters and re-publishing data to "corroborate" against the bulls. Starting to sniff a sense of panic ?

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lol

What's with the bears on here getting jitters and re-publishing data to "corroborate" against the bulls. Starting to sniff a sense of panic ?

bears panicking is always a good contra indicator.

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How many people do you think have enough cash to buy a house?You're talking about a small minority. Imagine how much cash it would take to buy all the house that were sold in a month during the peak years. Now if that cash isn't in bank accounts as we speak, and the banks aren't lending it, where is it going to come from?

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Mortgage lending is down but house prices are rising. That says that people with plenty cash are buying.

You don't get to have plenty of cash by being stupid.

It's time to snap up a bargain before prices go to Jupiter.

Bullseye!!

:P

Dazed n confused's comments even say "talking bull" at the bottom of them.

Who would you believe the author of the Money Week article or someone who in the middle of a bigger crash than the 1930's says "snap up a bargain"?

Have YOU seen ANY bargains recently? Or simply hugely overpriced properties that are about to undergo a major readjustment?

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Mortgage lending is down but house prices are rising. That says that people with plenty cash are buying.

You don't get to have plenty of cash by being stupid.

It's time to snap up a bargain before prices go to Jupiter.

Bullseye!!

:P

+1

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I can't believe everyone's jumping on the bull bandwagon lol

There are so many fundamental reasons why property has much further to fall.

People are falling into the same trap that occurred last time and are getting carried away with VI spin.

There has never been a property boom in the depths of a recesion and I don't see why this wont continue. Unemployment is set to increase, huge deposits are still required and housing is still inherently unaffordable.

Why can't people stand back and see what's happening objectively?

Ah well who cares?!?! Spunk your money away and let me clean up when we hit the bottom lol!

I am a great fan of common sense, well said.

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I live in a rented 3 bed semi 'worth' around £140k in a nice part of town.

The rent on this place is £500 a month. Can someone tell me where I can get a mortgage for £500 / month with a deposit of 15%?

You cant..... by a long way.

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You forgot : SENTIMENT

Many people have wised up, and realised that property is not a one-way bet.

Says the man that claims to own 13 BTL properties. :rolleyes:

Ah, but it's OK, because they are not in the UK, right? :lol:

Far fewer fools will be found to pay the high prices

Are you just trying to make yourself feel better that you sold out of UK property in 2001, right before the biggest boom in history?

Don't bother answering that, it was a rhetorical question. :rolleyes:

I'd take you more seriously if you had even a half decent history of getting the timing right on UK prices. But you don't. As anyone who wants to read through your post history will confirm. Calling a crash takes no talent. Getting the timing right does. Calling for a crash in 2007 does not in any way impress us, given the fact that you'd also been calling for it every year for many years previously. After all, even a stopped clock is right twice a day. ;)

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Says the man that claims to own 13 BTL properties. :rolleyes:

Ah, but it's OK, because they are not in the UK, right? :lol:

Are you just trying to make yourself feel better that you sold out of UK property in 2001, right before the biggest boom in history?

Don't bother answering that, it was a rhetorical question. :rolleyes:

I'd take you more seriously if you had even a half decent history of getting the timing right on UK prices. But you don't. As anyone who wants to read through your post history will confirm. Calling a crash takes no talent. Getting the timing right does. Calling for a crash in 2007 does not in any way impress us, given the fact that you'd also been calling for it every year for many years previously. After all, even a stopped clock is right twice a day. ;)

ha ha ha !!

If there's one thing I love on this site it's the "Casandras"... Bubb and Hamish - keep it up !

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You forgot : SENTIMENT

Many people have wised up, and realised that property is not a one-way bet.

Far fewer fools will be found to pay the high prices

Sentiment: interesting one that.

Forget not we have had 10 years of unbridled Success in the housing market. People as young as 35 have not experienced falling prices....theyve had all their adult lives to learn that prices only go up...indeed, the reality of falling prices is not a shock, its just incomprehensible!

so, in the mid set of one "trained" to see HPI as the norm, then the last 18 months of falls are to be seen as a blip...indeed it IS a blip compared to their Whole life experience.

this is why this Bull Trap is so dangerous for many.

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This blip is largely the result of STRers re-entering the market. They've large sums of cash lying around in bank accounts and they don't have the nerve to leave it there or invest it in other things. This residual cash can only go so far towards re-inflating and at best might take prices back to 2005 levels. Once that's all gone there really isn't anything except first time buyers to prop the pyramid up.

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