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Housing Revival Is Simply A 'false Dawn' With Prices Set To Fall Again

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http://www.dailymail.co.uk/news/article-12...fall-again.html

House prices will fall early next year and are unlikely to climb back to their 2007 peak for another five years, it is claimed today.

Recent evidence of house price rises are no more than a 'false dawn', according to a leading group of economists.

Property prices have already fallen by about 20 per cent compared with the peak in the summer of two years ago and many other economists have said they believe the bust is now over.

However, the Ernst & Young ITEM Club says it believes that the recent rise in house prices will not be sustained beyond the spring of next year.

Instead the group says it expects renewed price falls during the first half of 2010, followed by two years of stagnant prices.

It believes prices will then begin to pick up slowly through 2013 on the back of a strengthening economy and easier access to mortgages, hitting 2007 levels the next year.

The gloomy prediction goes against surveys by both the Halifax and the Nationwide, which have picked up price rises in recent months, while at the same time the number of sales and mortgage approvals have improved.

Last week the Halifax said low interest rates mean that mortgage repayments are at their lowest level in seven years in relation to income, so making property more affordable.

Hetal Mehta, senior economic adviser to the thinktank, said: 'ITEM believes the current stabilisation in the housing market is a false dawn.

'Price rises largely reflect the acute shortage of available properties, with many homeowners either trapped in negative equity or reluctant to sell for fear of locking in the losses of the past two years.

'A small number of cash-rich buyers have supported prices, but the supply of these funds is limited, which means prices are likely to dip again in the first half of next year.'

The group said it would be difficult for there to be a sustained pick-up in the market unless banks and building societies are willing to end the current rationing of mortgages.

Rising unemployment is also likely to limit any improvement in the housing market, with the group predicting the number of people out of work will hit 2.76million next spring.

At the same time, it said the combination of pay freezes and, in some cases, cuts meant people simply could not afford to buy a home.

Currently, the country is seeing a two-speed property market. In London, there is a real shortage of family homes so buyers are having to pay above the asking price.

The market in the capital is being fuelled by foreign investors from the likes of Russia and the Arab states, as well as City workers who are still winning significant cash bonuses, despite the failures of the banking crisis.

On the other side of the equation are the modern blocks of two-bedroom flats in Northern cities such as Leeds and Manchester where prices have plummeted by 40 per cent in two years with no sign of any recovery.

Analysts at Capital Economics have been among the most pessimistic on property prices.

A spokesman said: 'We continue to be sceptical that recent gains in house prices will be sustained.'

She added that on the one hand weak economic growth and high unemployment will put a cap on house sales, while if the economy does pick up, this will bring higher interest rates.

Did they just pull that "5 years to 2007 figures" out of a cows backside? It smells kinda farm like. Either way this will confuse the sheeple even more, might bring a few tentative reductions for a quick sale or no, keep it for 6 years and it'll be payday! wohoo!!

Edited by athom

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http://www.dailymail.co.uk/news/article-12...fall-again.html

Did they just pull that "5 years to 2007 figures" out of a cows backside? It smells kinda farm like. Either way this will confuse the sheeple even more, might bring a few tentative reductions for a quick sale or no, keep it for 6 years and it'll be payday! wohoo!!

It's on the beeb too.

http://news.bbc.co.uk/2/hi/business/8253017.stm

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This morning, they had a spokesman on 5 live on 'Wake up to money.' You could hear the pins dropping in the studio as he told them prices would fall back again at the start of next year.

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Can someone explain the difference between this prediction, and the much derided predictions from EAs a few years back?

Vested interest apart, why is one more believeable than the other?

who knows which is right. only time will tell.

150bn in tax interest, pubsec cuts..( maybe Trident and ID cards....thats 10,000 jobs apparently) means less disposable for your home buyer to spend on loans and or the economy.

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who knows which is right. only time will tell.

150bn in tax interest, pubsec cuts..( maybe Trident and ID cards....thats 10,000 jobs apparently) means less disposable for your home buyer to spend on loans and or the economy.

"who knows which is right. only time will tell."

Exactly. But at the moment, the only bearish headlines have the caveat, "may", or "could".

"150bn in tax interest, pubsec cuts..( maybe Trident and ID cards....thats 10,000 jobs apparently) means less disposable for your home buyer to spend on loans and or the economy."

So there could be an argument for becoming a neutral until next year before switching back to bear?

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Guest absolutezero
I could handle waiting 5 years to get top money for my house. 5 more years paid off the mortgage. Bit more in my pocket.

Sounds good to me either way. Prices won't drop a lot anyway. This is the bottom and it's up for now on.

Based on?

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"who knows which is right only time will tell."

Exactly. But at the moment, the only bearish headlines have the caveat, "may", or "could".

"150bn in tax interest, pubsec cuts..( maybe Trident and ID cards....thats 10,000 jobs apparently) means less disposable for your home buyer to spend on loans and or the economy."

So there could be an argument for becoming a neutral until next year before switching back to bear?

of course, making banks reveal their losses might not help either

link

As of last week, the ABX index of sub-prime mortgage debt showed that AAA-rated securities from early 2007 were trading at 28 cents on the dollar – AA was at 4 cents, near all-time lows. No one can say that $2 trillion (£1.2 trillion) of sub-prime and Alt-A debt is still trading at panic levels, exaggerating losses. The dust has settled. What we can see is that creditors will never recoup their money.

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That's good. Just proves nobody wants house prices to fall. The government will keep throwing everything at the housing market to make sure this doesnt happen. Thanks for that post. Cheered me up.

It really cracks me up when people put their faith in the Government saving the day.

Newsflash - the Government is not in control.

Cash is king - and the cash is running out.

The crash continues...

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That's good. Just proves nobody wants house prices to fall. The government will keep throwing everything at the housing market to make sure this doesnt happen. Thanks for that post. Cheered me up.

Of course they will but the end is near and people like you will be sorry!! It cheered me up to see that there are peolpe like you in another world....

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I don't see anyone complaining (or otherwise) about the prominence the BBC is giving this report. Hmmm.

very reasonable point

additionally - the BBC seem to be warming to the tories and need to cut spending - but for different reasons, I hazard

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House prices ‘will take five years to return to peak’

Katherine "Kat" Griffiths

House prices will not return to the peak reached in autumn 2007 for at least another five years, according to Ernst & Young’s Item Club. The influential group’s gloomy forecast contradicts the increasingly optimistic outlook of the Government and some commentators that the British economy has begun a sustained recovery.

__________________________________

The last big crash (1989-96) lasted 7 years. E&Y are not far of the track but I suspect the Great Crash (2007- )

will last a few more years, perhaps 10.

These things normally follow a pattern and the higher the prices went..................................

Edited by Realistbear

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And

Wales on Line

Building Magazine

24 Dash com

Southport Visitor

Sharecast

This Is Money

Property Week

Telegraph

Independent

FT

Times

Well I think you get the idea , that is a good blast of HOUSE PRICES WILL FALL time to come out of the DENIAL phase .

BBC - The Ernst & Young Item Club also says that property values will not return to their 2007 peak for at least another five years.

It says "a small number of cash-rich buyers have supported prices".

Which of course is what Rightmove's latest HPI said, and what the figures confirm, 2 properties per month being sold per agent and even then to the cash rich and 50% cash sales, that IS NOT RECOVERY .

Every article referred to the current 20% falls and :

ITEM says that overall in 2009, house prices are likely to fall by 11.4per cent, based on the Communities and Local Government measure

Eventually the message will get through :

that a small group of cash-rich buyers have supported prices but, as the supply of these funds is limited, prices are likely to fall again in the first half of next year.

"Mortgage lending remains depressed and with 56 per cent of owner occupiers having a mortgage, it would be difficult to make a case for a sustained pickup in prices without a recovery in mortgage lending," she said. "However, this would still appear to be some way off."

Quite why they believe property prices will go back up to 2007 values by 2014 though I cannot quite understand, do you think they are of the belief that inflation will take care of the 31.4% drop ? Historically property values go up 1/ 2% above inflation per year do they not, that is BEFORE the RMBS market kicked in creating this huge property bubble that HAS to POP!

Still its a good message to GET OUT THERE - PROPERTY IS NOT GOING UP - LENDING IS NOT GOING TO GET BACK TO 2007 VALUES ANY TIME SOON (if ever)

So what do you do if you are a seller, wait until your property has lost 32% + and has to climb back up or try to offload now which will push prices down even further?

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That's good. Just proves nobody wants house prices to fall. The government will keep throwing everything at the housing market to make sure this doesnt happen. Thanks for that post. Cheered me up.

No one in my street is happy about the arrival of winter.

We are going to start a petition to get the government to throw everything at the climate to make sure that this doesn't happen. ;)

PS Thanks for that post. Cheered me up.

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That's good. Just proves nobody wants house prices to fall. The government will keep throwing everything at the housing market to make sure this doesnt happen. Thanks for that post. Cheered me up.

You just do not get it. The more money is wasted now wll mean greater cuts in public spending and increased taxes later. We can not survive as an economy by selling over priced houses to each other.

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It may be worth a few of you going back over some of their earlier predications, houses to fall 14% during 2008, followed by a further 10% during 2009 before stabalising in 2010.

2008 - Uk may fall into recession early next year but only for a very short time before climbing back to 1% growth early 2010.

In all fairness they are one of the more accurate predictors out there, not always on the money but pretty close whichever way you slice it.

The end result is prices are unlikely on average to fall any further than 25% before climbing back to 2007 levels around 2014, its going to be a bumpy ride of ups and downs like we have seen this year.

Eventually employment will pick up as we exit recession and over the next 5 years we will all be earning a higher wage than we do today.

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