House Prices To Fall 5 Percent From Here - Poll

[cool_hand]

http://uk.reuters.com/article/idUKLNE68M03720100923

(Reuters) - Britain's housing market is in the midst of new dip that will shave at least another 5 percent off current house prices, according to a quarterly Reuters poll of economists and property analysts.

There was a marked shift in tone from previous polls, as 18 out of 24 respondents said they expected to see a "double-dip" in house prices -- a scenario dismissed by all but six analysts out of 22 in a poll taken less than three months ago.

With severe government budget cuts soon to take effect and around 600,000 public sector jobs expected to go over the next six years, respondents cited homebuyers' lack of confidence about the direction of the British economy.

The survey predicted house prices will fall 0.5 percent next year on average after rising 1.0 percent in 2010 -- essentially flat-lining. In July, analysts predicted home prices would climb 3.5 percent this year and nearly 2 percent next year.

Reports from the Nationwide Building Society, Royal Institution of Chartered Surveyors and property website Rightmove all showed house prices already in decline last month.

Too much supply coming on the market and legislation changes were cited by respondents as depressants for house prices.

"We are seeing signs that homeowners who had managed to hold off putting their homes on the market, are finally giving up, causing a pick-up in supply which has depressed sale and asking prices," said Azad Zangana of Schroders.

But Zangana said it was hard to foresee another crash of the sort that wiped around 20 percent off the average value of homes, peak-to-trough, during Britain's worst recession since World War Two.

Most analysts said prices would not see any hints of real recovery until well into next year.

STILL TOO EXPENSIVE

The poll showed UK houses are still too expensive, assigning a score of 7 on a 10-point scale where 1 is extremely undervalued. That is a rise from 6 predicted in the July poll, despite the average house price having fallen since then.

The Nationwide's house price index shows the average value of homes have fallen 1.4 percent over July and August.

"House prices should eventually recover but it will be a long haul before they return to their mid-2007 peak levels," said John Hawksworth of PricewaterhouseCoopers.

Britain's economy grew 1.2 percent in the second quarter of this year, the fastest in more than nine years, although economists polled earlier this month see this pace slipping markedly in the quarters ahead.

With the impact of the government's fiscal austerity measures yet to be felt, homebuyers' uncertainty about the economy looks likely to persist for some time.

The poll suggested that the tightening of banks' credit standards after the financial crisis would keep mortgage lending far short of pre-crisis levels for at least a year, despite the benefit of record low interest rates.

The number of loans approved for new mortgages fell in August to its lowest since the housing market hit a trough in 2009, according to data from major British banks published on Thursday.

The poll showed monthly mortgage approvals at 50,000 in six months, and 55,000 in 12 months. That compared with 55,000 and 60,000 in July's poll, far below the average of 104,000 seen in 2007 before the market crashed.

Some respondents also identified legal and tax changes as major factors that will push down house prices.

The UK's Financial Services Authority's review of mortgage market regulation is designed to prevent risky lending practices that contributed to the financial crisis, although industry bodies say it will hit first-time buyers and stifle the market.

"Numerous recent policy announcements are inadvertently conspiring to stunt what has been a surprisingly strong bounce back in the UK housing market," said Philip Rush of Nomura.

He said the withdrawal of home information packs had increased the number of listings and therefore the overhang of residential stock, while an increase in capital gains tax and cuts in housing benefit would hurt rental property values.

[Tired of Waiting]

http://uk.reuters.com/article/idUKLNE68M03720100923

(...)

Excellent news. Thanks for posting it CH,

My favourite bit:

"The poll showed UK houses are still too expensive, assigning a score of 7 on a 10-point scale where 1 is extremely undervalued. That is a rise from 6 predicted in the July poll, despite the average house price having fallen since then."

A mathematical measuring of penny dropping!

Another pearl:

"We are seeing signs that homeowners who had managed to hold off putting their homes on the market, are finally giving up, causing a pick-up in supply which has depressed sale and asking prices,"

It reminded me, a few weeks ago I read something like: "Don't panic. But when it is time to panic, be sure to be the first to panic!"

.

Edited September 24, 2010 by Tired of Waiting

[GordonBrownSpentMyFuture]

Let them get used to 5% initially... then have that revised to 7%... then that'll be revised to 10% in a years time... and then the fun will really begin.

[Tired of Waiting]

Let them get used to 5% initially... then have that revised to 7%... then that'll be revised to 10% in a years time... and then the fun will really begin.

Yep.

Actually I think it will be a bit faster than that. If the penny is already dropping now, I think this autumn and winter will make future trends much more clear.

[Pent Up]

Yep.

Actually I think it will be a bit faster than that. If the penny is already dropping now, I think this autumn and winter will make future trends much more clear.

Me too. Notice how quickly their sentiments changed from just three months ago. Three months time we will be in full on crash mode IMO

[Tired of Waiting]

Me too. Notice how quickly their sentiments changed from just three months ago. Three months time we will be in full on crash mode IMO

Exactly.

[Toto deVeer]

What's interesting is just how much things have changed. During the last 3 corrections, it took about 5 years for peak to trough. And the driver for the correction was a steep rise in interest rates. It looks as though this correction may happen due to assert deflation (driven by debt deleveraging) rather than rising interest rates, and it may occur more quickly. And sentiment seems to be playing a more significant role too.

Eventually interest rates have only one way to go, and that is up. But I believe this could put a long term downward pressure on prices after the deflation correction. Instead of the traditional broad 'V' recovery in house prices this time it may instead be an 'L'.

[abharrisson]

What's interesting is just how much things have changed. During the last 3 corrections, it took about 5 years for peak to trough. And the driver for the correction was a steep rise in interest rates. It looks as though this correction may happen due to assert deflation (driven by debt deleveraging) rather than rising interest rates, and it may occur more quickly. And sentiment seems to be playing a more significant role too.

Eventually interest rates have only one way to go, and that is up. But I believe this could put a long term downward pressure on prices after the deflation correction. Instead of the traditional broad 'V' recovery in house prices this time it may instead be an 'L'.

The technical driver of this correction was the credit crisis.... just becasue the initial slide stopped and was largely reversed doesn't mean we are not in the same phase. Don't doubt the degree to which credit availability is still driving this market as it did to its heights when it was in the opposite direction.

I do agree about the flatness ( ish) ... I just reckon that's what we'll see from here on in terms of nominal pricing ... my money's on this correction being driven largely through below inflation performance over the next few years.... which to Joe Blogss will feel like the L you describe.

[Tired of Waiting]

What's interesting is just how much things have changed. During the last 3 corrections, it took about 5 years for peak to trough. And the driver for the correction was a steep rise in interest rates. It looks as though this correction may happen due to assert deflation (driven by debt deleveraging) rather than rising interest rates, and it may occur more quickly. And sentiment seems to be playing a more significant role too.

Eventually interest rates have only one way to go, and that is up. But I believe this could put a long term downward pressure on prices after the deflation correction. Instead of the traditional broad 'V' recovery in house prices this time it may instead be an 'L'.

I think you are right. This reminds me of that old chart about the Japanese case, with slow falls for 20 years!

[Executive Sadman]

It does say "at least". Could mean they will fall 99%, although, call me a bull if you want, i personally dont see a fall of any more than 90%,

[Brave New World]

It does say "at least". Could mean they will fall 99%, although, call me a bull if you want, i personally dont see a fall of any more than 90%,

With the twin fuels of easy credit and the public sector bubble being a thing of the past - 10% fall seems rather bullish

25-30% over the next 3 years is my pure gut feeling. Dont forget some more deprived areas have already fallen circa 15-20% (North Bradford).

The least well off will always sucomb first but the pain will always trickle down as time goes on (and the public sector cuts hit the aspiring middle and lower middle class).

Does anyone see an real economic bound in these fundamental times? And as the game goes on less and less will be able to hang on.

[Tired of Waiting]

With the twin fuels of easy credit and the public sector bubble being a thing of the past - 10% fall seems rather bullish

25-30% over the next 3 years is my pure gut feeling. Dont forget some more deprived areas have already fallen circa 15-20% (North Bradford).

The least well off will always sucomb first but the pain will always trickle down as time goes on (and the public sector cuts hit the aspiring middle and lower middle class).

Does anyone see an real economic bound in these fundamental times? And as the game goes on less and less will be able to hang on.

I agree that the national average HP should fall by some 20-30% in real prices in the next 3 years. But partially masked by inflation. Perhaps some 10% inflation, and 10-20% nominal prices.

[Soton]

The whole system is a mess. The planning system coupled with high material costs and green tax in building has made building impossible in many South Coast areas.

This will hold up prices as nothing will be built until we see a 20% rise which in my mind will be in a generation.

This said the complete lack of stock will hold prices up in desirable areas while non desirable areas and city centre's will spiral into a mess. Price falls will differ from postcode to postcode let alone region.

I cant imagine how it will sort itself out as young people graduating are then paid peanuts which does not amount to a mortgage on anything other than a studio.

I see 10% falls in desirable areas from now till March 2011 and falls in Cities up to 25% falling into a 6.5%-8% return on LHA.

We are stuck as building costs more than housing and housing is not affordable to young people and the housing which is is not desirable.