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House Prices "over-Valued By 28%"

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House prices are 28% too high and mortgage debt is “unsustainable”, a new report has claimed.

It says that total household debt is massively up, and that the recovery is “extremely fragile”.

The report, Consumer Credit Trends by independent research company Verum Financial Research, says the UK economy is risking a major downturn due to unsustainable levels of household debt.

The report says that for every 0.5% increase in the Bank of England base rate, there would be a £48bn reduction in household spending.

If the base rate increased to 3% it would tip the UK economy back into recession – and house prices would undergo a “sharp correction”.

Professor James Fitchett, of Leicester University School of Management, says in a foreword to the report: “The prospect of even slightly higher marginal lending rates could have a catastrophic effect on the economy.”

The Verum report says that household debt remains unsustainably high due to spiralling mortgage debt. Last year, it says, of £1,437bn total household debt, 89% was mortgage debt.

Robert Macnab, Verum’s director of research, said: “This elevated level of mortgage debt is unsustainable.

“In a stable housing market, house prices should grow at the same rate as household incomes so that periodic ‘booms and busts’ are avoided.

“So unless wages increase quickly, which is unlikely, our analysis of the relationship between household incomes, debt and property prices indicates that UK house prices are currently over-valued by 28%.

http://www.propertyindustryeye.com/house-prices-valued-28-claims-new-report/

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Sounds about right for me.

Would bring desirable houses in my area into my "borrowing comfort range"

I seem to remember some of the big m-o-m drops in 2008 being 3%.

Crash could be over in a year or two IF THEY WOULD JUST LET IT HAPPEN !

Edited by Reck B

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"over-Valued By 28%" in Northern Ireland. :P

Just posted this in the NI forum.

BoEePwYIQAAhtSXb.png

Just imagine what these figures would look like if NI house prices declined by a further 28%!

from the Resolution Foundation - full report here. http://www.resolutionfoundation.org/us/downloads/mortgaged-future/Mortgage_note_2.pdf

post-11377-0-77980500-1400588726_thumb.png

Edited by little fish

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The link also highlights the fact that the two Government house prices surveys show one price at £169,000 and the other at £264,000. There really ought to be a standard way of measuring the average house price which is understandable and without exclusions. The land registry is a convenient reference allowing the MPC to persist with zirp and is still showing property in many provincial areas at an inflation adjusted nadir such as Wales.

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Just posted this in the NI forum.

attachicon.gifBoEePwYIQAAhtSXb.png

Just imagine what these figures would look like if NI house prices declined by a further 28%!

from the Resolution Foundation - full report here. http://www.resolutionfoundation.org/us/downloads/mortgaged-future/Mortgage_note_2.pdf

To be fair, NI prices (well, Belfast prices) seem to be recovering slightly of late. Certainly lots more stuff selling and asking prices rising.

Although they look good VFM relative to the madness that is London/SE England, relative to local wages they are still too expensive. However, as long as the government trots out a succession of loony schemes to pump asset prices and we see financial repression continue, there is every chance that they could continue to strengthen.

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The link also highlights the fact that the two Government house prices surveys show one price at £169,000 and the other at £264,000. There really ought to be a standard way of measuring the average house price which is understandable and without exclusions. The land registry is a convenient reference allowing the MPC to persist with zirp and is still showing property in many provincial areas at an inflation adjusted nadir such as Wales.

£264K is the target for the other one. :lol:

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  • 408 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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