Thursday, March 20, 2008

Shocker: Bank of England say “house prices will fall” !!

House prices fall 'won't help first-time buyers'

Homeowners and those hoping to step onto the property ladder have both been dealt a blow after a senior Bank of England policymaker warned that house prices will fall but the impact of the credit crunch means affordability won't improve.

Posted by quiet guy @ 11:36 AM (1747 views)
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29 thoughts on “Shocker: Bank of England say “house prices will fall” !!

  • Freefall without a parachute! messy.

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  • Very true, but a period of sanity when prices return to a sustainable level will see FTB start to trickle back into the market.

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  • @ quiet guy Shocker: Bank of England say “house prices will fall”

    @ actual statement We may see prices fall this year

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  • Why do people assume that people who rent do so because they can’t afford to buy?

    Haven’t they heard of choice?

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  • george monsoon says:

    I think the point he is trying to make is that with the credit crunch, we FTB’s will find it more difficult to get a mortgage without a substantial deposit. Being a family man with bills my personal savings would not cover a 10% deposit on a terrace for 120 grand, so I am well and truly snookered… for the moment at least.

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  • “a senior Bank of England policymaker warned that house prices will fall ”

    ‘Will’ not ‘could’. I can’t see that they would have said that on the record unless there has been a change of policy. Maybe it has been decided to let prices fall, get it out of the way and blame it all on the americans.

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  • This sound like the BOE trying to get people who have been priced out to somehow want house prices to stay high by telling them that low house prices are bad for them ! Desperate.

    However if you have to sell a house then you have to sell it at the current marked rate, so prices will have to drop to a level that buyers can afford at the time.

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  • Last_days_of_disco says:

    Wait a second, this is like saying. Nobody can buy houses now because they can’t afford them, therefore they must drop, but people won’t be able to get mortgages so that won’t help things.

    That seems to be based on the assumptions:

    1. Not enough houses and hence people will just sit tight.
    2. The economy will be hunky dory and everyone will just keep paying their stupid mortgages and stay in their jobs.

    They are looking at the reality through their bull market spectacles. Prices always go up, this is a correction and then they will go up again (assuming our inflationary Keyensian system survives, that is broadly correct, in real terms property values just stay the same on average, but inflation makes them appear to rise).

    No one will want to buy a house because it will be a depreciating asset and once the bulls turn to bears, the market will simply fall to where the few people who want to buy are able to afford. The immigrants are already leaving. No there will be plenty of opportunities to pick up “bargains” the problem is no one will want to. The herd instinct will be very strong in the other direction, think about it, lots of us got sucked in chewed up and spat out on the way up, so why can’t it work the other way?

    You will be ridiculed at dinner parties for even thinking of buying a place. The banks will be only to happy to find someone who is willing to buy a place and because it will be *so* much cheaper, the 10-20% deposit you need will be no problem, it won’t be so onerous. The problem is most people will be in negative equity and that will mean they are stuck whatever the prices.

    Prices will drop to what people can afford, but no one will want to buy because they were so badly burnt. But we are a *long* way from there. Things have to become like the US first. A year from now we will be approaching bottom. The more government interferes, the longer it will take (see Japan).

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  • Crashwatcher says:

    Prices will drop UNTIL affordability improves – that is the nature of market forces – simple economics not brain surgery,

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  • @ cornishman

    If you read the article I think you will find the actual comment was ‘We may see prices fall this year’

    The author of the article howerever paraphrases that as “a senior Bank of England policymaker warned that house prices will fall “

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  • Kate Barker said only months ago that high demand and low housing supply will ensure that prices won’t fall.

    She changed her tone now, hasn’t she?

    Which means we can safely disregard anything she has to say this time round too.

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  • “Why do people assume that people who rent do so because they can’t afford to buy?

    Haven’t they heard of choice?”

    Very good and interesting point, Davros. I used to cycle to work near Birmingham and people always assumed that I couldn’t afford a car! I think the idea of not wanting to have it all now on tick makes come people nervous.

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  • Innocent Bystander says:

    … and not a word about the Buy-To-Let market! Let’s face it, the demise of this sector itself has put the brakes on house-price increases. Why is everyone expecting FTBs now to start rescuing the market???

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  • some people very nervous.

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  • planning4acrash says:

    Bulls only call a fall to control perception of it. To try and contain it. Read between the lines, they are saying that prices will fall further than previously thought.

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  • I got a good savings and the bank is actually asking me if I want a mortgage

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  • I want to hear what Stephen Nickell has to say about the housing market, and whether he still has his (ridiculous, in my opinion) views.

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  • “but the impact of the credit crunch means affordability won’t improve.”

    That is one of the dumbest things I have ever read. Scary, considering the source.

    Affordability is someones income relative to the mortgage monthly payment, which in turn is made up of size of mortgage and interest rate charged. What he is basically saying is that paying less for a house, and therefore having a lower mortgage, will not affect affordability because interest rates are rising because of the credit crunch. Well – I think that just means that house prices need to fall more than interest rates increase. Then affordability will improve. And that is exactly what is going to happen.

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  • @Fools

    OK, it’s possible that the article contains a paraphrasing typo but without having been present for the whole interview, we can only guess whether or not the article reflects the message that the bank wanted to give out. The very fact that we are having this discourse at all speaks volumes about the current situation.

    I suspect that the bank is preparing the public for some substantial losses on housing, as suggested by planning4crash.

    Presumably, we should also read the headline as “House prices fall ‘may not help first-time buyers'” or did the Telegraph manage to publish what they intended for that part of the article?

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  • House price fall will definetely help me to step on property ladder. I’ve already saved a deposit which could bought me a house 10 years ago and I keep saving arounf 1k a month.

    So, como on prices, go down.

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  • great article.. hopefully people will opt to rent instead of buying like you guys, prices will drop (fingers crossed) and i will buy more cheaper property to rent out. Seems like things are getting better and better for investors…

    🙂

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  • This is another example of a newspaper twisting logic.

    Credit Crunch = no cheap mortgages = bad news for first time buyers (all other things being equal)
    Falling house prices = less money needed to buy a house for first time buyers (all other things being equal)

    So how exactly can anyone managed to conclude that falling house prices are bad for first time buyers?

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  • @ quiet guy

    In reality it probably doesen’t matter what she says or thinks. It’s just that if we are going to discuss some very serious and real issues, accuracy of information is very important, otherwise you are just as guilty of what you blame others for ( Stuart Law, Kirsty Allsop etc). Also there are some who have done very well out of previous economic climates, I don’t think their views of future scerios should be put on a pedestal. Everyone’s view has some validity to it, till it proved wrong, it’s all about working out the error factors involved!!

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  • happyrenterz says:

    @ paul
    I agree completely. You can’t get a mortgage now because any fool knows buying a house now means it will be in negative equity in a year’s time. The banks know this and big money knows this. No one wants UK mortgage debt anymore, all the subprime toxic slime adjectives apply.

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  • @Fools

    “In reality it probably doesen’t matter what she says or thinks.”

    I agree that Kate Barker’s views are not going to influence the market in themselves but how the bank chooses to present their policies is quite important in my opinion. As I said earlier, my interpretation of this report is that the bank want to depress future expectations (of wealth) and the reasons for doing that are probably not good news for the man in the street.

    “otherwise you are just as guilty of what you blame others for ( Stuart Law, Kirsty Allsop etc).”

    Ouch! I’m not trying to sell anybody anything; I just want to buy my own living space someday without getting into stupid levels of debt.

    “there are some who have done very well out of previous economic climates, I don’t think their views of future scerios should be put on a pedestal.”

    Not sure what you’re getting at here. Personally, I’ve no problem with views contrary to mine – preferably backed up by a decent argument.

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  • @Fools – yes point taken. I realised my mistake just after I posted. It’s a shame that we can’t get the posting back again!

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  • @ quiet guy

    “there are some who have done very well out of previous economic climates, I don’t think their views of future scerios should be put on a pedestal.”
    It was a moot point, but it seems that some on here believe everything that people like Dr. Doom said would happen because it did once before (and Merryn Somerset Webb too), at the end of the day you can spin statistics however it suits an argument, eg inflation in UK & USA, housing starts in USA, retail figures all this week.

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  • No worries Cornishman, I hope you understand why I made the point…otherwise it’s like chinese whispers!

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  • @Fool

    I’ve been waiting to see how other media report this story.

    http://www.bloomberg.com/apps/news?pid=20601085&sid=amM79p2GERdY

    Bloomberg give “may crash” rather than “will crash” which confirms your earlier comments.

    It seems that the real “shocker” was the Telegraph’s reporting. Oh well.

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