Sunday, April 26, 2009

IMF suggests housing crash is on the cards for the UK

IMF Forecast LONG Housing Slump

The IMF were sneered at a couple of years ago when they said that Britain's Housing was overvalued by 40%. This was when mainstream commentators were suggesting that housing would be FLAT for a year. It was also before there was any hint of worldwide recession and the words, Banking, Lehmans and the City were expressed in reverent tones. They now have an equally negative prognosis of the UK market and say that the crash has a long way to go. They point out that in the USA the crash started earlier, is accelerating and that the USA didn't have the bubble we did. In the last month we have had the worst ever monthly decline from the land registry -2% (actual sale prices), the worst GDP figures in 30 years -1.9%, the worst budget deficit in history and now the IMF's prognosis. Buyers beware!

Posted by britishblue @ 06:47 AM (2394 views)
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12 thoughts on “IMF suggests housing crash is on the cards for the UK

  • Considering the content of Darling’s recent budget farce, the IMF’s predictions look very plausible but the message isn’t getting through to property sellers. How many years before we see asking prices drop significantly?

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  • Quiet guy – I think the message will only get through to sellers if interest rates go up.
    At the moment their choice is (a) to hang on and hope the market goes up and risk having to sell at a discount later or (b) sell at a discount now. Option (a) makes sense to me.
    The BoE won’t put interest rates up unless they have to – maybe one of the techies could explain whether this is likely or not?

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  • Is the perfect storm coming?

    Government unable to sell guilts without increasing IR. Homes put out to rent unable to find tenants so going onto the market. Holiday homes being thrown onto the market due to withdrawal of tax reliefs.

    Not to mention all the usual suspects such as: tougher lending criteria; rising unemployment; negative equity; increasing repossessions; above all, because of all these things, a complete change of sentiment in the housing market.

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  • @cyril

    “the message will only get through to sellers if interest rates go up.”

    Considering how exposed we are to a gilts strike, I’d say that’s a real possibility. In fact it’s not hyperbole to say that the UK could be forced to go the IMF again which would pretty much guarantee double digit interest rates being imposed on us. Sellers hanging on for option a) may be taking a huge gamble.

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  • as house prices in my area have fallen by no more than 10% in the last 18 months , and the fact i see houses at the same price they were 12 months ago still on the market , one could be forgiven for thinking that this last house price crash was all hype and maybe so will this forecast .

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  • Look at any graph of any downturn, be it house prices, share prices, currencies – whatever; and the one thing you don’t get is a neat straight line.

    UK house prices have fallen sharply. The rate of fall is now easing a little, bringing a little misplaced confidence to the gullible, optimistic and impatient.

    What next? – Consider the broader outlook:

    – House prices are still far too high, and wholly unsustainable.

    – The government has just presented a budget that was entirely political, and bereft of credibility.

    – The government needs to borrow on an unprecedented scale, and virtually every other country in the developed world is also set on a course of heavy borrowing.

    – In the UK, there is no untapped source of domestic funds to meet this borrowing requirement, so the government is dependant on it coming from overseas.

    – Other countries that are borrowing heavily also appear to be in broadly the same position.

    Reduced imports from the far east and lower oil prices actually serve to reduce the amount of money available to lend to the borrowing nations. Overall, there does not appear to be enough cash to lend.

    Faced with a lack of lenders, the BOE will be obliged to print more cash or raise interest rates to attract investors. For political reasons, the present government will inevitably tell them to print the money.

    When overseas lenders wake up to the UK’s agenda, they will start to move cash out of the UK instead of into it. A trickle could morph into a flood in a matter of days.

    Other countries are not immune to the same thing happening; but the seriousness of the UK’s position, our democratic timeline, and the attitude of the incumbents of Downing St; combine to make me believe that we will probably be the first in the queue.

    So my prediction is that the next ‘big thing’ is likely to be a sterling crisis. This will see the pound fall sharply, and the BOE forced to catapault interest rates to levels not seen since the early 90’s, and possibly higher. This could happen in a matter of weeks, rather than months.

    When exactly? That’s the difficult bit – but my gut feeling suggests this autumn.

    And the consequences for house prices?

    – Freefall.

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  • average salaries in the private sector are also FALLING….this housing market is being propped up by the very things that caused the bubble!.its sheer madness….no society can survive if its kids cannot buy a property.

    Spain unemployment now almost 18%

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  • How’ s this for a drop?

    A property near me (in West Yorkshire) went on the market 03 July 2008 at an asking price of £895,000, 6 September 2008 it was reduced to £795,000.

    In yesterday’s Yorkshire Post and also on the EA’s website it is now “offers in excess of £575,000”

    Let’s say it sells for £600,000, that’s a drop of £295,000 or 33% in under 10 months.

    Green shoots my a*se!

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  • flintster1994 says:

    “no society can survive if its kids cannot buy a property.”

    Not sure about that one taffee. Maybe, no society can survive if its kids don’t have access to shelter may be a better point.

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  • my forecast is that:-
    The housing market will probably continue to be propped up by the Government, so be patient until after the elections..
    There is a serious risk that, UK debt will increase and we will need to be bailed out by the IMF
    Sterling will obviously decline
    the IMF bailout will probably mean a raising of interests rates and a massive fall in prices
    There will probably be an overshoot on the downside

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  • Aaahhh…..at last. Some proper experts giving advice about housing markets. What a refreshing change!!

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  • flintster1994 says:

    IMF experts?

    Their not the the most impartial of organisations.

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