Second House Price Crash Predicted As Property Prices Fall Again



Second Property Crash Predicted

Second Property Crash Predicted

More glum news for British homeowners; you are expected to lose the equivalent of a ‘typical annual salary’ from the value of your home by the end of 2011 according to new research.

In what’s being described as a ‘second house price crash’, Economist magazine is pre-warning homeowners with their dire financial predictions of banks being increasingly reluctant in lending money which will ultimately lead to a decrease in prices.

The survey results come at a time where those struggling to keep up with mortgage payments are increasingly turning to sell and rent back options. It’s often said that the one main downside of the scheme – that sellers are unlikely to achieve the market value for their home as they often do with an estate agent – is negated by the predicted house-selling gloom and the fact that a quick property sale through the scheme takes care of estate agent fees.
The news also comes as the latest Nationwide house price index reported typical values dropping 0.9% last month. That follows a 0.5% decrease in July.
The slump in prices follows a ray of light during the past year which some described as a mini property boom but it now looks as though they spoke too soon.
Martin Gahbauer, chief economist at Nationwide, said: “As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices.”

Ed Stansfield, chief property economist at Capital Economics, said: “The rebound in house prices lacked any firm foundation.

“Judging the speed with which the second leg of the correction will unfold is difficult. If interest rates are kept at current levels for the foreseeable future, that will help to mitigate the impact of renewed rises in unemployment and the squeeze on household incomes stemming from the tightening in fiscal policy.

“On the other hand, if house price expectations take a turn for the worse, or if mortgage credit conditions tighten further, that would tend to increase the pace at which house prices move back to more sustainable levels.”

Figures from the Bank of England released earlier this week showed that only 48,722 mortgages were approved for house purchase during July.

Nationwide reported that the 0.9% August 2010 fall means the average cost of a home stands at £169,347.

Comments & Debate

  1. September 7, 2010 at 4:30 pm rantnrave Commented:

    Most sensible article on the state of the housing market that I’ve read for a very long time!

  2. September 7, 2010 at 7:26 pm george Commented:

    a huge crash is just around the corner, it’s only been stalled by the desperate efforts of QE to shore things up.
    the last two years have been a bull trap and i feel sorry for anyone who has been caught out but surely anyone but a greedy fool could see what was happening. the clever money left ages ago………

  3. September 15, 2010 at 4:04 pm John Smith Commented:

    UK property prices have to fall about 50% in order to become realistic with respect to what people actually earn. This enormous bubble is still to burst!

    Average UK household income is about 26000 pounds. The average home price ought to be about 3 times that (according to historical precedent), or ~80,000 pounds. Currently it’s twice that! Still a ways to go…

  4. September 28, 2010 at 11:22 pm Johnny T Commented:

    If house prices collapse the banks will be left with all those 120% morgages they lent and will go bust once again.This is why they are hoarding the cash we gave them.If the BEO puts up interest rates the housing market will collapse!!.When the spending round kicks in and people lose there jobs they will not be able to pay there morgages so the housing market will collapse…………and the bankers lived happily ever after.

  5. October 24, 2010 at 3:34 pm J.M. LEE SHIM Commented:

    In the short term, UK house prices are going to fall but not a lot. If house prices fall an awful lot, banks will go out of business and confidence will be shattered. When the banking sector is ill, the whole economy will suffer. that would jeopardise any chance of economic recovery despite the drastic measures to re launch the economy recently. A 10% fall in house oprices within 3 months is more than enough to get to that position. So whatever the circumstances, expect that Goverment will intervene so that house prises fall is not too sharp in a very short while.

  6. November 24, 2010 at 3:38 pm Morage Browning Commented:

    The biggest housing CRISIS in our lifetime is on it’s way. Margaret Thatcher started it by selling off all the good council housing stock. Then came 100% mortgages which continued for donkey’s years. I asked a friend who lived in a big house pre 2007, “why are you so happy about crazy house price rises when you have children? Surely, it just means they’ll have to pay a lot more a house when they grow up?” She replied, “but by then everything else will have gone up as well.” WRONG. In some unfortunate cases wages are actually FALLING by huge percentages eg. public sector admin workers under ‘single status’ are having their wages slashed. I read one woman’s wage was being REDUCED by £17,000. I sincerely hope she didn’t take on a 100% mortgage at 5 times her original salary. These are the new salaries up for graps in the future. But my friend was right about one thing – everything else is going up – like petrol, heating, food, train fares etc. I think future governments will have to BUY BACK the council houses it sold off or there are going to be a lot more people sleeping in cardboard boxes. Either that or the price of a modest house might fall by anything up to 75% while big expensive houses in good areas might only experience modest drops as these are usually bought by people that have made big gains along the way and who do sometimes get significant wage increases and/or bonuses.

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