With the US subprime crisis spreading to Europe, shockwaves in Northern Rock which would spread to other banks, UK economy growth not looking healthy, increasing trade deficits, sharply rising mortgage costs, falling corporate profits and job cuts especially in the City, and as market turmoils escalates, housing price which shows a first drop of 2.6% (from Rightmove last month), this are the signs of the beginning of a housing crash. PROPERTY SHARES ARE A SELL!

hehe I can see someone is caught in the web.

HYLEO ..... not clear if you mean "sell prop SHARES" or "sell physical houses" ..... if you mean the latter, then for sure you are talking bollocks ....... it would comne as no surprise if house prices in general stagnated or even fell back a little, for it is (imo) self-apparent that the rises over the last few years are unsustainable .... however, quality property in the right location will always be in high demand, even if selling them takes a little longer than of late

this child needs sending back to the dark side!

I've believed for a couple of years that house prices will crash. It's only a matter of time IMO.

AL .... too sweeping a statement .... crash by how much and for how long?

They will fall, certainly, but Cynics is a fair question.
The other question is what the catalyst will be.
Tougher lending? Possibly. Higher rates? Seems unlikely for some time.
Higher unemployment? Perhaps, but the current unstable and low paid jobs culture hasn't done it.
Lower demand. Definitley. But this also seems unlikely unless the government does what people are demanding and creates massive investment in social housing and cheaper private housing. Those same people who demand that will the demand the PM's balls on a platter because there has been a housing "crash" and they are in negative equity.
Who'd be a politician?
Alan

Big Al,

Sooner or later you're bound to be right if yiu keep on saying it long enough!

Actually the last 'crash' was far from that, more of a slow downward spiral which lasted a few years.

Another random thought on house prices.
Your view on the direction is often driven by your own hopes for them, and that differs very much by life stage.
As a FTB, I would be hoping for a crash and looking for the signs, so I could afford to get on the ladder.
As a growing family in a small semi, I would be looking for stability so I could save up and move on, but a crash is no good as my equity would be swept away and I would be stuck.
As I reached retirement and the family moved on, I would desire a boom before I downsized, so that I had more equity than ever before to ease my life in retirement.
Whatever happens with house prices, some will be delighted, others horrified. Classic no win.

I think 30% is not unlikely with little or no recovery until 2015 or thereabouts.

Andy - the last crash was a crash and make no mistake. I know someone who bought in Norfolk in '88 having knocked around 20% off the asking price and he was still in negative equity for alomst all the 90's.

This time around you hear of 9x multiples being lent with interest rates being their lowest in 40years in 2005. Anyone who thinks a crash is not on the cards is a helluva dumb-ass IMO.

BTW, I've no properties in my investment, having sold up some time ago. They were bought 94/95. ;-))

i happen to own my house, which we bought in 1986 at what we thought to be absolute top dollar, but that has increased 6-fold and perhaps more ..... it happens to be in an ace positon and, for various reasons, almost unique (for lack of a better word) ...... even if prices fall, and our house is included, i'll not care much, for if we move then it will be to downsize.

i also bought a small freehold off Portobello Market in 1978 for what is now a risible sum ...... that has risen exponentially and for various reasons has further still to go . ..... by miles the best investment i ever made, though did not realise at the time.

point i am trying to make is that with property, quality and location (location, location) will always be a sound investment ....

though beware of companies who try to drag you in on that, for we also got totally screwed on a couple of EIS deals where the commercial properties, allegedly bought on the cheap, seemingly did no better than stand still over a number of years.

even if X rents, then Y has clearly bought, and Z has obviously sold!

Never bought and sold property as an investment but might be worth looking at should prices retract in the future.

ED: Sorry getting off topic here.

I agree with you, cynic (ha, make a note!) "quality property in the right location will always be in high demand", but that doesn't constitute the market as a whole by any stretch.

hi choccy .... long time no flirt!
one could draw the same parallel with shares!

Cynic, it is shares I'm talking about now...but in the near future, house prices will also drop.

Indeedy you old grouch ;)

But in my simplistic view it's all swings and roundabouts.

Ok, so in the case of mortgage default, house prices will be affected as lenders will dispose of properties at less than market value for a quick return. But aside of the impending dilemma facing property owners with negative equity, if prices slump considerably at the bottom end of the market, this would surely enable 1st time buyers to either move out of rented accommodation, or (please, please) give their parents some longed for space :)
Result: reduced BTL = more demand to buy property.

House builders might not be building as many new houses, but there is an increasing demand, having by nature been prevalent at the lower and median range of the market, but more recently closer to the higher range, for property extensions - and some of them are quite considerable. In the last couple months I have counted 14 skips just within walking distance. There are also as many houses on the market - one for almost a year!

Another subtle change which I assume is not localised to south Manchester, is that councils are finally listening to residents and slapping on conservation orders in many areas. This has two effects of course. The market for BTL is slumping, and therefore in the short term diminishes the value of previously suitable property for development - but conversely these areas as a whole have shot up in value, as ordinary 'professionals' are willing to pay the price to move into a markedly improved neighbourhood - and closer to work. Imo, these properties will always remain 'desirable'.

5 interest rate rises this last year, people forget they take a few months to take effect, on top of that add the extra supply of houses prior to 1st August to dodge the sips package (this includes all houses, as it was only a last minute decision to limit to 4 beds, most sellers had already marketed their property), 5.75% is low, and demand is still high... The growth in prices has surely got ahead of itself, but retracements in prices will only be to the serious sellers who have marketed their property at an over-inflated price in the first place.
Even if the government plan to build 250,00 starts a year it will take 10 years to solve the demand problems...
I see turmoil and panic in the stock markets and in general, but i still see people filling restaurants and buying expensive cars, plenty of money to be spent.
A slow down was predictable, but demand is still high and borrowing relatively affordable, i dont see a crash unless rates go much higher, or demand tails off.

What utter twaddle from most posters! House prices have been increasing at a steady rate since 1979 - see link below.

During that time mortgage rates have been at 15% and more (I know because I had one) and still prices rose!

The only dfference now is that, aided by easier borrowing, borrowers stretch themselves and, not realising the mortgage rate is historically low, run the risk of negative equity situations. It people weren't so greedy and didn't borrow the most they could afford, there would be no problem.

When push comes to shove, people realise bricks and mortar is a good investment and will sacrifice other spending to get on the ladder.


The property market occasionally slows down and these slow downs sometimes turn into a drop for short periods - but look at the facts - the prices always have regained their past levels after a drop and soared past them.



http://www.wheresmyproperty.com/prices/historicprices.htm

Historic mortgage rates since 1989 here:-

http://www.moneyextra.com/dictionary/Interest-rate-history-003455.html

oblomov ..... you contradict yourself ..... unless Alan tells me off yet again yet again, negative equity arises because your house price has fallen below the price at which you bought, not because mortgage rates rise ...... the latter might well hurt badly, and you may be forced to sell, but that is not the same thing.

you then continue correctly, by agreeing that over time, especially in UK, "prices always have regained their past levels after a drop and soared past them".

Agree cynic, though I dont think I contradicted myself. I didn't make myself clear. What I should have said was that negative equity is only a problem if you have to sell and that usually happens because of the mortgage rate rise because borrowers didn't account for the fact that the mortgage rate can rise! They borrow what they can afford at the current interest rate, not what they could afford if it goes up a couple of per cent.

Partly the lenders fault - they used to build in a margin so thet borrowers could afford a rise. Now the onus is on the borrower to do it themselves, and greed often prevents them from doing so.