House Price Crash Imminent

by Mark Johnston

More doom and gloom for the UK housing market as new figures show further prices slides. Last month showed the sharpest three month decline since April last year (2009).

The report shows that prices are down a further 0.7% during the month of October which followed a dismal performance during September and further drops of 0.9% in August and 0.5% back in July. At the current rate analysts are predicting a 1% reduction in house price inflation by the end of this year.

Looking over a three month average doesn’t paint a rosey picture either, figures are down 1.5% with the average house price at around £164k down one and a half percent since the start of September and a massive three and a half percent since the markety peak way back in June.

The report which was published by leading mortgage provider Nationwide backed up unsettling figures from the British Banking Association (BBA) which painted a picture of low mortgages approvals (lowest in the last year and a half), a slow rate of growth and a troubled first time buyer market which has been impacted by the governments announcement of their spending review. Even if when first time buyers aren’t put off by looming job cuts they are finding it practically impossible to find credit.

Howard Archer, the chief economist at IHS Global Insight was quoted in saying: “Latest housing market data and surveys have been consistently weak, and the housing market really does not seem to have got much going for it at the moment. Critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability and how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in.”

Market insiders are no longer asking themselves whether there will be a house price crash but instead how deep the crash will be. September alone slashed house prices down £6,000.

Ed Stansfield, chief property economist at Capital Economics, said: “The fact that house prices now appear to be on their way back down after the past year’s rather unexpected surge should not be a surprise. Not only is the market overvalued on most measures, but house price falls are entirely consistent with the drop in buyer inquires and mortgage approvals that we have seen in recent months. They also square with reports that lenders have begun to tighten credit standards again.”

The industry has warned that obtaining a mortgage will get even more difficult as new regulation kicks in and lenders make it more difficult for first time buyers by asking for larger deposits. Even the Bank of England have raised concerns over the increased number of borrowers that are unable to pay back their mortgage.

The Bank of England has warned that obtaining a mortgage is about to become even more difficult amid fears among lenders that increasing numbers of home owners will be unable to keep up with monthly mortgage payments.

Nick Moon, managing director of GfK NOP Social Research, said: “Confidence has remained reasonably consistent since June but this could change as the public comprehends the full impact of the Government’s cuts. Should November’s figures show a significant drop, it would suggest that a double-dip recession had become more likely.”

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