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Moneyforums
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Joined: 18 Jun 2004
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 Posted: Wed Oct 27, 2004 9:58 pm Post subject: OCT 04 - Fears House prices are Set for a BIG FALL ! |
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More evidence that the housing market has run out of steam emerged yesterday as the Nationwide reported the first fall in prices for three years.
And the National Institute of Economic and Social Research warned of the danger that house prices could tumble by 20%-30% in the near future.
"Looking at the history of the housing market, we have to say there is a significant risk of house prices returning to more normal levels fairly quickly," said Niesr director Martin Weale.
"I would not bet my money on there not being a 20% to 30% fall in house prices," he added.
The Nationwide said prices fell 0.4% during October - the first fall since the month after the September 11 attacks in 2001 - reducing the annual rate of price increase to 15.3%, the slowest rate since January.
Additionally new data shows new mortgage approvals tumbling by 30% in September compared with the same month a year ago.
The cooling of the property market follows five Bank of England interest rate rises since last November. Many analysts now think that soft house prices will be a key reason for the Bank to hold off raising interest rates again from 4.75%.
"This has been a period of marked deceleration in house price growth and is in part a result of 'real' factors, such as weak real take-home pay growth, rising interest rates and stretched affordability, acting as a drag on the market," said Alex Bannister, the Nationwide's chief economist.
Nationwide also said that the buy-to-let market, which has supported prices for many years as investors capitalised on a combination of the rising value of homes and high rental yields, was softening. "There is less demand from buy-to-let investors, perhaps dissuaded by low rental yields and the prospect of limited future capital growth," said Mr Bannister. |
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fireboy
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Joined: 18 Oct 2004
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| Posted: Fri Oct 29, 2004 1:51 am Post subject: |
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| I think they are going to fall maybe 10-20% over the next 2 years. |
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Neo
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Joined: 24 Oct 2004
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| Posted: Fri Oct 29, 2004 1:54 am Post subject: Triple Whammy ! |
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The key reasons why house prices are now falling and continue to fall well into the next year or more is that after the next election, Mr Brown will put up the taxes to cover his big budget deficit. Afterall theyve will have won the election ! They have thus upto 5 years to ingnite the next boom for the next election, 2 or maybe 3 years of pain before they start buttering is up for the next election is on the cards !
Since global inflationary pressures are building up and not decreasing this means that 2005 will be an inflationary year, which can only mean higher interest rates, which will slow the economy.
So a triple whammy is hitting the market and will continue to hit house prices more forceably during 2005. That is rising interest, rising taxes and slowing economy, all three together will defiently knock the stuffing out of house prices at extreme levels. |
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Deborah
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Joined: 12 Jul 2004
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| Posted: Fri Oct 29, 2004 7:03 pm Post subject: |
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Most people buy houses to live in for the long-term i.e. over 10 years, so it does not matter that much if they fall for 2 or 3 years and then rise.
Houses today are near 3 times where they were at the peak in 1990, so over 14 years house prices have not only recovered the whole decline form 1990 to 1994 but have tripled had you bought the house at the peak in 1989 or 1990.
In the long-run house buying is a no brainer no matter if you buy at the peak or bottom. |
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fireboy
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Joined: 18 Oct 2004
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| Posted: Fri Oct 29, 2004 7:07 pm Post subject: |
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Good points, though would prefer to buy AFTER a 30% drop than go into negative equity.
You also forget that now house prices are expensive to buy, i.e. it costs 5 or more times salary |
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Deborah
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Joined: 12 Jul 2004
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| Posted: Fri Oct 29, 2004 7:46 pm Post subject: |
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| fireboy wrote: | Good points, though would prefer to buy AFTER a 30% drop than go into negative equity.
You also forget that now house prices are expensive to buy, i.e. it costs 5 or more times salary |
The obvious problem is that IF house prices DON'T FALL ! you will be worse off by waiting for a house price fall. |
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fireboy
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Joined: 18 Oct 2004
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| Posted: Fri Oct 29, 2004 10:00 pm Post subject: |
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| Deborah wrote: | | fireboy wrote: | Good points, though would prefer to buy AFTER a 30% drop than go into negative equity.
You also forget that now house prices are expensive to buy, i.e. it costs 5 or more times salary |
The obvious problem is that IF house prices DON'T FALL ! you will be worse off by waiting for a house price fall. |
even if house prices don't fall, I will have made say 10-15% in interest over the next 2 - 3 years so will be in a better position. |
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Deborah
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| Posted: Fri Oct 29, 2004 10:18 pm Post subject: |
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| Don't forget the cost of renting. |
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fireboy
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| Posted: Sat Oct 30, 2004 12:48 am Post subject: |
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I'm not renting, I live with my parents so I guess I'm lucky  |
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Neo
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| Posted: Sat Oct 30, 2004 2:45 pm Post subject: |
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Don't forget that this time there are also all the buy to letters !
Who once its clear are not going to get the capital gains they were betting on will run for the exit, as their impact has been a strong contributary factor to the house price rise. |
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John1
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| Posted: Sat Oct 30, 2004 8:23 pm Post subject: |
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Hi
We have been trying to move up the property ladder in our area, and the market is falling, with average house prices down some £25k since April.
I think the reasons are both the interest rate rises and all the scare mongering in the media and gloom and doom merchants, has frightened a lot of first time buyers from gettting onto the property ladder.
Though I think its short-term and that prices will start rising again once people see there is not going to be a crash |
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