Crash just started. 40% by mid 2009.

zcacmxi

I used to think we'd see 20% price falls, and those predicting 40% or 50% were being over bearish.

But now, looking at the facts, I think the 20% we've seen already in the mainstream market, is just the start. We will certainly see another 20% next year, and this is even now predicted by the Treasury & mortgage lenders! I agree with them for the following reasons:

1) Mortgage funding. Banks can no longer fund on wholesale markets. Northern rock demonstrated that this business model no longer works.
2) Banks unwilling. Banks unwilling to lend due to rising repos, and falling prices.
3) Tax rises in next few years: Government keeps on borrowing, and taxes will have to rise to pay it back. National Insurance increase is already announced. People will start tightening budgets to prepare for it.
4) Inflation. Cost of goods (majority imported) will increase as are paid in dollars. As the value of the pound falls (40% drop this year already), importers will have to pass the cost increase on.

In all, we have a "perfect storm". The buyer's market will continue, and prices will continue to fall during 2009.

Really2

zcacmxi wrote: »

I used to think we'd see 20% price falls, and those predicting 40% or 50% were being over bearish.

But now, looking at the facts, I think the 20% we've seen already in the mainstream market, is just the start. We will certainly see another 20% next year, and this is even now predicted by the Treasury & mortgage lenders! I agree with them for the following reasons:

1) Mortgage funding. Banks can no longer fund on wholesale markets. Northern rock demonstrated that this business model no longer works.
2) Banks unwilling. Banks unwilling to lend due to rising repos, and falling prices.
3) Tax rises in next few years: Government keeps on borrowing, and taxes will have to rise to pay it back. National Insurance increase is already announced. People will start tightening budgets to prepare for it.
4) Inflation. Cost of goods (majority imported) will increase as are paid in dollars. As the value of the pound falls (40% drop this year already), importers will have to pass the cost increase on.

In all, we have a "perfect storm". The buyer's market will continue, and prices will continue to fall during 2009.

So a 25% fall in just over 6 months.
Have you been naughty on HPC or as it got a bit boring everyone agreeing.;)

zcacmxi

The reasons I believe the rate of fall will accelerate:

1) Previously some people did not believe prices would fall. They believed the government/banks/etc that were predicting stability.
2) Previously mortgages were still available. The banking/funding crisis is in full swing.
3) The economy is heading for a recession.
4) Agents shutting down. Many properties remain unsold for 12+ months. People seeing asking prices coming down.

So due to all of the above, more & more people are seeing & believing prices are falling and therefore put off buying, and those that can buy are putting in offers that take account of the current climate.

zcacmxi

In addition, the mainstream stats trail the market by a number of months.

Early indicators are auctions & investment trusts which are always ahead of the mainstream markets, and already show falls of up to 50%.

The auction/repo market property is already selling for up to 50% below. See previous post: http://forums.moneysavingexpert.com/showthread.html?t=1288325

Property Investment trust companies are selling at up to an 80% discount of Net Asset Value! So a company with 74p worth of property per share, is selling at 15p per share!
See: http://www.trustnet.com/it/funds/perf.aspx?txtSearch=&universe=ut&nsUniverse=UT&sort=9&page=0&ss=0&txtS=&txtSS=&columns=&class=conv&booAITC=0&reg=1&sec=4&aitc=all

So when asking prices are 20% lower now, people will be putting in offers of 10% below and the once the stats come out they'll show 30% falls... etc. etc. It will not be long before we see 40%. Mid 2009!

Really2

You still need over falls of 3.5%+ per month untill the end of June to get to that figure.
That is a massive decline in a short space of time and even the most bearish would strugle to see a 25% fall in just ove 7 months.

PS Auctions are not ahead of the main stream they are an extream view of the markets. People use auctions last in this market and auctions are restricted to cash buyers at the moment.
How many people can get an aproved mortgage without a valuation at the moment?

zcacmxi

Agreed, auctions are an extream view. However, in the current market where the "regular market" is selling very few houses, and auction sales are booming they are setting sentiment amongst regular buyers...

In addition, although extream at present, an auction sale is the same as any other sale and the transaction is registered with the land registry and figures end up in the statistics. Sold prices are freely and readily available on the web. So, when trying to sell a property in the regular market the price achieved will be affected in valuation and offers received if there is another sold recently in the local area at a massive discount via auction.

Would you pay £400K for a 2 bed flat in East Dulwich via Foxtons when one in the same block sold last month at auction for £200K? Many people will not!

The market is now transparent, unlike the last crash. Falls will be faster!

Really2

zcacmxi wrote: »

1) Agreed, auctions are an extream view. However, in the current market where the "regular market" is selling very few houses, and auction sales are booming they are setting sentiment amongst regular buyers...

2) In addition, although extream at present, an auction sale is the same as any other sale and the transaction is registered with the land registry and figures end up in the statistics. Sold prices are freely and readily available on the web. So, when trying to sell a property in the regular market the price achieved will be affected in valuation and offers received if there is another sold recently in the local area at a massive discount via auction.

3) Would you pay £400K for a 2 bed flat in East Dulwich via Foxtons when one in the same block sold last month at auction for £200K? Many people will not!

The market is now transparent, unlike the last crash. Falls will be faster!

1) EA sales are out performing auctions by miles. Not seen any auction results?

2) Auction sales are not on the LR figures, but are listed. But distressed houses are selling through EA's at 30% disscounts not auctions.

3) I would not buy a flat at all.

Are you being a wum.

black_taxi_2

its tougher now to get a mortgage--decent rate--need a deposit

people either dont hav the money-paying off debt---or just waiting for further falls

lower interest rates--if passed on might slow the fall

StevieJ

Really2 wrote: »

So a 25% fall in just over 6 months.
Have you been naughty on HPC or as it got a bit boring everyone agreeing.;)

Strange, that is exacly my thoughts when I read that, I think what gives it away is:
We will certainly see another 20% next year
They talk as if their expected drops have already happened, no IMHO for this lot.

zcacmxi

1) See my link above for auction results.

2) You are right. Houses selling with discounts with EA's too. Not just auctions.

3) You or I may not want to buy a flat, but they are integral to the market. Somebody selling a mansion may be reliant on the first time buyer at the bottom of the chain buying the flat!

We are discussing the current market and House Prices which is what this forum is for..

Really2

StevieJ wrote: »

Strange, that is exacly my thoughts when I read that, I think what gives it away is:
We will certainly see another 20% next year
They talk as if their expected drops have already happened, no IMHO for this lot.

Agree, we are only looking at 20% from peak (July 07) by the end of this year so 20% in 17 months.
He Expects another 25% in 7 months.:eek:(sorry 6 months.)