Homeowners are in for a drop in prices in next year’s first half

brit1234

House prices ‘will take five years to return to peak’


House prices will not return to the peak reached in autumn 2007 for at least another five years, according to Ernst & Young’s Item Club. The influential group’s gloomy forecast contradicts the increasingly optimistic outlook of the Government and some commentators that the British economy has begun a sustained recovery.


The recent rise in property values is a “false dawn” that will not last beyond spring, Hetal Mehta, Item’s senior economic adviser, said. In a special report released today, Item predicts that homeowners are in for a drop in prices in next year’s first half and then two years of stagnation. Sustained recovery will start only in 2011 and take until at least 2014 to return prices to their 2007 high, Item says.


The housing market is sicklier than many think because several fundamental problems have not been solved. First-time buyers are continuing to find it very tough to get on the ladder, banks are reluctant to lend and many homeowners are trapped in negative equity and do not want to crystallise losses, Item said. Rising unemployment — expected by Item to peak at 2.76 million, or 8.8 per cent next spring — will also hamper a strong rebound, it said. House prices have leapt in the past few months, partly because few properties have been put up for sale and well-off buyers with cash have snapped up those that have been listed for sale. However, over the longer term, supply will freeze again, Item said, as cash buyers dried up and homeowners continued to be reluctant to sell while their property was worth less than it was a few years ago.


Would-be buyers would also be inhibited by a lack of attractive mortgage offers, Item believes. Although banks have promised to increase lending to mortgage customers, a greater priority is shrinking their balance sheets by reducing lending, it said. Mortgage availability was slightly up amid a plethora of funding packages created by the Government, but will stay very restricted, according to Item.


http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article6833095.ece

chucky

probably not too far from what is expected to happen as far as just house prices goes.
what you've missed out on Brit and made this not bear food is the true cost of buying a property.

the cost of buying a property including future mortgage rates will be much higher in 12,24 and 36 months than today.
therefore the savings made by waiting a period of time to buy is offset by the higher mortgage repayments.

edit - this wouldn't be the case for buyers buying without or a very small mortgage

treliac

chucky wrote: »

the cost of buying a property including future mortgage rates will be much higher in 12,24 and 36 months than today.
therefore the savings made by waiting a period of time to buy is offset by the higher mortgage repayments.

It's hard to make an accurate calculation though. I'm bl**dy glad we just got a good 5 year fix.

As far as 2007 prices go, I'm betting on not reaching them until, say, 2018.

IveSeenTheLight

Bit of a non story really, but taking your points in bold

brit1234 wrote: »

House prices will not return to the peak reached in autumn 2007 for at least another five years, - Hetal Mehta, Item’s senior economic adviser, said. In a special report released today, Item predicts that homeowners are in for a drop in prices in next year’s first half and then two years of stagnation. Sustained recovery will start only in 2011 and take until at least 2014 to return prices to their 2007 high, Item says.

Many of us here have been saying there will be drops over the winter.
Are you agreeing with Items prediction that there will be no further drops after this period?

brit1234 wrote: »

The housing market is sicklier than many think because several fundamental problems have not been solved. First-time buyers are continuing to find it very tough to get on the ladder, banks are reluctant to lend and many homeowners are trapped in negative equity and do not want to crystallise losses, Item said.

One could argure that the issues depicted here have been created by the credit crunch i.e. FTBers finding it tougher now than in 2007.
Certainly in the last six months it would appear that there are those who do meet the new criteria and are being lent to.
Lending is starting to ease with recent mortgage products being made available with higher LTV and lower interest rates.
As for many (you missed out this bold, presumably because you wanted to infer it was more) homeowners being trapped in negative equity, it would be nice to see actual figures for this. With the drop from peak according to LR being approx 15% and likely to lower in the coming months as recent data is fed in to the figures, the number of homeowners in negative equity and looking to sell their property could quite possibly be very low.

brit1234 wrote: »

Rising unemployment — expected by Item to peak at 2.76 million,

Unemployment is currently 2.4 Million. So we are looking at an addition 3-400,000. Unfortunate yes, but we have not seen the 600,000 or so that have already became unemployed affect house prices that much.

Others on here say that foreigners are leaving the UK as well, surely if true this would increase the number of jobs available. When times are tough, people adapt.

brit1234 wrote: »

However, over the longer term, supply will freeze again, Item said, as cash buyers dried up and homeowners continued to be reluctant to sell while their property was worth less than it was a few years ago.

Is this not a counter argument to house prices dropping? Supply lowering

brit1234 wrote: »

Would-be buyers would also be inhibited by a lack of attractive mortgage offers, Item believes. Although banks have promised to increase lending to mortgage customers, a greater priority is shrinking their balance sheets by reducing lending, it said. Mortgage availability was slightly up amid a plethora of funding packages created by the Government, but will stay very restricted, according to Item.

As said earlier, there are now signs of better mortgage products and also indicated in your link

nembot

I agree completely, the banks and all the other companies with a vested interest, Halifax, Nationwide and the major lenders are just a bunch of lying toe-rags (no offence if you do work for any of these companies).

The economy is screwed, we're at historically low interest rates for one reason only and that is to avoid the potentially worst recession ever seen in the UK. Job losses don't appear to be slowing down, food and fuel prices keep going up, where is the money required to buy these overpriced shoeboxes coming from?

Mum an Dads money won't keep coming forever and you can pretty much guarantee prices will be nearer to 20% cheaper than today in 2 years time, no matter how the big cheeses spin it...

brit1234

IveSeenTheLight wrote: »

Many of us here have been saying there will be drops over the winter.
Are you agreeing with Items prediction that there will be no further drops after this period?

No there will be further falls after this.

You can't just distount all those years of mortgage fraud (self cert lies, over generous evaluations for no money down deals) which affected all properties due to the land registry inflation.

We have a long way yet to get to a natural balance with prices

IveSeenTheLight

brit1234 wrote: »

No there will be further falls after this.

So you disagree with the expert comments in the link you provided.

brit1234 wrote: »

We have a long way yet to get to a natural balance with prices

I'm interested in knowing what your idea is of a ""natural balance".
It's still a market and supply / demand is key to setting the market rate.

P.S. I know you have updated your sig given you were so wrong before, but just a tip, you should refer to the Land Registry for stats on house prices.
Rightmove and Auction houses are not the best stat's to use.
Also your facts on them being down the last two months are also wrong. Rightmove was up in July
http://www.rightmove.co.uk/news/files/2009/08/july-2009.pdf

lemonjelly

chucky wrote: »

probably not too far from what is expected to happen as far as just house prices goes.
what you've missed out on Brit and made this not bear food is the true cost of buying a property.

the cost of buying a property including future mortgage rates will be much higher in 12,24 and 36 months than today.
therefore the savings made by waiting a period of time to buy is offset by the higher mortgage repayments.

edit - this wouldn't be the case for buyers buying without or a very small mortgage

Not convinced by the bit I've highlighted Chucky. My reasoning is that the impact of the levels of personal debt have yet to have the impact which reality will see. I also feel that even if we are merely having a correction, to be through it within 6 months or so, when the foundations of the credit crunch took 10-12 years to build, it all seems to have a lack of proprotion to it all.

Low interest rates appear to be here to stay. With some offers about, it could be argued savers are making more on interest recieved - a reason not to jump in? Perhaps a reason to hold on for a bargain?

Forced sales have also been suppressed, with government pressure seeking to reduce the lenders taking swift action too.

pickles110564

IveSeenTheLight wrote: »

P.S. I know you have updated your sig given you were so wrong before, but just a tip, you should refer to the Land Registry for stats on house prices.

I asked Brit the same question about his signiture but he did not reply.
He is still trying to scare everyone about impending doom with house prices.
He was completly wrong before and will not get it right this time.

Graham_Devon

Same story, slightly different angle here:

http://news.bbc.co.uk/1/hi/business/8253017.stm

It says "a small number of cash-rich buyers have supported prices".
"The supply of these funds is limited, which means prices are likely to dip again in the first half of next year," said the body's Hetal Mehta.

Do you really think we will just simply recover AGAIN, if were into round 2?

Dan:_4

Graham_Devon wrote: »

Same story, slightly different angle here:

http://news.bbc.co.uk/1/hi/business/8253017.stm

Do you really think we will just simply recover AGAIN, if were into round 2?

Not even Hamish thinks its gonna be nothing but rises from now on. I would say pretty much everyone on his board has preidcted further months of falls.