Property market 'heading for a fall in 2008'

Sisyphus · 2 April 2007 at 11:13AM

according to Edmund Conway, Economics Editor of the Torygraph.

http://www.telegraph.co.uk/news/main.jhtml;jsessionid=RCGTJ3DKWBG4HQFIQMFCFF4AVCBQYIV0?xml=/news/2007/04/02/nhomes02.xml

The housing market is heading for a fall next year, experts have warned, after it emerged that property is at its most overvalued level in more than 15 years.
Soaring prices are putting properties out of reach for many, with unaffordability reaching the worst level since the end of the last major crash, according to figures produced for The Daily Telegraph.
The warning coincides with news that the average mortgage rate has reached seven per cent, with millions of households paying well above the Bank of England's 5.25 per cent.

reported in today's Mail too. "House prices 'could plummet next year'"
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=446115&in_page_id=1770&ito=newsnow

AndrewSmith · 2 April 2007 at 11:44AM

Same as was being reported about 2007 last year, just changed the dates.

Generali · 2 April 2007 at 11:44AM

http://www.askbm.co.uk/aboutbm/news.asp?n=&w=&id=772&g=1

"A fifth of those planning to buy a home in 2007 will purchase their property as an investment, according to new research by Birmingham Midshires..."

Any ideas of what would happen to house prices if BTL demand was removed for the most part?

Sisyphus · 2 April 2007 at 11:55AM

AndrewSmith wrote: »

Same as was being reported about 2007 last year, just changed the dates.

So nothing to worry about then?

It's difficult to predict the top of a bubble. But a bubble this is. It was fundamentally unsound to over 'invest' in residential property last year it's even more the case this year.

At the very top of the dot-com bubble in March 2000, the bears were buying against their better judgement because they couldn't 'afford' to miss out on potential gains.

This is the Eonomic editor of the Telegraph who' putting his name to the story. Deluded? Maybe he is.

dnwilliams · 2 April 2007 at 11:55AM

The fall will come sooner than that. Properties are beginning to flood the market now that the gov have annnounced HIPS on 1st June. (Sellers looking to avoid the £500 cost) By the 2nd June we will see a complete flip from sellers to buyers market, compounded by rising interest rates and hey presto! falling prices. This has a very similar feel to 1988 when the market reacted to the removal of MIRAS and prices fell by as much as 35%.

AndrewSmith · 2 April 2007 at 12:04PM

You also have to take into consideration the effect the media itself has on the movement of the property market.

The more that a potential looming crash is reported by the media the more that buyers will have the expectation of prices falling later in the year/ turn of the next year and, as such, will hold off buying until this time. This has the effect of 'stalling' the housing market tempting sellers to drop their prices to get sold thus creating a somewhat artificial 'falling of property prices'.

The same happens in reverse when the press report property booms. Sellers expect more for their properties, buyers jump in to buy before prices increase stimulating demand which has the effect of increasing prices artificially.

Generali · 2 April 2007 at 12:06PM

According to this, 67% of London new builds were bought by investors:

http://www.ludlowthompson.com/news/landlords_news.php

I hope they're all 'in it for the long term' because otherwise there'll be a lot of cheap flats up for sale in Clerkenwell.

Sisyphus · 2 April 2007 at 12:25PM

AndrewSmith wrote: »

to get sold thus creating a somewhat artificial 'falling of property prices'...

The same happens in reverse when the press report property booms. Sellers expect more for their properties, buyers jump in to buy before prices increase stimulating demand which has the effect of increasing prices artificially.

:rotfl: :beer: artificial price movements - hadn't heard that one yet.

have to agree, this hysteria for buying any old shed at 10x income does seem artificial.

PoorDave · 2 April 2007 at 12:30PM

We've had this discussion about what is an "artificial" influence on a market before. I still don't see how anything that has a real impact on the state of the UK property market, or any other market, can be called artificial.

Media representation of the state of the market, people's perception of this, and the actual state of the market (which is almost always different to that being reported!) are all important factors in the market.

BobProperty · 2 April 2007 at 1:02PM

dnwilliams wrote: »

The fall will come sooner than that. Properties are beginning to flood the market now that the gov have annnounced HIPS on 1st June. (Sellers looking to avoid the £500 cost) By the 2nd June we will see a complete flip from sellers to buyers market, compounded by rising interest rates and hey presto! falling prices. This has a very similar feel to 1988 when the market reacted to the removal of MIRAS and prices fell by as much as 35%.

Which is what I said about a year back.

pricedout_1 · 2 April 2007 at 1:55PM

It seems to me that everyone is now in the same boat ... FTB's, BTL's, upgraders etc ..... More and more will be less inclined to take on increasing mortgage debt with the prospects of capital depreciation, poor yields, rising interest rates etc.... Most of the general public view the property market as overpriced, overhyped and there is now more and more bearish reports finding their way into the mainstream media. Persoanlly, I am one of the FTB's who could buy but am unwilling to do so because of the reasons already mentioned. Whatever way you look at it, at the end of the day, a property purchase is an investment. For me, to buy now (in London) would be a very risky (bad) investment.