House prices will fall next year
First fall since financial crisis on the way.
The Centre for Economic and Business Research (Cebr) has predicted that house prices will fall next year, the first annual fall since the financial crisis.
After an average of 7.8% growth this year, the average house price will fall by 0.8% in 2015, according to the Cebr.
London is forecast to lead the way with the biggest drop of 2.6%, compared to a 17.5% increase throughout the course of 2014.
The Cebr argues that buyer interest is already declining. This could be attributed to the introduction of the Mortgage Market Review (MMR) in April, leading to a lower number of mortgage approvals. The lower demand has resulted in properties being on the market for longer than normal before they sell.
Demand has declined abroad as well. House prices are now above their pre-crisis peak in euro and US dollar terms, making the London housing market less attractive.
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Uncertainties
If there’s one thing the property market doesn’t like, it’s uncertainty. There’s plenty of it in the UK at the moment, primarily in politics. And that makes investing in property a less than enticing prospect.
For example, the outcome of the next general election is unclear, bringing Britain’s future relationship with the European Union into doubt. The Scottish referendum has also given the UK’s stability a shake-up, with many investors waiting for the final result before buying properties.
A potential mansion tax puts the UK’s international safe haven status at risk, acting as a possible deterrent to future foreign property investors.
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The early signs
The Cebr is not the only organisation to pinpoint house price difficulties. Last week Nationwide reported that the surge in house prices is starting to level off, with prices falling by 0.2% in September. That's the first decline since April 2013.
However, figures from the Land Registry suggest that house prices have hit a new high, as we explained in UK house prices at record high.
More on property and mortgages:
House prices fall in September
Average price of flat jumps £50,000 in 10 years
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"Who is this supposed to scare? If you own property, a slowdown or flatline next year is nothing to worry about." Quite a lot of people actually. The UK is a country where nearly all its wealth is tied up in property. There are a lot of people who are shivering in their flip flops, because if the house prices collapse, then they are going to be in negative equity. They could be in negative equity for decades. Look at history. The collapse of property prices in Florida during the 1920s, for example. You also have a societal imbalance, where you have a load of baby boomers clinging for dear life to the phoney wealth of their house, while a huge number young couples can't buy because the house prices are far too high. And they are constantly being told by the baby boomers that they should be jumping onto the so-called housing ladder. This is just not fair on our youngsters. And it is just not right. In fact, only an idiot would want to buy property in the current climate. Why take out a gargantuan loan to try to purchase a dump hoaching with rats and cockroaches, and the old devil living next door, when you can rent a place with perks like swimming pools, etc. If a good job turns up in another area of the country, or you have the neighbours from hell, you can up sticks and move, whereas if you are stuck with a house in a jammed housing market, you've got problems. The only good news - for Society, and for all those youngsters, at any rate - is that demographics dictate that as the baby boomers die off, house prices will have to collapse, because there will be fewer people around to buy them. "My property I struggled to buy just over 10 years ago is worth well over double now." Is that all? Ours has gone up over five times. But we just bought this place to live in. "Not afraid of interest rate rises either. They will be very gradual." That's where you're wrong. True you can welcome high interest rates if you are debt free and sitting on large amounts of cash, and your government can honour its bonds. But interest rates can be jacked up several percentage points in a few seconds. Ask anyone who was around in 1979. In fact this is more likely to happen than an orderly increase, because the rise will probably be a reaction to some crisis. If you own property, a slowdown or flatline next year is nothing to worry about. My property I struggled to buy just over 10 years ago is worth well over double now. If it goes down a few points or stays the same for a year, I don't care. Not afraid of interest rate rises either. They will be very gradual.
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Who is this supposed to scare? If you own property, a slowdown or flatline next year is nothing to worry about. My property I struggled to buy just over 10 years ago is worth well over double now. If it goes down a few points or stays the same for a year, I don't care. Not afraid of interest rate rises either. They will be very gradual.
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The BoE is autonomous and the PM has no control over interest rates, in theory. ;) Aside, so both labour and the tories have had a hands off approach and let this free wheeling free market spiral out of control on the way up... ...will the free market operate so freely on the way down? In the event of a serious house price 'slide', with arrears, respossessions and negative equity will we see bailout part II, as the government tries to shore up the finances of an unhappy electorate who are seeing their (false) wealth disappear down the plughole?
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09 October 2014