Despite a slight improvement in house price statistics in January, the annual rate of house price inflation in the UK slumped to -16% for 2008-09. Source: BBC
The best forecasts for 2009, suggest falls of 5-10%. The worst forecasts suggest falls of 25% or more.
On the Negative side. Many factors are pushing house prices down
1. House prices fell for four years during last slump
2. Economic Recession The recession continues to worsen threatening more unemployment and therefore more home repossessions.
3. Lack of Funds for Mortgages. The Banking Sector is still fragile after more bad debts exposed from credit crunch. Lending conditions likely to remain tight.
4. House prices still expensive. House price to earnings still higher than long term averages
5. Lack of Confidence as falling prices and recession put people off.
Positive Aspects for House Prices
- Government encouraging new lending from Northern Rock
- Nationalised banks may have more stability for lending.
- Low interest rates make mortgages relatively attractive to renting (if you can get mortgage that is)
- Long term shortage of housing may come into play at some stage.
4 comments ↓
The flow of funds from the far east to western banks halted some time ago, and as Japan and China seek to preserve cash to deal with their own crises, the tap isn’t going to turn back on any time soon. Even when credit conditions do start to ease, buyers are still reluctant to accept that today’s prices are the trough following years of above inflation growth. Only time will tell where the bottom will be.
Since house prices were already touching ceiling till last year.. isnt this a good news, at least for common people?
Look at Japan…their real estate took years to bottom.
Rents drive real estate prices. Supply/demand drive rents. Demand is driven by incomes. Supply is driven by incentives to build (usually high rents and low costs).
Oh well, anyone looking for a $6,000 3-bdrm in Detroit?
http://www.planbeconomics.com/2009/03/11/looking-for-a-6000-3-bdrm-house/
the last year has been good for first time buyers but they better get a move on, otherwise prices will start to rise soon.
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