Housing market meltdown?

April 8, 2008

housing.jpgThey’re still up there in the list of conversation topics at dinner parties, but house prices nowadays are more likely to have the guests huddling together for warmth than bragging about the value of their properties.

As the lending windows slam shut and the market contracts, prices according to the biggest lender, Halifax, are falling at their steepest rate since the recession of the early 1990s.

Do you think this is a welcome pricking of a property bubble that has gone on far too long and that — with features like no-deposit loans of five times income and above — could have been seen coming years ago?

Or is it likely to be merely a correction, a wake-up call to banks that have strayed from prudent lending principles, with the housing market still basically underpinned by the ever-growing demand for housing?

Tell us your views — and if you want to read more, visit our special report on the housing market.


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I think people will support the market at a certain level when there’s more value to be had – rather like the situation in the stock market. I think that level will be reached when asking prices have dipped by about 10%, with average actual selling prices being somewhat lower than that. The way prices have gone in the past I suppose you’d have to call this a mere correction.

Posted by Matthew | Report as abusive

It is very difficult to judge how far house prices will fall, but looking at previous house price downturns in the 1970’s, 80’s and 90’s, current house prices have a long way to fall.

Posted by Steve | Report as abusive

Halifax report a 2.5% fall in house prices today, that equates to £2500 off a £100,000 house in only one month! That loss is very significant. The housing market is like any other asset market, and all asset markets crash eventually.

Posted by Mr Parker-Lister | Report as abusive

Based on experience in the US, this is just the beginning. In fact slack lending in the UK – mortgages, equity withdrawal and credit cards – has been every bit as bad as in the US and is heightened by far more spectacular over-valuation of assets (certain lenders and brokers have been just as irresponsible and greedy as City traders).
The price of mid-top end property in prime (New York commuter belt) areas in the US has been falling for three years plus and has, according to my research and personal knowledge, reached 11-20 percent below 2004 valuations.
The UK housing market may not reach these negative levels but only because there is limited land and development potential here. On the other hand, outward immigration (non-dom and otherwise disenchanted Brits) will increase the supply of unsold homes and fewer first-time buyers will choke demand.
If you need to sell, do so quickly and if buying, you should probably wait until 2010, earliest.

Posted by graham mellor | Report as abusive

Its time for the so called adjustment, many were outlining that it would take place. It’s on the front door, and no can send it back, even Gordon with his Darling.

There is a strong correlation with prices and supply of mortgages, the level of fall is simple, they will reach were equilibrium takes place of the affordability of on market rates, deposits and flexibility of products i.e. self certifying.

Any of this attributes not taking place, particularly the last one, would cause even a deeper fall.

The rescue, the government and BoE have limited power to stop this avalanche; it will take place, and should have been prevented to become monstrous, when Gordon was referring to growth, which was an illusion of borrowing on equity releases.

I strongly suggest, that ministers, which ever hierarchy they are on should be fully accountable for there act and punished, as it happened with CEO, ie Enron.
Currently, the only shield is lots of questions, but no actions.

Posted by Yucel | Report as abusive

The UK housing market could be in for a few years of falling prices. Estate agents in my area are all saying the same thing – “no one is buying” The only thing that will stop prices going into free fall is if mortgage rates fall and employment levels remain high. Lets hope for the best

Posted by Sean Taylor | Report as abusive

What those fretting about their property value declining need to remember is this: as long as they have bought with a long term view (eg: a family home or a long term investment), the relatively short term pain we are all likely to feel to varying degrees will, in the space of a lifetime, be exactly that – short term.

Posted by Wayne Morris | Report as abusive

People don’t seem to realise just how difficult it was raising a mortgage back in the 1970’s, compared to today. In my own case I was required to provide a deposit of 25% before being granted a mortage for £12’000. By comparison in recent times, buiding societies and banks have become over-generous in their lending, to the point at which, a) new customers demand in some cases 100% mortages & b) no consideration appears to have been paid to “What If” interest rates did increased, how much extra in payments would be required to sustain it.

Posted by Philip Lowe | Report as abusive

Anything, that by reasonable benchmarks, house price/earnings. P/E ratios, comodities, oil prices, even Tulips. that are grossly overvalued ALWAYS find a way to correct themselves !

Posted by Mick | Report as abusive

We have all become too used to rising house prices and making a big profit as soon as we can. The price falls now only a correction on the huge prices rises from spring to September 07. Those who can and that is the majority will just have to ride out the storm until the next peak, when we will all once again be excitedly talking about price rises. Now the lenders should stop penalising existing borrowers by raising interests rates on loans they borrowed at cheap rates last year.

Posted by Fiona | Report as abusive