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Insights from the UK and beyond

from MacroScope:

Darkening outlook for UK housing

The outlook for the UK housing market has darkened again. The usually optimistic bunch of property market watchers polled by Reuters, who have tended to predict ever-rising property prices no matter what the season or financial climate, now say the market will move sideways for the next two years.

housing1.jpgThey say that in the next few months, the small double-dip in prices that has begun will continue. Modest gains predicted less than three months ago for this year and next essentially have been wiped away.

No one should be surprised by this.  It smacks of an awakening to reality more than a slight change to a few variables in the statistical model. What’s perhaps most striking about these new poll results is that economists think houses are even more overvalued now than they were in July even after a few straight months of falls.

The poll found the proportion of property market watchers who expect a double-dip in prices has swung to a three-quarters majority from about one in four minority in July. As polls go, that is a big shift in sentiment in a very short period of time. The consensus points to a 5 percent fall from here on top of the 1.4 percent fall over the last two months, but the forecast range goes as far down as 22.5 percent from here.

from MacroScope:

UK house prices close to a trough?

MacroScope is pleased to post the following from guest blogger Simon Ward. Simon is chief economist of Henderson Global Investors in London and previously worked for New Star Asset Management and Lombard Street Research. His own blog is Money Moves Markets.

UK house prices are no longer expensive relative to a measure of "fair value" based on rents. Prices fell significantly below fair value during the major house price busts in the 1970s and 1990s but a big undershoot is unlikely in the current downturn because low interest rates will limit forced selling.

Green shoots in the housing market?

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House prices have dropped, interest rates are low and plenty of people are straining at the leash to get on the housing ladder.

Now the Nationwide Building Society says house prices have risen for the first time since October 2007. 

Web round-up: More gloom and doom on house prices

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There was more gloomy news for the housing market today as property website Rightmove announced that asking prices for houses in England and Wales were 9 percent lower than a year ago. New listings meanwhile were 57 percent lower than March 2008. The average asking price actually increased by 0.9 percent between February and March this year, but Rightmove warned that this was caused by new sellers being unrealistic about how much their homes are worth.

So what can be done to revive the stagnant housing market? Citywire has one radical suggestion: make sellers pay stamp duty rather than the buyers. Every year there are calls to abolish or reform this “flawed tax”, but Citywire’s Lorna Bourke says that making this switch would be an incentive to first-time buyers and would cost the government nothing. What sellers would say about this, however, is another story.

Housing market: what is your prediction?

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One thing looks to be sure this year – the housing market has further to fall. Some of the gloomiest predictions are for a further 20 percent slump before a recovery may set in.

Our own Reuters poll of 37 analysts at UK banks, published today, predicts that prices are likely to drop by about 11 percent this year and that it will take until 2010 before it gets better.

Negative equity nightmare returns as house prices drop

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It’s every houseowner’s worst nightmare – and it’s official now: more than a million households could fall into negative equity if the housing slump continues, the Bank of England said today.

Growing numbers of home owners could be forced to sell their properties at a loss, as the property downturn gathers pace and vendors run out of options.

Housing market recovery not until 2023?

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When exactly the housing market will recover is anyone’s guess and gloomy predictions abound. One academic says it even could take as long as 15 years. for-sale-signs.JPG

Andrew Clare, a professor of asset management at Cass Business School in London, used futures contracts based on the Halifax house price index to figure out his dire prediction. He calculated that in 2010 the average will be 40 percent lower than the peak of 199,600 pounds in August last year – about 120,000 pounds.

You know things are bad when..

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    You know exactly what the population of Iceland is and can also pronounce the name of its prime minister. Even the word ‘crisis’ seems to have lost its currency. Countries pop up for sale on eBay for 99p and get few offers. Posters on BBC messageboards stop discussing the undulating pitch of Robert Peston’s voice and listen to what he’s actually saying. The speech bubble on Page 3 of the Sun is given over to discussing the credit crisis. Financial market updates displace stories about Jade Goody on the tabloid front pages. Bad news stories from government departments are rushed out day after day and not even the Opposition seems to notice. Estate agents finally admit house prices have fallen but tell you now is a really great time to buy because the market is stabilising. People marketing get-rich-quick property seminars don’t get taken seriously any more. The Chancellor, writing in the Financial Times, says that “now, more than ever, we need new ideas”. Your primary school-aged children know that credit crunch is not a type of biscuit and that IMF isn’t just a fictional organisation in Mission Impossible. You go for a while without noticing one estate agent’s mini and then you see a whole bunch of them on the back of a car transporter. A pensioner on the evening tube train from Canary Wharf gives up her seat to a banker because she reckons he might need it. The Ivy rings to ask if you’d like a table tonight or any night. There are no spare trolleys when you turn up at Aldi to do your weekly shop.

Do you have any better suggestions? All contributions welcome – please send in your selection.

Comeback for the Misery Index

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misery4.jpgCredit crunch, surging food prices, rising unemployment, house prices tumbling, maybe even a recession …. isn’t it all enough to make you feel miserable? And I’m not even mentioning the dismal British summer weather.

And all that desolation can be measured – the Misery Index is a financial pain barometer measured by adding the rate of inflation to the unemployment level.

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