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House prices 'to fall off cliff'

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    House prices 'to fall off cliff'

    House prices 'have further 17pc to fall'

    The recent rises in house prices will prove to be a false dawn because of the broader problems facing the British economy, Fitch Ratings said yesterday.
    By Angela Monaghan
    Published: 10:34AM BST 08 Oct 2009

    The ratings agency predicted that house prices in Britain would fall by around 30pc in total from the October 2007 peak, indicating that they have a further 17pc left to fall. The current average house price of £162,000 is 13pc lower than that peak, Fitch said.

    Rising unemployment, which will peak next year and remain at that level into 2011, as well as a low wage inflation and poor credit availability, will drag on house prices, the report said.

    “Despite the fact that a global economic recovery is under way, the economic fundamentals do not augur well for a sustained strong recovery in the UK housing market,” said Alastair Bigley at Fitch.

    Both Halifax and Nationwide have reported house price rises in recent months but Mr Bigley said they were being driven by a lack of supply in the market and cash-rich buyers, which was not sustainable.

    Fitch says the UK’s average house price-to-income ratio is likely to come down to below the long-term average, as it did during the early 1990s' recession. The ratio is currently “significantly higher” than the long-term average.

    “A 30pc fall from the peak of October 2007 would bring this ratio back in line with the long term average,” said Brian Coulton, head of global economics at Fitch.

    The report also warned that recent signs of easing in credit availability were only likely to be temporary. It said that as unemployment continued to rise, the rates of mortgage arrears and repossessions could rise, which would in turn prompt mortgage lenders to tighten lending criteria.

    Attractively priced funding with a loan-to-value (LTV) of more than 80pc remained scarce, Fitch said, pricing first-time buyers out of the market and stifling housing demand. Fitch calculated that a first-time buyer would have to find £32,000 in cash as a deposit to buy a house in the current market, more than the £25,000 average pre-tax salary in the UK.

    Lenders were also judging mortgage applications against a growing number of criteria, Fitch said, for example by declining loans where they see evidence of significant debt consolidation, regardless of whether the LTV and credit score were within policy.

    “An appropriate loan-to-value ratio alone is not enough to secure a loan. Lenders are increasingly judicious about whom they will lend to and as the effects of unemployment and possible rate rises in 2011 feed through to performance Fitch expects lenders’ risk appetite to remain reduced,” said Mr Bigley.

    The agency does not expect the UK economy to start growing again until next year.

    But not everyone is as downbeat as Fitch even though many analysts have reservations on the pace of recovery.

    Howard Archer, chief UK and European economist at IHS Global Insight, said: "Despite further likely gains in the very near term, we suspect that house prices will be prone to significant relapses and will probably be no more than flat overall between now and the end of 2010."

    Ray Boulger, senior technical manager at John Charcol, said: "I think during the next few months there is every indication that prices are going to keep rising."

    ------

    Too tired to put my comments in italics

    #2
    Still no property in your investment portfolio then?

    You've come right out the other side of the forest of irony and ended up in the desert of wrong.

    Comment


      #3
      I certainly hope so as I'm still waiting for the market bottom or close to it so I can buy somewhere to live.

      However that would be the same Fitch ratings agency that told us all the Investment Banks were all in fabulous shape until they started collapsing like a house of cards....

      And as for all the tossers from within the industry, mortgage brokers, Estate Agents and their associated bodies, when did they ever tell us that the housing market wan't going to rocket perpetually skyward ?

      So I think we can safely ignore everything that was said in that article.

      Comment


        #4
        Originally posted by Ruse View Post
        I certainly hope so as I'm still waiting for the market bottom or close to it so I can buy somewhere to live.

        However that would be the same Fitch ratings agency that told us all the Investment Banks were all in fabulous shape until they started collapsing like a house of cards....

        And as for all the tossers from within the industry, mortgage brokers, Estate Agents and their associated bodies, when did they ever tell us that the housing market wan't going to rocket perpetually skyward ?

        So I think we can safely ignore everything that was said in that article.
        Why not just rent?

        What is the obsession in the UK with buying houses?

        I've rented some lovely properties in London that I could never afford to buy - even in the good times.

        My missus and I own a few properties, and our tenants are all nice, respectable people, who are not going to hobble themselves by getting a mortgage.

        If I were starting over, in today's market, I would rent - not buy.

        You've come right out the other side of the forest of irony and ended up in the desert of wrong.

        Comment


          #5
          Originally posted by bogeyman View Post
          Still no property in your investment portfolio then?
          Nope, invested all my money into SKA

          One house nearby that did not sell / get rented for the last 3 year is now gone - ******s, I was thinking to move into it (renting) before Xmas

          Comment


            #6
            Originally posted by AtW View Post
            Nope, invested all my money into SKA

            One house nearby that did not sell / get rented for the last 3 year is now gone - ******s, I was thinking to move into it (renting) before Xmas
            Bad luck. I think you're right to stick with rental though. Especially if you're working hard getting your business off the ground. The last thing you need is a mortgage.

            You've come right out the other side of the forest of irony and ended up in the desert of wrong.

            Comment


              #7
              Originally posted by bogeyman View Post
              Bad luck. I think you're right to stick with rental though. Especially if you're working hard getting your business off the ground. The last thing you need is a mortgage.
              Indeed - with a morgage I would not be able to quit working for someone else.

              I should have bought in 2000 or so, but back then I did not have permanent residency, so it was too risky from my point of view.

              Current prices for real estate too high - either them or pound will have to fall, or some serious inflation (after £ falls).

              Comment


                #8
                Originally posted by bogeyman View Post
                Why not just rent?

                What is the obsession in the UK with buying houses?
                Strange question, the obvious aim of buying is so that one day, hopefully sooner than later, you pay off your mortgage and have a much greater degree of financial independence without the major outgoing of a large monthly payment to a landlord or bank/buliding society. In your case you are getting someone else to do it for you and presumably getting a nice little income as well.

                Personally I have the equity from the sale of a previous house sitting in an account earning very little interest. So I'm just trying to time somewhere close to within 10% of the bottom of the market before jumping back in.

                Comment


                  #9
                  Originally posted by Ruse View Post
                  Strange question, the obvious aim of buying is so that one day, hopefully sooner than later, you pay off your mortgage and have a much greater degree of financial independence without the major outgoing of a large monthly payment to a landlord or bank/buliding society. In your case you are getting someone else to do it for you and presumably getting a nice little income as well.

                  Personally I have the equity from the sale of a previous house sitting in an account earning very little interest. So I'm just trying to time somewhere close to within 10% of the bottom of the market before jumping back in.
                  I don't think it's a strange question at all.

                  Having lived in mainland Europe, and metropolitan Canada for quite a few years, where almost nobody actually buys their house/apartment, I wonder why it is considered the epitome of success here, to own a bundle of bricks and mortar.

                  You've come right out the other side of the forest of irony and ended up in the desert of wrong.

                  Comment


                    #10
                    Originally posted by bogeyman View Post
                    Having lived in mainland Europe, and metropolitan Canada for quite a few years, where almost nobody actually buys their house/apartment, I wonder why it is considered the epitome of success here, to own a bundle of bricks and mortar.
                    Tenant's rights in this country are ****. That's a good reason to buy - especially if you like pets that most landlords don't.

                    I don't mind buying, but I do mind paying over the odds and saddling (sp?) myself with a risky debt that can bankrupt me.

                    Comment

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