U.K. Home Prices Seen Falling as Much as 40%

Discussion in 'Economics' started by ByLoSellHi, Feb 2, 2009.

  1. http://www.independent.co.uk/money/...l-40-per-cent-without-loan-boost-1523110.html

    House prices 'could fall 40 per cent without loan boost'

    By Sean Farrell, Financial Editor
    Monday, 2 February 2009

    House prices could drop by a total of 40 per cent unless the Government steps in to boost lending, a report says today. The extreme scenario painted by the Centre for Economics and Business Research (CEBR) would see prices plunge by a record 25 per cent this year after last year's 16 per cent slide.

    If the Government's banking bailout is able to boost mortgage approvals to 50,000 a month from the current level of about 32,000, the price fall from peak to trough could be limited to 32 per cent with values bottoming out in the first quarter of 2010, CEBR said. But without effective intervention to increase lending, the total fall would be 40 per cent with prices stagnating until 2012 and not getting above 2003 levels until the following year.

    As part of a range of measures to get banks lending again, the Government intends to guarantee mortgage-backed securities to restart the market for securitisation – packaging up of loans for sale to investors. Securitisation provided £200bn of finance for banks in 2007 before the market was paralysed by fears stemming from the sub-prime crisis in the US.

    The plan was recommended by Sir James Crosby, the former chief executive of HBOS, who predicted in November that, without action, net lending for house purchases could fall below zero as fewer loans are made than are paid off. Bank of England figures on Friday showed a rise in mortgage approvals to 31,000 in December from 27,000 a month earlier. The surprise increase followed data from the Royal Institution of Chartered surveyors that showed new buyer enquiries beginning to rise.

    Halifax, the country's biggest mortgage lender, has pointed out that prices for first-time buyers are now more affordable than for years but potential buyers remain wary of further falls while banks are limiting their lending as bad debts rise.

    Benjamin Williamson, an economist at CEBR, said: "The glimmer of light at the end of the tunnel for the beleaguered housing market is that prices and interest rates are now at levels whereby any improvement in lending is likely to lead to substantially increased activity and at the very least a bottoming out in house prices. However, if lending remains close to current very low levels, the spectre of the biggest annual drop in UK GDP since post-war demobilisation in 2009, with concomitant rises in unemployment and collapsing confidence, will likely lead to an acceleration in house price falls."

    CEBR said that the crisis in the housing market lay at the heart of the credit crunch and that direct intervention to shore up the supply of mortgages would stimulate activity. The research unit added that a recovering housing market might play a part in a broader boost to consumer confidence that would help revive the economy.
  2. I'm waiting for stock_turd3r to advise me on when to get long some real estate!

    That's 'cuz he knows how stocks werk!'

  3. fhl


    Saw on a blog that credit default swaps cost more on UK debt than they do on Mcdonalds Corp.

    I won't laugh. When the dems get through here, cds on our debt will go through the roof, too.
  4. It's hitting people on both sides of the pond.

    All the Russians that bought the most prime London RE may get their heads handed back to them.

    London commercial RE is going take it in the ass, also.