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Archive for the ‘Housing Market’ Category

The Economy Turns

Thursday, December 6th, 2007

Property prices have dropped for the third month in a row and the bank of England is feeling the pressure to cut interest rates as trading slows this Christmas.

Jonathan Davis who spoke on behalf of House Price Crash during the BBC program predicts that properties valued at £300,000 will fall to an astonishing £200,000. Great news for first time buyers, not so great news for property developers.

The inevitable correction in the housing marking has been awaited by many trying to get on the ladder, will this finally be the crash all first time buyers have been hoping for?

Check out the video below from BBC News:

House Price Update

Thursday, November 29th, 2007

HouseAccording to mortgage lender Nationwide, UK house prices have seen the sharpest fall during November than recorded in the last 12 years. In some areas the fall has been by as much as 0.8% from the beginning to end of the month.

Mortgage lenders are being less generous with their money and we have seen a 12% decrease from September in mortgage approvals and a 31% decrease since October last year.

A cool down in the market has been a hot topic of discussion throughout 2007, is the market finally correcting itself?

Are We Heading Towards a Recession?

Thursday, August 16th, 2007

Stocks CrashThe big question bouncing around this week is “Will the UK’s debts drag the economy into a recession?”. The average household owes almost as much as their yearly earnings now, money has been too easy to borrow and naturally the UK has taken advantage of the situation allowing for bigger and better assets and more disposable incomes.

Huge crashes in the US stock market today have affected countries all around the world, banks are likely tighten their lending habits as the level of risk continues to increase. Will interest rates rise again to dampen consumer spending even more? Will US house prices continue to fall? I can’t help but wonder, “Is this the beginning of the end?” And by that I don’t mean the end of mankind (obviously) I mean the end of the housing boom!

Clearly a recession is a less that ideal situation for the economy, but unfortunately I personally think that’s where we’re heading.

Interest Rates Hit 5.75%

Thursday, July 5th, 2007

GraphMortgages and loan repayments continue to increase throughout the UK with interest rates now risen another .25% to 5.75%. Seriously, how long can this continue for? We have already been warned that the price of flats are levelling off due to less demand, so how long can it be until the next house price crash?

Are we going to be a generation of renters, I hope not – it’s totally unfair that our generation cannot afford to buy a family home. Who wants to live in a two bed flat for the rest of their lives, I know I don’t.

Interest Rates Expected to Rise Again

Thursday, May 17th, 2007

GraphAs I watched the evening news last night I was surprised to hear that interest rates are expected to rise again in the next few months. In a recent poll 65% of the economists predicted another rise to 5.75% later in the year.

The reason so many believe it will take place is so The Bank of England can hit their 2% inflation target within the next 2 years.

However, if interest rates continue to grow at this speed what is going to happen to the housing market? We’ll have to wait and see.

Interest Rates Hit 5.5%

Thursday, May 10th, 2007

GraphToday, the Bank of England officially increased interest rates to 5.5% as predicted. Although this is the first rise since February, it has taken the cost of borrowing higher than it has been since 2001. If you are a saver then I’m sure this will be good news for you however, homeowners are likely to face higher bills and higher mortgage interest repayments.

For the average household with a 100,000 mortgage there will be an average increase of £16 extra on repayments, could this be the beginning of a crash?

Read more information at The Guardian.

Catalyst For a Crash?

Wednesday, April 25th, 2007

WalletInflation has hit 3.1% forcing the bank’s governor, Mervyn King to write a letter to the chancellor explaining why inflation has broken through the 3% level. I suppose the next question is – how high will interest rates go? With the rise in inflation it is likely that interest rates will increase further in order to discourage consumer spending and to decrease the rate of inflation. The base rate is currently set at 5.25% but it is forecasted to rise to 5.5% on 10th May when the Bank of England’s monetary policy committee is due to meet.

However, if interest rates increase by more than this there will be some unfortunate consequences; those who have taken out interest-only mortgages will be hit hard as their repayments will seem more and more unmanageable. The many buyers who opted for a fixed-rate loan may not notice a difference however if they have a short-term contract they could also face steep rises in interest repayments.

Investment bank ABN Amro predict that the base rate will in fact rise to 6% by the Autumn, they are also preparing for a possible house price crash, however many other large banks disagree.

As these minor changes occur in the economy, I also wonder if it’s all heading towards a crash. Although I know this will dampen economic growth, it may also mean I can finally buy a house :).

Further information at The Guardian.

House Prices

Friday, April 13th, 2007

Over the past 10 years since Labour came into power house prices have risen over 200% across the UK. This is great news for home owners, and particularly the older generation who have purchased a house before or during the earlier years of this period. It’s not so great for the ones who have only just gotten on to the property ladder, and for young people who are looking to buy their first home now, the situation is dire. House price to income ratios are now astronomical at something like 10 times earnings.

Yet people seem to have been brainwashed in to thinking that rising house prices are always a good thing. If the price of any other essential commodity was rising this fast there would be outrage (imagine food rising at 20% a year), so why is it acceptable for the equally essential roof over our head? Well, quite simply, it’s because people treat housing as an asset, and in a lot of cases it’s their one and only asset. Pension funds and stocks have been going through a rough few years and only recently have they recovered to their pre-2001 levels, so rightly or wrongly people have been ploughing money into housing at an unprecedented rate. A lot of people will depend on equity in their house to pay for their retirement.

During this time Labour has been more than happy to sit back and let it happen, as rising house prices have meant that people feel richer and therefore spend more thus keeping away a recession, and allowing the chancellor to claim the longest period of economic growth for more than 100 years.

However, even if you are an existing home owner, unless your next move will be trading down to a smaller property, or selling up all together, you won’t truly gain from any house price rises. In fact, if you have ambitions to live in a bigger property, then rising prices are only making your next house even more expensive, meaning you will have to borrow even more to get that dream home.

So why are people convinced that prices will never fall (even though they have for several periods in the last 40 years)? Well, the mainstream media are the main culprits. If you look through most newspapers you will find they are pasted in adverts from property companies; property seminars, estate agents, mortgage companies etc.. All these advertisers have a vested interest in talking up the property market. If house prices were to nose dive, the newspapers know that at best these companies will cut back their advertising budgets, and at worst a lot of them will go bust all together, which would damage their profits.

So it’s in the newspapers interest to keep home buyers confident in the stability of the market, and this is reflected in their articles. In fact, even The Times of all papers was recently criticised in the way it manipulated an interview with BBC Economics Editor, Evan Davis to imply that he thought houses were a safe bet. It turns out he actually thinks they will probably fall, and has set out why a house price crash could be beneficial in an article on BBC news.

So how do we solve the housing problem? It’s clear that restrictive planning is a major cause, so for a start we need a major overhaul of our planning system to make it easier to build new homes. On top of that, we should probably put stricter lending criteria on loans and mortgages.

The BBC recently aired a well-balanced news piece on the 10 O Clock News:

If you feel as passionate about this subject as me, then you should join the debate over at the House Price Crash forum. You should also vote for this issue on webcameron to see if we can get David Cameron to raise the issue in the house of commons.

What Goes Up Must Come Down?

Friday, March 2nd, 2007

House prices have been rising at an extraordinary rate, there’s one question most people want to know: should I buy now or wait? Tonight had a really interesting debate on whether or not there’s going to be a house price crash. The first case put towards the panel argued that prices will continue to rise; with money continually flooding into London and its success and profitability, the impact will be prices remaining high all across the UK. The average house price currently stands at about £200,000 and those arguing against the crash predicted that house prices will continue to rise by about 15% this year.

Those arguing that a house price crash is inevitable forecast prices would fall by 20 – 30% if not more, by the end of the year. With interest rates rising, demand is likely to slow, which will force house prices down according to some. Inflation is high, interest rates are high and increasing, and borrowing is high – all this will encourage property prices to fall.

There are so many people looking to get on the property ladder that won’t any slight fall in demand be seen as a buying opportunity therefore preventing the crash? The answer is that we’ll have to wait and see. Some advice from the panel was that if you do buy now, only buy what you can comfortably afford or a rise in interest rates could cause real trouble – last year 17,000 homes in the UK were repossessed.

Lily Allen's views on the UK housing market

Friday, February 23rd, 2007

I’m quite into programs like News Night and This Week especially when there’s a younger personality involved in the debate or discussion. Last night on This Week, Lily Allen was asked the question “What are the main issues affecting young people?”. She spoke out about her views on money, debt and the cost of housing in the UK and seemed rather angry about the state of the economy and kept mentioning the ridiculous cost of houses. She revealed that although she earns good money, she still can’t afford a one bedroom flat in London. If Lily Allen cannot afford to buy a property, is there any hope for the rest of us?

I am the same age as Lily and I agree that the cost of UK houses must come down or level off at some point; they simply cannot continue their steady increase for much longer. I was annoyed while watching the program because Lily came out with many good points yet Andrew, Diane and Michael just seemed to ignore what she was saying and move onto new subjects.

I think it’s great that a high profile celeb like Lily is so down to earth and aware of what’s going on in the economy, it would be great if more people our age could speak out. Read more about Lily Allen’s housing opinions at House Price Crash.