Before we dive into the usual hyperbole that characterizes this blog, I thought it might be useful to take a longer term perspective on today's mortgage approvals data. The Bank of England website offers data going back to April 1993. Today's number - 64 thousand was the lowest in that admittedly limited data set. The previous lowest was 69 thousand back in June 1995.So, today's number is bad. In fact, it is badder than bad. It is awful. Lenders have abandoned the market. In fact, there is a whiff of desperation in the air as one lender after another have tightened their lending conditions.
It is hard to overestimate the importance of the mortgage approvals number. While it is true that some houses are bought with cash, the housing market needs mortgages like the rest of us need air. If there is no credit, the housing market seizes up. That is what is happening right now across the UK.
How far will prices fall? I have a rather modest forecast. I reckon house prices will fall by around 9 percent from the peak within a twelve month period. After that, I expect them to fall further still. Over the medium term, a 20-30 percent drop seems reasonable, though I wouldn't be surprised to see prices fall even further.
10 comments:
This blog just gets better. Keep up the good work.
Somebody make this blog go away. I can't stand these charts anymore. They are so miserable. Everything seems to be falling apart.
i love that graph..."a thing of beauty is a joy forever"
i just started using Property Bee, it tracks price changes on Rightmove...very interesting...in just the week I've had it, I've seen several asking prices reduced up to 8%, and a handful of properties changed from "Under Offer" to "Available". It's definitely going down big time. Like you say, it's just a question of how long it takes to REALLY drop.
Pleaze Please give comment on N/S Ire
once in a while Im hanging on your every sylible, long time now 4 months
Go AA
AA
The irish property - north and south - is just mad.
Perhaps, I should post something on Northern Ireland. I'll try to do something in the next couple of days.
The republic is more a problem. I am not sure where to get any decent data.
Can anyone help? A link is all I need.
Alice
Forest views.
http://www.ipd.com/OurProducts/Indices/Ireland/tabid/435/Default.aspx
.pdf of their last quarterly property index
http://www.ipd.com/LinkClick.aspx?fileticket=2l3zNUZM8hM%3d&tabid=435&mid=4342
Love the blog, btw.
Cheers,
Rawdon
Northern Ireland will be OK - don't you know about the peace dividend/things are different now/it would be a great place if it wasn't for the troubles/etc,etc
When a 3 bed detached house in a development in a village of about 400 people (2 pubs and 1 grocery store), 50 miles from Belfast is on sale for over 300k - there's definitely something wrong.
When a 1/3 acre greenfield building site with outline planning for a 1600 sq ft bungalow sells for 240k - before you even start to build it! - that's screwed up.
Regarding how far prices will fall: saw something in FT yesterday. If I remember correctly, apparently the ratio of annual wages to average house price is now on average x 6. The longterm median is x 3.5. Would it be unfair to reckon on a 40% drop, to bring it back to the median? That would be nice. Might take a while, though.
We could always bring it back to the median by having a bit of wage inflation whilst other prices stay stagnant. :)
I'm dreaming, I know.
Some more serious thoughts :-
1) My understanding is that when bubbles collapse they generally overshoot a bit, but not necessarily massively.
2) The reality most of us see will be slightly different than the picture that these aggregated averages show us. Different parts of the housing market will experience different price decreases. I would expect the plasterboard-and-spit 'urban flats' built for the buy-to-let investors to see a bigger price decrease than the average. Maybe 50% from peack to trough.
3) To see the effect on first time buyers, I'd want to know what the ratio between current prices just on the type of homes they buy, and average household incomes of the particular demographic that buy them are.
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