Two stories today that illustrate just how precarious the UK housing market is right now. The market may have slipped 16 percent relative to the peak. However, here are two stories that suggest that things are about to get much worse.
The first, from the Telegraph, highlights the huge number of empty homes in the UK. When prices were going up, it made sense for speculators to buy and hold properties rather than rent them out. It was supposedly much easier to time the market with a vacant house whereas a rental property would contain those awkward renters with their six month contracts.
"Almost 1 million homes are standing empty across the United Kingdom, and the vast majority – more than four out of every five – are believed to be owned by private landlords.
Some landlords might be actively trying to sell, or planning refurbishment, while many have simply given up on their empty properties. Whatever the reason, the Empty Homes Agency (EHA) believes that a staggering 85pc of empty homes in this country belong to landlords.
The EHA claims that there are more than 762,000 empty residential properties in England. Based on earlier figures, about 650,000 of these are believed to be owned by private landlords, and almost half of these are thought to have been empty for more than six months. Almost 1m homes are standing empty across the United Kingdom, and the vast majority – more than four out of every five – are believed to be owned by private landlords. The charity estimates that there are at least another 77,000 empty residential properties in Scotland, plus 50,000 each in Wales and Northern Ireland."
Meanwhile, the Financial Times reports an increase in voluntary repossessions in the UK:
"Banks are seeing an increase in the numbers of homeowners deciding voluntarily to hand back their properties because they cannot afford to keep up mortgage payments. Voluntary repossessions involve the bank selling the property at auction but this will not show up in official figures as a repossession because there has been no court order.
The phenomenon is widespread in the US, where it has been nicknamed jingle mail because homeowners often post their keys to lenders if they cannot make the payments and no longer have any equity in their homes. It was also common in the UK recession of the early 1990s when homeowners were in negative equity."
With huge supply and rising repossessions, it isn't too hard to imagine a surge in supply which will quickly lead to outright panic amongst speculative investors.
A further 15 percent fall in prices next year looks very likely.