Thursday, 30 April 2009

UK house prices down 23 percent in real terms


Today, the Nationwide put out their April numbers for house prices. After March's surprise increase, prices are again edging downwards.

This chart, however, looks at UK property prices adjusted for inflation. Since the peak during Autumn 2007, prices in real terms are down 23 percent. The recent crash has wiped out all gains since October 2003.

How much further will prices fall? During the 1990s housing bust, prices fell peak-to-trough by 35 percent. I wouldn't be surprised if we repeat that experience.

18 comments:

London Estate Agent said...

So you think the UK property market is about two thirds of the way to the bottom?

Personally, I think we are already there. Interest is definitely picking up.

Mark Wadsworth said...

Why stop at 35%? Why wouldn't it go back to 100 or even lower?

Alice Cook said...

Mark,

Maybe.....

alice

roym said...

wont it overshoot on the way down?

Alice Cook said...

Roym,

I think it will, but we will see...

Alice

Ullrakesh said...

I may have missed some 'in joke' here (given above comments) but I think another 10% fall in house prices is well within the realms of possibility.

Talk of the market finding bottom when the UK overdraft is about to reach £175 billion assumes that the housing market works in isolation from job losses, currency pressures and the potential for big increases in interest rates.

Anonymous said...

This bubble was worse than the early 90's, and the consequent credit crisis much, much worse. Bull traps are there for the unwary - the drop will go on at least another five years. This one took nine years to wind up and will take nearly as long to wind down - that's what the past teaches. And those who don't learn its lessons...

B. in C.

electro-kevin said...

There is also the issue of hidden inflation.

Have you noticed how many matches it now takes to strike a light ? Or how often light bulbs need replacing ? Or how small Wagon Wheels have got ? I remember when they were as big as my face !

The same too for houses. I was discussing with my police constable friend the disparity in house sizes between one generation of police constables and another (we are both from police families)

Our fathers' houses were three bed semis too. Except they had two sizeable reception rooms instead of the smaller modern arrangement of a single lounge/diner.

Modern houses seem to be built considerably smaller and yet - on paper at least - they fall into the same category. My next cat will be a Manx - the temptation is just too great and I don't want the RSPCA on my back.

There is a long way to fall before housing offers value for money again.

Boiling Frog said...

35pct of 2007 prices seems an awful lot of actual money to lose,
far more than in the nineties.
Anyhow that's a national average. I wonder if London will be hit hardest this time?

Anonymous said...

electro-kevin: "(we are both from police families)"

I fancy Police are smaller too. When I applied to join the police in the early '80s there was a hight qualification of 6'1". Now it seems a midget can join.

Even then, the Met. were notorious for taking anything. If you couldn't get into any other force in the country, the Met would take you if you could fog a mirror.

*no disrespect to midgets.

Sackerson said...

EK/Anon 07:00 - to continue the jouse/copper analogy, now you have "through policemen" - the PCSOs; and the jerry-built Territorial Support Group.

Sackerson said...

Sorry, meant house, not jouse.

Panos Konstantinidis said...

@boilign frog

> I wonder if London will be hit hardest this time?

The higher you go the harder you fall.

Anonymous said...

I don't suppose you have the inflation figures used for this calculation?

electro-kevin said...

To continue the police theme ...

When I joined the City old bill in '86 I was the shortest on my intake - at 6'2" !

One of the guys was 6'7" (not unusual in that force) and yet the section house beds were limited to 6'5".

He was known as Bovril on account of the fact that he kept a jar of it beside the Vasalene in his bedside cabinet. It was an accident waiting to happen.

Anonymous said...

My grandparents lived in a nice house they bought in the depression. Both of them had very lower order jobs: gran was formerly in service in rich people's houses, while grandfather occassionally worked for the post office. These days, we earn in the top 10 percent of the UK's income, yet can't afford a house in London period. Now that's proof how much we have been fooled about real wealth!

Alice Cook said...

Anonymous,

The inflation numbers are from the ONS. I suspect that they are wild underestimates of the true level of inflation, but it is the best we have.

Alice

Sybil13 said...

The UK is bankrupt. Doubts have been cast on whether the government will be able to raise the £220bn it needs to cover this years debts. The money available for lending this year is down nearly 2/3rds and doubts are being cast on what will be available next year with Moodys downgrading lenders on the basis "that the assumption last year was 25% falls but the assumption now is 40%" they stress tested for 60%. In effect this means councils etc will have to withdrawn their money from BS's with credit ratings below AA (most fail), which will result in a LOT more money being unavailable for loans and of course BS's failing. We are on a very difficult slippery slope. 2 weeks ago a BOE official warned Darling "not to stop the property crash" the article said that even with the curren 21% falls property remained 40% overvalued. Of this there can be no doubt, property values trebled in 3 years from 1.2 trillion to 4 trillion it was NOT sustainable and we are ALL now paying the price of a few reckless years of lending. UKplc is broke and nobody is going to be able to stop the property market falling 40% minimum, 60% seems more and more likely if you look at the funding figures and loan to income etc.. CEBR said there would be 35% falls minimum even if mortgage approvals doubled by the summer, British Banks Associate confirmed last month they fell to 2001 levels. CEBR said there would be 40% falls if lending failed to double. The Council of Mortage Lenders this week said" the green shoots have no roots". We went broke trying to support a hugely inflated property market the market must now adjust and most believe the sooner property falls to the levels it must the better. The debt from the last few years will need to be bracketed and dealt with but at least eveyone will then know where they are. Property prices then will only go up very slowly in line with income and historically in line with inflation 1 - 2 % above inflation each year. 40 - 60% falls , do your sums?