House Price Fall Biggest In 15 Years

Hmm, interesting observations Swarbs. As you say Halifax isn't the only lender in the market but as the uk's largest lender their statistics can hardly be ignored. Remember that the Land Registry does lag behind by a couple of months - it'll be interesting to see their next statistics. I don't see why so many people slate the Fool for using attention-grabbing (and true) headlines - if it weren't for the media we wouldn't have the over-inflated housing market we have at present.

House prices are on the decline and its about time too. Inflation is only one factor that is contributing to this trend but the real driver was the disproportionate lending that has been available up until the credit crunch. Easy credit coupled with lax lending regulations and sub-prime lending (I recall Mr Brown saying "There is no sub-prime in the UK") has combined with a housing media frenzy to ramp house prices up to unsustainable levels.

Now that the mood has changed and that lending is much, much tighter I would expect to see significant falls over the next 18 months or so, say around 30% to get housing roughly in line with 3 x salary again, where it should be. People must remember that a house is only worth what people will pay for it and the factors behind that are outlook and credit availability. Both of these have dried up.

As a final thought, high house prices that increase over and beyond the general rate of inflation really only benefit property developers and the tax man. The general public do not benefit from this trend unless they are down-sizing. Besides, isn't it time people stopped looking at houses as investments and seeing them as homes again?

Falls in house prices must be very area specific, for whatever reason.
I sold near Oxford last October, and the local estate agent has said that the house would go for around £15,000 less now.
I downsized to a place near Rugby, and prices started to fall here last summer. This house is being renovated. Once done it will still have lost some value (though not as steeply as the Oxford house, and also that is very dependant upon who gives the forecast). The market has slowed considerably in both places, and people are either renting out their bigger houses, and renting a smaller house, or they are extending their existing property. Builders in this are are extremely busy.

I can now save, as well as saving on interest payments, which will recoup the loss. I plan to move back in a year or so. Or I may rent this and recoup that way.

The Halifax and Nationwide adjust for house types sold to give a more meaningful result. The land registry are something like 3 months behind and give a mathematical average, that is, if only expensive housing sell, then the average appears high.
Looking at all the evidence (and talking to an EA) houses are on the slide. We just don't have the wealth generation to support high prices. The economy has been run on credit for too long, and the bubble has burst. The credit crunch has only shown warning signs so far.

The old chestnut about only 25% of the national housing stock being mortgaged belies the fact that this is not spread evenly. It's comprised of lots of older people with small mortgages from the last 3 decades, and a large number of younger people mortgaged at 80% LTV or higher.

Looking at the recent Halifax figures, and given that property markets are cyclical, and once they start to move in one direction, they tend to keep going in that direction, to imagine that the current downturn will level off, and we'll then return to 6% house price inflation within a year is not realistic.

To return to the mean house price for the last century will involve falls of at least 30% overall, and probably more in some areas of the UK. A very substantial number of people will have negative equity because of this, in at least some part because they accepted the lie (hook, line and sinker) that house prices were a one-way bet. A depressingly higher number of homebuyers (not BTL landlords) have taken to referring to buying their first home as 'investing in property'. It isn't.

As with all other markets, the key is to understand the fundamentals and to take a reasoned choice of when to enter and exit. The public shed few tears for the masses of FTB's who have been priced out in the last decade, so conversely, those FTB's will show no compassion for the overstretched borrowers who end up in negative equity.

savills have produced a report on the resi market today.

Best case: 8% down 2008 and a further 2% down 2009.
Worst case: 10% down 2008, 15% down 2009.

if i was thinking of buying a house that was worth 300K with 60k worth of works needed, I would take at least 20-30% off the £300K, to protect myself from further price falls and i would add 35% onto the cost of repairs to cover contingencies and to give myself some reward for the risks and work involved.On this basis you might be able to borrow on the project.

Chas

Kapic - how much is the property on the market for? Is the price already reflecting the state it is in? I am also looking at a house which needs 60k at least to do it up - it was priced at £315k and my offer was 275k originally then I had to go to 295k to beat another offer. House prices around here were in Jan around 400k but they may be less now. The area is very desirable but I'm still not sure..and I'm a cash buyer and renting.... Any advice from anyone on this topic would be truly welcome - should I hang in there or not?

there is a neat free little prgramme called 'property bee'that tracks changes in the descriptions and asking prices of properties for sale on rightmove. This allows you to monitor how long a property has been on the market and to track the reduction in asking prices. worth using. google 'property bee' to find the program. chas

I see that several respondents living in more affluent areas have recorded no noticeable sliding of the housing market, or asking prices, in their areas. I live in south Wales, an area which has seen a greater weakening of the market than most other regions. A contributory factor must be the low wage feature of the local economy. Young people around here have little chance of saving the deposit needed to enter the market and prospective older purchasers are too frightened to make a move. Valley terraced streets are bristling with estate agents' noticeboards and "Sold" signs are as rare as hens' teeth!

Houses cost more or less depending where you live.If you have a house that you can't or won't sell at the offered or going rate yo pricu have to keep it.Your choices are to live in it or to rent it out.If you sell it and rent another place to live in the hopethat

I just thought I'd reply to a few comments in these posts.

- regional house price figures vary. That's always been the case in past property cycles and it doesn't surprise me in the slightest that the same is happening now.

- as rm966 says, the Halifax numbers are adjusted to take into account what kinds of property are being bought. I'm in no doubt that overall, Uk house prices are falling. That's important and I don't regret writing about it.

- I completely accept that for many people, falling house prices are a good thing. That's why I said: 'investors in residential property got more bad news today.'
In this article I said that some people gain:
http://www.fool.co.uk/news/your-money/2008/05/13/interest-rate-cut-looks-very-unlikely.aspx

- I also think that a modest fall in property prices followed by some sideways movement for a while would be good for the UK economy.

- I strongly disagree with the argument that because only £1.1bn worth of a £4.7bn market is mortgaged, house prices are safe. Prices in all markets are driven by supply and demand. For the most part, there isn't a vast amount of supply in the UK housing market. That's one reason why house prices have gone up so much in recent years. But if demand falls off - as is happening - then house prices will fall.

And demand is falling off:

- many FTBs can't get mortgages
- it may get harder for some homeowners to get larger mortgages to move upmarket
- budgets are being hit by rising prices which once again reduces the likelihood of people wanting to move upmarket

Ed

Swarbs - HBOS actually publishes an article on their methodology for calculating the Halifax House Price Index on their website. It's not a simple "add up the sterling value of all our mortgages and divide it by the number of mortages" they do account for the type of house. I agree with you though that if their methodology was as simple as you suggest then the index would be pretty useless. As for the official inflation figures produced by Office of National Statistics I think you will find that they also use something more sophisticated than you realise.