A very interesting report in the Times looked at how things may turn out in the coming months for UK property with the latest political changes.
The articles expressed that one of the greatest challenges the new coalition Government faces is to make sure that pessimistic predictions about the housing market do not come true. Allowing prices to plummet would be catastrophic economic policy. If the market falls by significantly more than 10 per cent our banking industry could once more find itself in difficulties, triggering a negative spiral of new lending restrictions and further house price falls that would put the economic recovery in great jeopardy. Nor should we forget that falling prices would trap tens of thousands more borrowers in negative equity.
Property Set to Rocket or Plummet after Hung Parliament
The replies were even more interesting based on whether an extended period of stable prices may allow incomes to catch up with valuations or whether a return to an era when houses are viewed primarily as places to live rather than speculative investments. Here are the comments below….
“One of the greatest challenges the new coalition Government faces is to make sure that pessimistic predictions about the housing market do not come true.” Why? What happened to “you can’t buck the market”? Why should the Government prop up excessive house prices?” – Ned Ludd
Not sure I agree when you say falls in excess of 10% could cause the banks problems:
Firstly, the net lending figures tells us something interesting – people have been steadily paying down their mortgages, therefore increasing equity. Secondly, the average deposit for the past few years has been around 25%. See where this is going? The banks are positioning themselves very comfortably for the coming falls. Also, whilst keeping house prices artificially high may have suited a government trying to get re-elected, a lower starting point would suit any incoming government. Anyone buying recently will find the next few years quite stressful I think.” – Mike Williams
“We are approching the end of the “suckers rally”in land and property prices.This rally in theory cauld continue until interest rates start creeping up due to inflation or the end of the banks monetary policy that is supporting the economy some which should happen at the end of this year or the beginning of next.How ever interest rates cauld rise alot sooner due to the contagian of delinguat soverign debt in europe that WILL hit us at some time meaning interest rates will have to rise subsantially and speedily to defend the pound against a down ward spirral,thus pulling down the last prop holding the property market up.The shake out has not finished, this will be a dramatic colapse.To prevent this cycle happening again we need to tax the land owners/free holders and not the wage earners and savers!Buy to let investers have destroyed the hopes and asperations of many people.They are the new land barrons!!! Tax them out of existance!” – Rousel Duke
“The house price bubble created during Brown’s era of fiscal imprudence that led to the collapse of the banks is over. The bubble Brown encouraged to power our economy has left the nation with the highest level of debt in decades. The subject matter of that bubble, house prices, have yet to reflect economic reality. Prices are grossly distorted against any measure you care to name including wages, ability to borrow under the new rules that eschew “creative financing,” jobs and the unemployment trend, rentable values and the global trend of house price collapse. House prices in this country will collapse and they have a long way to go before reaching a viable level. I expect to see further falls of between 40-60% over the course of the next 3 years.” – Real Istbear
So what do you think?
Are prices still greatly inflated and we are about to find out?
Will interest rates dramatically sneak up over the coming months?
Will the next few years be really tough on new time buyers?
Place your comment