Today sees the best evidence so far that house prices are falling and are likely to continue to fall into 2011.
In the last few weeks the surveys have pointed in different directions and the pundits have disagreed about whether the housing shortage will push up prices or austerity send them down.
Now the closely-watched survey by the Royal Institution of Chartered Surveyors (RICS) is showing its first price falls since July 2009 and is indicating that this could be just the start.
The surveyors say demand is falling as buyers take account of the economic uncertainty and have continuing problems getting a mortgage.
But supply is rising at its fastest rate since May 2007 as more buyers test the market in the wake of abolition of home information packs (HIPs).
Looking to the future, the balance of surveyors expecting price falls rose sharply and the ratio of sales to stock - a lead indicator of future price movements - fell to its lowest level since June 2009.
The survey would have been even more gloomy but for continuing resilience in the London market, where prices have been propped up by foreign buyers taking account of the weak pound. And prices have started to fall before any real impact from public spending cuts.
On the face of it, that should be much-needed good news for first-time buyers. A survey published by the Nationwide yesterday show that they need three times the deposit of five years ago and that the house prices they are paying are scarcely any lower in relation to their earnings.
However, fresh price falls will cause alarm at the banks - only last week Lloyds was congratulating itself over big reductions in the number of its borrowers on 90%-plus mortgages - and make it even harder to get a loan in a market that should already be restrictive.
Falling prices could also put new pressure on families struggling to pay the mortgage - at the same time as the coalition starts to dismantle Labour’s emergency support measures. And what will the implications be for housing associations?
There is no suggestion yet that the price falls will be on the scale of 2008 or lead to anything like the same problems in terms of unsold stock but they will be happening at the same time as associations’ public funding faces its biggest-ever squeeze.
Have your say
You must sign in to make a comment
Readers' comments (7)
Sidney Webb | 10/08/2010 2:46 pm
Lowering prices is both welcome and needed, but no serious commentator would expect it to continue.
It is not a viable proposition for the majority of people in the UK to own their own home based on current house prices and wages.
Mortgages of values that are high multiples of income are not now being loaned, and at least that shows that something has been learned from the disasterous Thatcherism-Reagenomic experiment (TRE).
However, there remain huge amounts of unsafe borrowing from the TRE years. Should that default the need for alternative accomodation, on top of existing demand, will be enormous.
Producing lower-cost (affordable) housing options within the reach of the average and below average waged is therefore paramount.
Why then does this government, and its numerous majority apologists, insist that rearranging the furniture and capping benefits is all that is needed to put matter right?
Unsuitable or offensive? Report this comment
Anonymous | 10/08/2010 3:15 pm
Oh yeh. It's tin hats time.
Turn off the credit tap. Bump up the deposit. Inch up the rates. Put a million on the dole.
And hey presto. Prices are going down in a self-fulfilling death spiral.
The market is overpriced by 30%, according to Capital Economics.
Well done, Gordy. Alll the chickens of that talentless bully are coming home to roost.
Unsuitable or offensive? Report this comment
Melvin Bone | 10/08/2010 4:37 pm
With all the ups and downs I do not think anyone (including me) is qualified to make any prediction as at the moment its complete guesswork.
Only the Land Registry has the truth...
Unsuitable or offensive? Report this comment
Anonymous | 10/08/2010 5:30 pm
"The market is overpriced by 30%, according to Capital Economics."
Capital Economics said that in 2002, in 2003, in 2004, in 2005 etc etc etc
It's been 'overpriced' for years but it's driven by sentiment/speculation not by any objective view of what houses are worth, so 'overpriced' is meaningless
Unsuitable or offensive? Report this comment
Chris | 10/08/2010 9:22 pm
I loved the story of Chicken Little when I was a toddler, although at no time did I ever believe it to be real.
Unsuitable or offensive? Report this comment
Melvin Bone | 10/08/2010 9:33 pm
Doomed. Just like 'Peak Oil' this story will run and run.
Unsuitable or offensive? Report this comment
Bernard Townroe | 12/08/2010 7:55 am
Anonymous, what happened in the housing market was a classic bubble, endemic to the economic system we 'enjoy'. Whilst it most certainly took place during Brown's watch, does that mean that the blame for all such phenonmena can be laid at his door? Similar cycles in the USA, Ireland, Spain, for example? But why leave it at that. How about the early 18th Century 'South Sea Bubble'?
That is just lazy politicking.
You might spend time more profitably considering the response to the credit crunch since 2007 with what took place in the early 90s. I think you'll find that far more instructive, although probably Brown caused that market collapse too in your world view.
Trust you will enjoy the stagnation of the markets for an extended period. Look up Japan's experience from the 90s onwards because it's likely to be our own.
Unsuitable or offensive? Report this comment