So now it’s official. UK house prices slid 0.8 per cent in November, their biggest fall since June 1995 and the first drop in price since February 2006, according to the Nationwide’s latest house price survey.
The annual rate of house price inflation now stands at 6.9 per cent, down from 9.7 per cent in October.
Well, what’s new? A combination of higher mortgage interest rates, tighter lending criteria, lower loan to values and the introduction of Home Information Packs are all having a dire effect on the housing market.
Small wonder, then, that the number of mortgage approvals fell to a near three-year low in October, nearly a third less than in October 2006.
As mortgage approvals are a key indicator of activity in the housing market, Nationwide sees this as pointing towards a rapid downturn in the market. Land Registry figures indicate that even prices in London, which were buoyed by City bonuses and wealthy foreign investors for much of 2007, have now started to slow.
Commentators like Capital Economics who were predicting a house price crash of up to 30 per cent a few years (since revised to 10 per cent) may not be so far of the mark.
All of which could be a good thing. The London market, in particular, was a bubble waiting to burst and if prices fall by 10-20 per cent, so be it. Sub prime mortgage holders’ misery, could turn into a blessing to all those who have been priced out of the market in recent years – first time buyers in particular. But anyone wanting to release the equity in their home by trading down had better get a move on.
You have a suggestion in mind. Maybe that could help us get out of the payment crisis.
regardsreport this comment
In principle, it may be a good thing for house prices to come down, particularly for first time buyers. What is worrying me, however, is the impact that this will have on the economy as a whole. The extent to which the so-called “growth” of recent years has been fuelled by house price inflation and mortgage debt is a cause for concern. The knock-on effect of this change in the housing market could well be a general economic downturn.report this comment
I take your point that a fall in house prices could affect the overall economy, but the latter is based on an unsustainable level of consumer debt - a problem which needs to be tackled sooner rather than laterreport this comment