Predictions for House Prices UK
Last March, saw house prices fall in UK by some of their biggest % levels for many years. April and March are traditionally a good time of the year for selling a house, but, the credit crisis has changed the nature of the housing market and prices look set to fall by 10-15%.
Of all the reasons mentioned here - House prices set to fall I think the most important reason is the drying up of the mortgage market and the credit crisis. The Bank has promised to inject money into mortgage sector. But, even £50 billion may be insufficient in a mortgage sector worth over £1.19 billion or 85% of total GDP.
The council of mortgage lenders notes that mortgage approvals are down 40% and this is causing a shortgage of first time buyers. In recent years, first time buyers have been able to overcome rising house price to incomes ratios by using mortgage products which enable big mortgage to income ratios. But, these products and mortgages with low deposit ratios have been withdrawn or made more expensive. Therefore there is a significant fall in the number of buyers.
For house prices to fall to their long term average of house price to income ratios, even bigger falls may be expected. However, on the positive side, base rates are set to fall (even if banks don’t pass these on to consumers). Falling house prices are unlikely to increase the cost of homeownership; therefore, for most people who buy a house to live in, there should be no panic to sell.
Furthermore there is still a fundamental shortage of supply in the UK, which may mean that long term house price to incomes ratios continue to be higher than in previous decades.
Alot depends on how deep the credit crisis continues to be for the UK and whether the Bank can do much to unfreeze the credit markets.
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Original post by Tejvan R Pettinger