Four reasons to be pessimistic about house prices

Why the sad face? Ok I agree the conditions you describe are negative factors for the general economy and for those trying to trade down or leave the housing market and of course investment buyers including the btl lot, BUT for the majority of home owners things are good, variable rates are historically low, the decreasing gap in prices between house sizes means climbing the ladder. Fixed rates are going up, but they are still low compared to a couple of years ago.

Yes it is unlikely for the BOE rate will go down or even stay the same for a long period, but is it likely that it will go high enough over the next two years that the average rate is higher that todays 4+% fixed rate mortgages?

Personally I'm using the time to clear off as much of my existing mortgage as possible and save what I can so that at some point in the near future I can take my family to the 4 bed detached house we want. When this crash started we were 200k awat from the type of house we wanted, now we may be only 50 or 100k away, wouldn't this imply that in my case I have saved 100k+ by waiting?

As unlikely as it is, I think the best thing most people could do is stay out of the game for a year or two...let things bottom out, clear their mortages or negotiate their rent and save. Then look at the market again in a years time when things have settled and enough competitively priced property has aggregated on the market.

Of course house prices are on the up and will never drop again.  My estate agent friend and his mate (a bank manager) told me so.  To show how much of a good friend he is he has offered to sell me a few of his properties.  I mean come on what would he have to gain from lying to me?

16 years of rising prices, some into double digits, and only 1 year of modest falls (restricted by rast ammounts of tax payers money).  With the average person in the street expecting pay freezes/ job loss. A week pound slowing economic migration.  Buy to let market being restrict to people with business plans and high equity ownership.  Major investors getting bored of waiting for a quick property bounce so are looking at more traditional investment options.  I can't possible lose.

Why trot out articles like this?  Who does it benefit?  Do you have to meet an article quota, regardless of content? 

This represents the media mania for doom mongering with no help and substance.  It does not matter what rating agencies, charities or economists say.  The value of any house was, is and will always be what the eventual buyer pays for the property.   

The real sufferers are those who bought when values were high but who are now forced to sell for whatever reason.  For their sake, stop twisting the knife in an already painful wound. 

Back in 1990 a friend sold his flat which was in negative equity and declared property value would never return.  History put that statement into context.  Even current dropped "values" are far higher (even accounting for inflation) than what he got for his flat.

It is no coincidence that the economy has shown some positive signs since the press stopped printing economic doom and gloom and focused on MPs' expsenses.  This country is adept at talking itself into a hole, but never out of it.  Survivors of any crisis do not moan - they adapt and keep a healthy perspective.

Glads - the knife twisting is not just for those who (somewhat riskily) bought at the peak, but for the many more that can't afford to buy because of the (still) ridiculously high values on property.

I think this was a good article - though, from my part, it is in my interest for houses to drop further.

When it comes to house prices, EVERYONE has a vested interest in it - bullish or bearish - mostly depending on whether you have a house or not, but also if you plan to move up the ladder (as per CMcM). 

However, there is something that's more ethical on enabling more people to own their own homes, rather than them being owned by the wealthier few big-portfolio-holders, who see a house as an investment, rather than a home. My sympathy is with people who are struggling to pay their mortgage, not with those who own houses for investment. For them, they took the risk and it's now coming back to bite.

On the basis of current evidence, house prices seem to be in for a prolonged plateau for the next few years. Prices appear to have stopped falling, although I reserve judgement on that until figures unaffected by the Spring bounce come out. And the drivers for any rises are simply not there: restricted mortgage lending and continuing poor affordability for FTBs look set in for the long run.

However, there are many, many factors that could send them further down or precipitate further rises: worse unemployment, longer (or shorter) recession, sudden inflation, better (or worse) recovery, fiscal policy under the Tories, the Zloty exchange rate, etc., etc. . Anyone who tells you what house prices are going to do is a) an idiot or b) selling something.

Is that the same group of ratings agencies who gave all those CDOs an A rating?  Why Yes. So they're not very good at what are they are supposed to be good at are they? (There are numerous other examples of their failings) I doubt they have a clue on the UK housing market.

I do think that Shelter is a valid source of information though, although they do, like everybody, have their own agenda.

To counterbalance Christina's article I'll give you one very good reason why Home prices are going to go UP.

The Government is printing money like a drunken sailor on shore leave, so the price of everything is going to go up in absolute terms. It's called inflating away the debt and is a ruse used ever since central banking was invented by the FEDs in the early part of last century. If Central Banks are so keen on fighting inflation why are they so scared of zero inflation or even deflation?

Matchmade. Why would a house that I purchase be taxpayer-subsidised?

Let's get one thing straight: Landlords become landlords, not to enable people to have a roof over their head, but to make a profit and to provide for later life. SO whilst there is nothing wrong with someone wanting to make 'money outside their regular job', there has to be some kind of difference in ethics if it is preventing Joe Bloggs from getting a house for themselves: a house they can decorate, extend, live in for some time - rather than somewhere they might get kicked out of in two months if the landlord feel they have completed their return on investment.

I would love to buy - and could service a mortgage no problem - but because of the stupid amount I need for a deposit, it's some way off. And the inflated house prices are partly because of the rush for BTL mortgages to increase folks' portfolios... and so on.

So yes, I am benefitting from someone putting a roof over my head, but I'd sooner put my own roof over my head; at least that way I have some control over it. The end game of exorbitant house prices would have been that, unless mummy and daddy bought you a house, we would have ended up with a generation of renters. Is that fair? No. Kindly think of people in differing circumstances to yourself before jumping on those who criticise the status quo.

Christina, I think you have only provided half an argument in this article. You have provided four relatively sound pieces of evidence, but not explained why any of them should lead to downward pressure on house prices.

1) Yes repossession are up from last year, but this is part of what has already driven house prices down. It doesn't mean that they will keep falling in future - you are effectively arguing that past performance predicts the future, exactly the same error that the bulls made in 2007. Indeed, *if* we are at the bottom of the cycle, you would expect repossessions to have peaked, as the CML predicts they are currently doing.

2) The only evidence here seems to be that Shelter is receiving more calls about people who are concerned about mortgage arrears and repossessions. It doesn't mean that the callers are in arrears or being repossessed - they are probably just worried by the hype and myths being spread by the media and want to clarify their position.

3) I'm not sure how this is a timebomb. Negative equity doesn't provide any downward pressure to the housing market, it simply prevents the person with negative equity from being able to move house. It doesn't stop them from remortgaging to many of the market leading deals, and doesn't increase the likelihood of repossession. If anything, it acts to reduce downward pressure on their property's price because they can't sell it until prices rise again.

4) To be honest, gross mortgage lending being down 2% from April doesn't sound like a particularly convincing statistic to me - it sounds much more like a seasonal variation. It also seems that few people have made the connection between mortgage lending and the number of buyers. Yes, mortgage lending is down 58% from May 2008, but sales volumes are down by 44%. So borrowers are, on average, borrowing 14% less than at this point last year, which corresponds to the 14% drop in the market since this time last year. And so what? Again, this doesn't tell us anything about any potential for future recovery.

As always, rightoncommander is right on the button. Anyone who thinks they can predict the market is either an idiot or is selling / buying something.

Oh dear, seven pillars. Your "followed by" is heavily edited in order to make me look foolish, for motives that I cannot pretend to fathom. The paragraph that you refer to actually reads:

"However, there are many, many factors that could send them further down or precipitate further rises: worse unemployment, longer (or shorter) recession, sudden inflation, better (or worse) recovery, fiscal policy under the Tories, the Zloty exchange rate, etc., etc. . Anyone who tells you what house prices are going to do is a) an idiot or b) selling something."

So no, your last statement is not correct, nor is it supported by the text of my post, which you appear not to have read very carefully. My "prediction" is of what prices would do if current conditions continued to prevail. However, since I explicitly state that I don't expect current conditions to continue, your point is utterly fatuous. Notwithstanding, I do hope you enjoyed making it.

What I am trying to point out is that the current indicators are neither up nor down, so anybody predicting rises or falls at the moment is doing so for their own reasons. These reasons may be ideological (as appears to be your own case), financial (because they want to flog me a house or a mortgage) or simply motivated by hope with regard to their own circumstances. For the record, my circumstances would benefit from a substantial fall in prices, and I can see plenty to support the view that that might occur, but I try not to be one-eyed about these things. Your evidence pointing to further falls is perfectly valid, and I sincerely hope you're right, but how can I be sure that it has not already been factored into prices, or that some other external factor will not counterbalance these elements? The truth is that nobody knows.