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5 "Tells" that the Stock Markets Are About to Reverse

UK House Prices Crash, Record 3.6% Monthly Drop

Housing-Market / UK Housing Oct 08, 2010 - 01:04 AM GMT

By: Nadeem_Walayat

Housing-Market

Best Financial Markets Analysis ArticleUK house prices crashed in September, falling by a record -3.6% to an average of £162,096 (SA) according to the Halifax, which annualises to an eye watering -43%. The slump beats the preceding record monthly drop of -2.8% in December 2008 when house prices were in free fall, therefore fears are prevalent of a similar downtrend now unfolding as the Labour election bounce has fast evaporated following the May 2010 General Election.


The record monthly price drop comes even before the Coalition government's austerity cuts and tax rises have been implemented on fears of a million job losses and loss of earnings purchasing power due to persistently high inflation, which therefore does not bode well for house prices over the next 12 months at least as clearly many home owners are starting to panic by putting their properties on the market against which there are fewer new buyers seeking to commit in the face of economic uncertainty which therefore means sellers now have to settle for far lower offers than asking prices (typically 93%).

Halifax Economist, Martin Ellis tried to calm the housing market fears by making the following statement :

"Looking at quarterly figures - a better measure of the underlying trend, house prices in the third quarter of 2010 were 0.9% lower than in the second quarter of 2010.  This rate of decline is significantly slower than the quarterly changes of between -5% and -6% that were seen in the second half of 2008.  It is therefore far too early to conclude that September's monthly 3.6% fall is the beginning of a sustained period of declining house prices.  "

However, it should not come as any surprise that the housing economist of Britain's largest mortgage bank (Halifax) is trying to calm fears for it is the same Martin Ellis who during 2008 came out with similar soothing commentary, just as the housing market literally fell over the edge of a cliff (08 Apr 2008 - UK House Prices Plunge Over the Cliff ) who's statements I repeatedly ridiculed during the early period. (Jul 10, 2008 - UK House Price Crash In Progress! )

The Halifax still appears to be in a state of denial as to the weakness of the UK housing market by still issuing statements such as "The housing market continues to be underpinned by sound fundamentals.", with the Chief Economist, Martin Ellis, continuing to clutch at straws by trying to talk the market higher.

"House prices have declined by 6.1% over the past year. Nonetheless, the average UK price remains slightly higher than two years' ago and is appreciably stronger than three or four years ago.

House prices fell by 2.0% in June compared to 2.5% in May, a slight moderation in the recent rate of decline."

This is entirely predictable in that vested interests in a stable / rising housing market will not acknowledge the seriousness of the state of the housing bear market as which transpired during the 1988 to 1994 housing bear market and warned of in the analysis of Sept 2007 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!

Martin Ellis's statement that house prices have declined by 6.1% over the past year fails to mask the fact that UK house prices ARE CRASHING!, my original forecast for a crash of 5% in the quarter April 2008 to June 2008 has been exceeded as house prices have fallen by 5.8%! So 5.8% of the 6.1% annualised decline has occurred in just the past 3 months!

UK House Price Trend Forecast

A series of in-depth analysis are under way that aim to conclude towards an updated multi-year UK house prices trend forecast (FREE E-Book by late November 2010) that seeks to more than replicate the original 2 year bear market forecast of August 2007 made right at the very peak of the UK housing market (22 Aug 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth ), which also builds up on the 100 page Inflation Mega-Trend Ebook of Jan 2010 (Free Download Now), which contained the following UK housing market graph (updated):

The UK housing bear market has experienced a strong bounce off of the March 2009 lows and now stands up approx 10% off of the low as a consequence of unprecedented measures as mentioned in this ebook, the Labour government has succeeded in temporarily bringing UK house price falls to a halt and triggering an Election Bounce.

Recent in-depth analysis conclusions:

12 Sep 2010 - Britains Population Growth and Ageing Demographics Impact on UK House Prices

Population Growth and Demographics, Housing Supply Conclusions for UK House Prices

This analysis concludes towards three competing forces driving UK house price trends - an increasing population that generates ever increasing demand for housing that supply has never been able to keep pace with, several millions who have permanently sat on benefits being forced into the workforce and thus increase demand for housing, against an ageing population that looks set to put downward pressure on the housing market for several decades as many elderly seek to downsize into retirement homes and probably soon to be built retirement villages, the overall implications are for long-term real terms price stagnation as ever more resources will continue to be expended on servicing the demands of an ageing population, whilst high inflation acts to drive up prices in nominal terms. This does not mean there will not be future booms in house prices, just that it is highly likely that they will be more subdued in real terms than that which has occurred during the past 10 years as there will be increasing supply overhanging the market ready to sell at higher prices.

In terms of the trend for the next 10 years, the implications are for a real terms stagnating market for the next 2-3 years, followed by weak real-terms growth, with nominal house prices supported by the governments inflationary policies in an attempt to mask the true economic impact of an ageing population through the illusion of increasing wages whilst real purchasing power falls, which again reaffirms the importance of inflation forecasts being accurate as that will be the primary driver for nominal house prices for the next 25 years as covered at length in the Inflation Mega-Trend Ebook (FREE DOWNLOAD).

03 Sep 2010 - UK House Prices and GDP Growth Trends Analysis

'

Conclusion - GDP Growth trend analysis points to a continuing depression in the UK housing market for the next 3-4 years, with the most probable outcome being for a gradual shallow drift lower in prices over the next 1-2 years (6-12%), followed by a further 1-2 years of base building.

02 Jul 2010 - UK House Prices, Unemployment and Claimant Count Impact Trend Analysis

UK House Prices Against Unemployment Trend Analysis

Therefore the conclusion of this analysis is that UK house prices will remain weak into early 2013 and then trend higher. It has yet to be determined if weak house prices means falling house prices in nominal terms, i.e. after inflation, the most probable conclusion from this segment of analysis is for stagnating house prices i.e. a sideways trend channel for the next 2.5 years.

17 Jun 2010 - UK House Prices Inflation Adjusted Long-term Trend Analysis

This analysis suggests that the value of UK house prices will continue to be eroded in real terms as a consequences of high inflation and weak nominal house prices trends which implies several years of stagnation to be followed by several more years of weak house prices growth in real terms. Thus those looking for a return to the boom times over the next few years are likely to be disappointed, especially the buy to let brigade that rely on capital appreciation in real terms to generate investment returns after costs.

To receive on going in-depth analysis and well as the final ebook and forecast trend in your email in-box, ensure you are subscribed to my ALWAYS FREE Newsletter.

Comments and Source : http://www.marketoracle.co.uk/Article23332.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 24 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Martin daley
10 Oct 10, 00:58
strength of GBP

Hello

I have enjoyed reading Nadeem's analysis, excellent. I currently live in Australia, and have done so for 10 years, but wish to return to live in UK within 1-2 years and am trying to gauge forecast for exchange rate of AUD and GBP. Will Nadeem be discussing this currency pairing at any future stage?

kind regards

Martin Daley


Daniel
01 Nov 10, 21:02
Australian Housing

It seems the Australian Economy dodged the GFC.

With unemployement really low, and inflation seemly heading on the way up. What do you expect for Australian home prices going forward.

I think they are way overprice compared to income, but can it be sustained? IMF says 40% decline. What do you think?


Paul
02 Nov 10, 15:23
Australian Housing2

Australia's housing boom is actually very patchy and is largely confined to the State Capitals. In many more regional areas the opposite is true.


Nancy
04 Nov 10, 02:15
Aussie Housing

Not sure what to make of Aussie housing. My gut feel is that contrary to everyone else's beliefs that the good properties will go up. If anyone is interested they should check the winter climate/unrest in the northern hemisphere and put 2 and 2 together and realise it is easier to live with being less well off when the climate is warmer in winter. Australia still has jobs. Australia I believe is also the first cab off the rank with the proposed new government (Singapore the pineal gland). Those stuffing up the northern hemisphere will want to have a warmer/safer place to run to (even if albeit for a short time). TPTB would want to control who comes here - unlike what would happen if we were too cheap. Maybe cheap for those with a gold backed currency and PMs, expensive for locals weighed down with debt............?

Eventually our chickens will come home to roost too. We will have harder times I fear.


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