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Trading Lessons

UK House Price Forecast 2008- Bear Market is Only Beginning

Housing-Market / UK Housing Jun 06, 2008 - 02:15 AM GMT

By: Nadeem_Walayat

Housing-Market

Editors Note: Housing Market Forecast Updated December 2008 - UK Housing Market Crash and Depression Forecast 2007 to 2012

Best Financial Markets Analysis ArticleUK House Prices, the current bottom line - Down 6.4% year on year, Down £14,600 from the peak, Down 7.2% from the peak. Down 3.6% on a quarterly basis. The Halifax, Britains biggest mortgage bank's housing market data for May 08 continues to confirm the Market Oracle forecast for a 15% drop from August 07 to August 09, and a 7.5% drop for 2008.


The UK housing market is currently falling ahead of trend which is inline with expectations for a sharp drop in UK house prices for the quarter April to June 2008 as forecast in November 2007. The expectation is that after a further sharp fall in June, the housing market will move back towards trend during the following months targeting a fall of 7.5% for the year 2008 and 10% from the August 2007 peak to the end of 2008.

House price falls in terms of annual percentage change are falling at the extreme end of the forecast range, which confirms earlier expectations that the mainstream media will come to term the current period as a mini-crash in UK house prices. Again the expectation remains after a further deterioration in trend the rate of annualised house price falls will move back towards trend as the pace of declines slows later in the year.

Over the past 12 months, over 40 pieces of analysis on the UK housing market have been completed and archived at Nadeem Walayat, that continue to consistently confirm that the UK housing market downturn is set to continue for many years..Some of the primary drivers of the bear market are extreme over valuation, both in terms of local currency and more so in foreign exchange. The US subprime sparked credit crisis has not bottomed out and continues to result in increasing losses amongst the financial institutions that with decimated balance sheets continue to tighten lending criteria and withdraw mortgage products from the market place thus a mortgage market that can no longer support the extremely high housing market valuations. The UK consumer used to using their houses as ATM cards to finance spending are finding themselves saddled with huge amounts of debt at high interest rates, on top of this the UK is being hit by stagflationary forces of surging fuel and food prices that act as a tax on the consumer and put further strain on housing affordability and therefore are pushing the UK towards recession in 2009.

Preliminary analysis in advance of an extension to the existing forecast suggests house prices could fall by 25% in nominal terms by mid 2011 which equates to a 50% to 60% drop on an inflation adjusted real terms basis. Therefore despite the falls to date, the UK housing market is barely at the beginning of its bear market that looks set to dwarf that of the early 1990's bear market. I plan to publish in depth analysis during August 2008 that aims to give housing market participants a road map well into 2011, much as the analysis of August 07 has managed to give market participants an consistently accurate road map during the past 10 months.

Key Analysis of the UK Housing Market:

03 Jun 2008 - Housing Market Boom and Bust Cycles Driven by Real House Price Values
26 May 2008 - US and UK Housing Bear Market Trends
22 May 2008 - Council of Mortgage Lenders 2008 Housing Market Forecast Demolished
08 May 2008 - UK House Prices Tumbling- Interest Rate Conundrum
21 Apr 2008 - Bank of England Throws £50 billion of Tax Payers Money at the Banks
17 Apr 2008 - Credit Crisis SCOOP- LIBOR Is Now Irrelevant to Derivatives Pricing
08 Apr 2008 - UK House Prices Plunge Over the Cliff
01 Apr 2008 - How to Fix the Credit Markets
11 Mar 2008 - RICS Data Confirms UK Housing Market Heading for 1990's Style Crash
03 Mar 2008 - Credit Crisis Morphs Into Stagflation- Protect Your Wealth!
26 Feb 2008 - UK House Prices Fall for 5 Months in a Row- Housing Market Will Go Negative April 08
07 Feb 2008 - UK Interest Rates Cut to 5.25% - Will Not Help the Housing Market
21 Dec 2007 - UK Commercial Properties Crash Looms as Property Investment Fund Frozen
07 Dec 2007 - Analysis of Interbank and Base Interest Rate Spread
05 Dec 2007 - UK Home Owners Unable to Refinance Mortgages As Fixed Rates Expire During 2008
02 Dec 2007 - UK Housing Slump Gains Momentum as Properties Fail to Sell at Auction
10th Nov 2007 - Crash in UK House Prices Forecast for April 2008 As Buy to Let Investors Sell on Capital Gains Tax Change
28th Oct 07 - UK House Prices - Primary Reasons For a Sharp Fall
25th Sep 07 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!
22nd Aug 07 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth
1st May 07 - UK Housing Market Heading for a Property Crash

 

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 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.

Attention Editors and Publishers! - You have permission to republish THIS article if published in its entirety, including attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

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