Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

RICS Data Confirms UK Housing Market Heading for 1990's Style Crash

Housing-Market / UK Housing Mar 11, 2008 - 04:44 AM GMT

By: Nadeem_Walayat

Housing-Market

Best Financial Markets Analysis ArticleA matter of days after soothing words on the prospects for UK house prices for 2008 were issued by the chief economist of Britain's largest Mortgage Bank (The Halifax), the Royal Institute of Chartered Surveyors released data today which shows the worst margin between rising and falling house prices since the height of the 1990's property crash.

The RICS data shows that only 4% of surveyors reported a price rise against 57% reporting price falls, thus resulting in a net negative reading of 53%, which seasonally adjusts to a 64% negative reading, the worst since June 1990. Stocks of unsold inventory continue to build up on surveyors books to levels not seen in a decade and up more than 50% over the last 12 months.


Home sellers hoping to escape the property slump via the quick auction route may find the situation there having further deteriorated since the most recent analysis of 2nd December showed a near 1/3rd of properties unable to be sold at that time despite cuts in reserve prices from months earlier.

As this analyst warned in an article barely 3 days ago, the UK housing market is primed for a crash that is scheduled to occur in April 2008 following the changes in capital gains taxes, though this is not the reason for falling house prices but merely a triggering point. Today's RICS data merely illustrates the tail end of the hurricane that is about to hit the UK housing market, which will be far more lasting and damaging than the recent stormy weather that has battered much of Britain's coastline.

The prospects for the UK housing market is to continue to trend towards at least a 15% fall in average house prices over 2 years from August 2007 to August 2009 (Data:Halifax NSA).

Even property shows such as the BBC's popular and entertaining 'Homes Under the Hammer' is finding it difficult to present a positive picture on the outcome of auction buyers ability to realise a gain on their speculative refurbished buys. Instead of the slickly dressed walk on estate agents announcing potential profits of several tens of thousands of pounds, as used to be the case, now are being replaced with wide ranging rental value estimations. Defensive smiles from the property speculators cannot hide the fact that yields of under 4.5% are nothing much to smile about given the risks of capital loss, and this taken from programming shot during the second half of 2007. It will therefore be interesting to see what current programming reveals in say 4 to 6 months time.

The reasons why the UK housing market is heading towards a crash are many, and have been iterated numerous times since May 2007 which can be revisited in the extensive articles archive. Home owners hoping that interest rate cuts will able to halt the decline will find disappointment in that expectation, as sentiment switches from greed to fear. From the prospects of capital gains to the realisation of capital losses as expressed in the loss of equity far beyond that of the £30 or so saved in interest payments per month following each 0.25% base rate rate cut. That is IF the banks in their decimated state are willing or even able to pass on the rate cuts to their increasingly high risk mortgage borrowers. No, not even wishful thinking that the government will step in to save the day will come to pass as we have seen with the Northern Rock debacle. A bank which is driving mortgage interest rates higher so that mortgage borrowers remortgage to another bank and hence Northern Rock moves that step closer to repayment of the £50 billion loaned from the British tax payer.

The UK has already witnessed the once booming flats and commercial property market crash. The plug pulled from under many commercial property funds starting in late last year, as the investment funds ran dry of cash and become forced sellers of properties to meet panic redemption requests from investors in the face of sharp falls in fund unit values. Those that remain in the funds, are now increasingly locked into depreciating assets.

The buying instead of renting dead money mantra never really stood up to proper scrutiny as highlighted back in October 2007, the relative costs between the two are never usually properly evaluated when seen through the rose tinted glasses of perpetual money for nothing capital appreciation during a mania driven market environment.

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 120 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.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Speculator
14 Mar 08, 12:40
House prices / Earnings / Interest Rates Ratio

Any chance of getting an update on this chart after the recent interest rate cuts?

http://www.marketoracle.co.uk/images/uk_housing_market.jpg

It might show interesting breakout.


Nadeem_Walayat
14 Mar 08, 23:23
House Price Ratio Chart

Hi

The formula used to calculate the chart was revised to make it more accurate.

The chart is updated quarterly, with next update due on release of the March data.

The current chart be found here - http://www.marketoracle.co.uk/Article3814.html


Post Comment

Only logged in users are allowed to post comments. Register/ Log in