Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK House Prices Fall for 5 Months in a Row- Housing Market Will Go Negative April 08

Housing-Market / UK Housing Feb 26, 2008 - 12:03 AM GMT

By: Nadeem_Walayat

Housing-Market Best Financial Markets Analysis ArticleHometracks house price data released on Monday points to house prices in England and Wales falling for 5 straight months in a row as banks tightened lending criteria as the risks of residential housing market bad debt exposure continues to grow. Annual UK house price inflation fell to a near 2 year low of 1.4%. The hometrack data is in line with the Market Oracle forecast as of August 2007 for a fall in average UK house prices of 15% over two years to August 2009.


The November 07 article explained that buy to let investors selling will ensure a further sharp deterioration in the UK housing market during the quarter April 2008 to June 2008. Many analysts fail to realise that the house prices for the months of April through June 2007, i.e. last year, are significantly above the CURRENT average house price, therefore even if house prices do not fall, i.e. stabalise; UK house prices will still go negative in April 2008, as the table below demonstrates (Halifax data).

Annualised UK House Price Inflation 2008 Stabalised house prices House prices fall by £500 per month
March 2008
1.1%
0.6%
April 2008
-1%
-1.8%
May 2008
-3.5%
-4.5%
June 2008
-4%
-5.3%
Dec 2008
-1.5%
-4.4%

 

The actual trend expectation as per November 2007, is for a sharp drop in the quarter April to June 2008 due to the impact of the capital gains tax rule changes on the buy to let sector from April 08 onwards. Following which house prices may stabalise at lower levels for some months before the next series of declines takes place as the UK economy slows going into 2009. This trend would imply that the UK will end 2008 with a house price decline of about 9% from the August 2007 highs and at annualised house price deflation of as much as 7% this summer, which would be expected to reduce to under 5% by the end of 2008 as the following graph illustrates.

The UK housing market remains at historically high unaffordability levels as illustrated by the Market Oracle UK House Price Affordability Index. Affordability concerns will continue to come to the fore as the expectations of capital appreciation diminishes and the number of repossessions continues to escalate as record amounts of debt put households under increasing pressure.

The UK Economy is expected to far under perform the Bank of England's forecast for 2% growth with the Market Oracle growth forecast for 2008 of between 1.1% and 1.4% as of December 07. Apparently the consequences of the evaporation of Mortgage Equity Withdrawals has not been fully taken into account by economic forecasters, despite the fact that MEW consumption has accounted for as much as 1% of the growth in annual GDP for the duration of the housing boom.

UK Interest rates are on track with the Market Oracle forecast as of August 07 and Sept 07 for UK interest rates to fall to 5% by September 2008, this was revised lower to 4.75% in January 2008 , following the US Panic rate cut 0.75% on 22nd Jan 08 to 3.5% which was later followed by a further 0.5% cut to 3%

UK inflation, interest rate forecast 2008

 

However, UK Interest rate cuts won't be of much help to home owners due to the impact of the wealth effect going into reverse as house prices continue their month on month declines. For example on an average mortgage of £100k, a 0.25% cut in interest rates would result in a cut in monthly repayments of just £21. Whereas a decline in house prices of 0.5% per month results in a monthly loss of equity of £950 on an average £190,000 property. Therefore many market commentators and economists expecting a series of rate cuts to turn the UK housing market around may be surprised that the rate cuts will have very little impact on the weakening housing market.

The impact of the interest rate cut on the UK housing market is further diminished due to the fact that mortgage lenders raised interest rates in the weeks preceding Februarys interest rate decision with a view to declaring a cut of 0.25% following the decision. However this means that the real cut compared to a few weeks earlier is negligible, if any at all. ( 31st Jan 2008 ).

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.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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