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
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
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

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

© 2005-2022 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