UK homeowners, property investors and estate agents are no longer debating whether house prices will fall, now it is how far and how fast property prices will fall.
With job losses, banks on the brink and recession knocking at the door, it’s difficult not to have a sense of déjà vu. Media headlines have been focusing on the double dip recession and the prospect of property price falls for weeks and confidence in the UK market has been shaky at best several times already this year.
The prospect of a double-dip recession could trigger more UK property price falls. For first-time buyers, the recession could offer a tiny glimmer of hope.
In 2008 both property buyers and banks were left reeling from the collapse of Lehman Brothers, which crippled credit markets and saw Britain dive headlong into the deepest economic downturn since the great depression of the 1930’s.
The UK property market has struggled to recover over the last few years with buyers forced to overcome the banks insecurities about lending.
For 3 years, property buyers have been jumping through whatever hoops were deemed necessary by banks, in order to be considered for a mortgage. Even then, some of the limited mortgage products that were available had more clauses and stipulations than an MP’s claim for expenses, with a hefty arrangement fee on top.
Overall property prices in 2010 were fairly steady, but now property prices are falling again.
Is the UK headed for a property crash? The question now being asked is not whether house prices have further to fall, but how fast and how far they will drop.
Property pundits in the media have already begun to fuel the debate, speculating that the UK property market is heading for a spectacular crash similar to the one that devastated the USA housing market.
Data from various UK housing market surveys are often conflicting, however, in recent months the results have been almost uniformly downbeat.
Two of the UK’s biggest lenders, Halifax and Nationwide have both reported year-on-year falls in house prices in recent weeks.
Data from the Land Registry showed sales in June 2011 were down 13% on 2010 before the Eurozone financial crisis had hit.
Property website Hometrack fuelled fears of more property price drops ahead as its latest survey of England and Wales showed a fall in new buyers coming to the market.
Hometrack also said property prices had fallen for the 15th month running in September 2011.
In October 2011 potential property buyers are finding it easier to get mortgages and up until last month 2012 had been predicted to be fairly stable.
There is one key factor that will help the UK stave off a USA type crash, Demand, and that still remains relatively high compared to the current supply. If people are not going to buy, they will rent!
The number of Estate Agents in the UK has fallen from 16,000 at the peak of the market in 2007 to less than 9,000 says Hometrack.
That is also reflected in the drop in transactions from an average 1.25 Million per year up to 2007 to less than 700,000 in 2010.
Hometrack is forecasting that prices will have dropped 2% this year and will come down at the same pace again next year.
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