Will there be another housing market collapse in the UK?

Question

And how would it affect the housing market for first-time buyers?

Answer 1

Yep always happens. Builders over build. Markets drop. Then rise again.

Answer 2

There has already been a "Mini" collapse - last year was the worst year in 30 years to sell your house(including the time of the collapse in the 80s). Prices are starting to rise slightly at the minute.

Next year there will be less houses on the market due to the HIPS that the government is bringing out (all houses must have a survey and all the searches on them before they are put on the market) so less people will "test the water" with their houses and only serious sellers will put their houses on the market. This will create a shortage of houses being put on the market and therefore the house prices will rise again.

Answer 3

Of course there will be many housing market collapses in the future, the very basis of a so-called free market makes the outcome inevitable.
Should you worry...NO... it will only affect you if you are buying/selling a house at the time of the collapse, a collapse would mean cheaper houses but a greater price on interest (get it cheap ensure you have an adjustable and variable rate, buy a house at inflated costs, get the best alternative)
The real question should be "Are the collapses in the housing market (as in any other commodity) a haphazard event, or a carefully orchestrated movement by the money manipulators.........
That question I cannot answer!!!!

Answer 4

I hope not, but yes.

House prices have little relation to the cost of building, and the price of land is highly artificial because of planning controls. The cost of houses largely reflects their use for financial speculation, and when people lose confidence in the housing market it collapses. The housing market appears to follow something called "catastrophe theory": a long steady increase in prices is followed by a sudden drop at a moment which is impossible to predict.

In theory, a housing market collapse would be good for those who had not yet bought. The people who would really get hurt, as I was in the collapse of 1990 (for which I will never forgive Thatcher and the Tories), are those who have bought just before the collapse. However, house purchase fuels economic prsoperity because it is accompanied by purchase of household goods like washing machines. A housing market collapse is therefore inevitably accompanied by an economic slump, which hurts everybody. You cannot buy a house if you do not have a job.

The consequences of a housing market collapse help explain why governments are so keen to push private house building. The trouble is that when they run out of incentives and propaganda the resulting overvaluation of houses makes the collapse even worse.

Just to worry you more, there are now two additional problems with the UK housing market. Firstly, the huge differential in the housing market between the South and the North depends upon London's continued status as a world financial centre. It is not obvious that this can be taken for granted, not least because of high land and associated business costs. Secondly, the design of British houses has not changed essentially since the First World War, and it is quite conceivable the nation's houses could become obsolete (as stage coaches became obsolete when railway trains were introduced), for instance because as oil runs out housing will need to be integrated with different transport facilities. Less densely popluated countries overseas would find it easier to replace their housing stock than the United Kingdom. A further issue is that Global Warming will leave many of our houses both short of fresh water supplies and liable to sea flooding.

No society has ever succeeded for long with a totally free market in housing, for instance because essential workers get priced out. I am not stating this as a matter of political belief, but of hisotrical fact. Depending upon political orientation, this impossibility is either addressed by hidden subsidies, such as tax relief on mortgages, or by the provison of housing by local government or charitable organisations (such as Housing Assoications). The Government is currently getting developers to provide a prorportion of "social housing", but for obvious reasons they will try to sell as many new houses as possible on the open market. Housing policy is always a political "can of worms", but none of the major parties are addressing houisng issues adequately at present.

Answer 5

you better start saving any cash you have to save.i look for a stock market crash as well as food getting to expensive to buy. i have seen this before in the early 80s.i live in the states but it will affect the entire world and housing costs will be at least 2x the original costs because of the turmoil in iraq and other muslim countries.if your thinking of purchasing a home for the first time,do it now before the crunch.i dont see a light at the end of the tunnel when it comes to this war in iraq.many years have already passed. it started with the elder bush and it really didnt stop.since 1990 iraq has been a huge hemmoroid in the worlds backside and lets not forget the rest of the muslim people also n.korea. iran and n.korea having nuclear technology has most people nervous and im sure there are many in america and the uk.

Answer 6

Yes because the government (John Prescott) have placed what the call Moratoriums, planning restrictions around certain parts of the country, private and big developers are in trouble because of it, small land owners like me are having to move on and sell property which should have been developed, loosing over 30%
of it's true worth.
They are now selling government land and land belonging to the special privileged few.
If they swamp the market with government and council land etc
then there will be a slump in the market.
I have recently been approached by the forestry commission trying to buy my now useless land robbery by the back door, I will not sell to them, the govern can extort and build up it's land-bank from somewhere else.

Answer 7

No, for there to be a significant drop in the value of houses the bank of england would have to raise interest rates - DRAMATICALLY. They will not do this for one main reason if they raise interest rates it does not affect only interest rates for mortgages it affects them across the board: credit cards, personal loans, savings accounts etc. aswell. With the U.K population having such high borrowing this would force many into bankruptcy with the first to be hit likely to be those with unsecured borrowing. The fact of the matter is that the bank of england could simply not afford to wipe that much debt from so many people!!!!!
There is still plenty of cheap property if you don't mind moving though, I bought my first house four years ago in coventry and paid £56,750 for it (a 3 bed end terrace with land to extend), houses in the street where I live are selling for around £120,000 which is still well affordable for most couples.

Answer 8

Yes, and there needs to be, although it could be long and drawn out.

To fully appreciate the current situation regarding the housing market it is important to understand what has happened to it in recent years. So a potted history follows -

Prior to nineteen eighty seven (approx.) houses were regarded as places to live, and not as investments. All that changed when chancellor Nigel Lawson removed exchange controls. This allowed Foreign Banks, for the first time, to lend money into the British property market. In addition to this, British high street banks had also started lending money into the retail property market. This massively increased the amount of money being pumped into the housing market.

If you consider that prior to nineteen eighty seven only the Building Societies were lending into the property market. Given also, that they were only able to lend out money received from their own depositors. Funds were frequently rationed and sometimes restricted to the Societies own depositors. Also, societies kept a tight control over how much they would lend to each person requiring a mortgage. Usually two and a half times annual salary and, I believe, that this was backed up by goverment legislation.

The price of houses were kept in check at that time because there simply weren't the funds available to push up prices. There tended to be step increases in prices every six to seven years to take account of wage rises that had already occured.

In nineteen eighty eight and nineteen eighty nine house prices increased massively. My own property, and it was typical, increased two and a half fold between nineteen eighty six and nineteen eighty nine. That is hard fact because I bought and sold
on those dates.

This was the first time that the general public started to think about houses as investments. Between nineteen ninety and about nineteen ninety two house prices actually dropped because interest rates went up significantly. They then stagnated until about nineteen ninety five. Crucially though, the public had woken up to the possibility of making money out of the housing market. Because house prices had risen so much, even though they had stagnated for a while, many thought they would not start rising again until about the year two thousand. Two significant things happened, however. Interest rates started to drop toward forty year lows and the lending agencies started to increase the funds that they had available to lend by borrowing on the money market. They also relaxed their lending rules significantly.

Many people considered that houses were already fully, if not over valued, in the year two thousand. The price of houses now, and we have all watched them rise significantly since two thousand, almost beggars belief. By previous standards and measures they are well over priced.

However, another huge problem has been developing. House owners have been borrowing against the bloated value of their houses and indulging in an ongoing spending binge. This has made the economy appear much stronger than it actually is. Also in the USA.

The goverment have pusued a low interest rate policy and have done nothing to stop the runaway housing market. The reasons are obvious. They have benefited from the reflected glory of an apparently strong economy. Trouble is, it is based on unsound money and we havn't mentioned credit card debt.

Obviously the goverment are taking a very keen interest in the housing market. They must be terrified that it might crash because the sums of money involved are truly frightening.
So today, the goverment, the lending agencies, builders, estate agents, architects and house owners ( particularly those who are heavily borrowed) are busy talking the market up because a crash doesn't bear thinking about.

As I stated at the begining, house prices need to be contained over a long period of time. Finally, I think that the Bank of Englands main concern, in considering whether to raise interest rates has much more to do with containing the housing market
by controlling further borrowing, rather than containing inflation.

Answer 9

There will be, or maybe already is, a slowdown but some areas have proven recession proof and others are still in the doldrums. There's plenty of relatively cheap property up North if you can get a job there to pay for it.

As for the long term? Mark Twain advised "Buy land, they're not making it anymore"

Answer 10

its programmed in to happen so that ordinary people lose money the middle class and rich don't want you to join them so they let you sponsor them with your money or increased wages knowing they are going to take it off you later. only a government that has a set income tax level, which i thought was the promise with VAT that that is what would be used when more tax was required, however the user pays philosophy of the conservatives destroyed nhs dental service and gave the public owned utilities away to friends and profit makers that previously couldn't run them without great losses, but suddenly big prifits from the same bosses and reduction of jobs, for which they got knighthoods big bonuses and payoffs instead of the sack and prison for cheating so the answer is yes it will drop until the next gullable lot of us come along to be fleeced,

Answer 11

Yes, because greed wiil mean that people will not be able to buy houses in the future unless they are very rich. But also too many will be built and thus the people who have purchased their own houses will find that they owe more than the house is worth.