Do You Believe there could be a House Price Crash in the UK?

Question

With inflation totally out of control, therefore forcing Interest Rates to follow, with the largest debt in the country's history, with the average house now costing 7 times the average national wage, are we on the verge of a House Price Crash in the UK?

Surely is rates go up, the amount people can borrow drops, and those on fixed deals coming onto variable, will be stung with much higher repayments.

Its happenning in the States, coudl it happen here?

But Mahal

If Japan has awful space problems, how do you explain their 20 year House Price Crash making a £250,000 property in 1985 now worth about £100,000?

Is this not a credit boom, rather than a housing boom?

Answer 1

Hey Mahal, what cave have you been living in? You need to stop smoking that weed dude, your brain is fried.

Housing prices don't fall? Tell that to the Japanese when during the 1990's, housing prices fell by as much as 50%. People who bought for (the USD equivalent) of $500,000 for a flat at the height of the real estate bubble could barely get $250,000 for it a few years latter. R.E. prices crashed by as much as 70% in Japan. And during the great depression, a house that sold for $11,000 prior to the depression sold for $100. Right now in the U.S., people are finding themselves "underwater", where they purchased a house for $390,000 and now it only values at $300,000 - they lost 23% of their homes value in a few years.

Yes, people do just stop buying. It's called "renting". If prices get too high and people are priced out of the market, they'll just rent, or live with relatives. Right now, new home builders are experiencing cancellation rates as much as 50%, existing home sales are falling. What happening now is that sellers still believe they can get top dollar for their property and aren't lowering prices. But as the number of buyers continue to dimish and interest rates go up, thus pushing the amount buyers would qualify for down, its' going to force sellers to ultimately lower their prices.

But, these are not normal times, this is the biggest real estate bubble EVER. Houses that couldn't sell for $250k, 5 years ago are going for $550k - $600k now in the area where I live - more than double in price in 5 years. That's insane. And considering most people are now priced out of owning, prices will come down.

Gees dude, you need to get a life. Seeing that you've been on Answers since Dec. 28, 2006 (almost 4 weeks) and you've earned, 4667 points with a 10% best answer rate, that tells me you must be living on Yahoo Answers and not spending time in the "real world".

To answer your question Chris, yes, it can happen in the UK. No country is impervious to the collapse of an asset bubble. The US is experiencing it and the UK will follow. The US real estate bubble has only begun to deflate and it's going to get much worse. I'm looking for a minimum of a 40% drop in real estate values and fully expect a crash that will sending real estate prices tumbling to levels not seen in decades.

You are correct, as interest rates rise, people qualify for less money, thus they bid less on houses. The UK and US are tapped out. As rates rise, it makes loans more expensive and people qualify for less money. Add to that that people can't afford to purchase at existing price levels and you have a recipe for a major price correction.

Here in the US, demand for new housing is running about 1 million units per year, but builders are building at rate of about 1.15 million units per year. So they're building more homes than needed. Add to that the default rate and foreclosure rates are skyrocketing (Massachusetts experienced a 300% increase in their foreclosure rates in Nov. Y-O-Y from Nov. 2005 and I believe Atlanta was up 99% YOY) thus adding more inventory to the market is going to push prices down.

Yes Chris, the US and in my opinion, the UK will experience a severe housing crash. How the UK will whether it, I'm not sure, but the US will experience an economic crisis that's going to make the great depression look mild in comparison.

Answer 2

I;m not sure but the point that has been missed so far is that the uk currently has a high percentage of house ownership compared to other european countries where people often buy once they reach their late thirties and forties. I'm not currently sure what rental prices are doing but i suspect they are probably going up. In the south east I believe there are not enough properties for rent and so supply can drive prices. I would suspect there will be more buy to let investors coming into the market, it is still a relatively young market, people have been renting out property for years but only in the last 10 have we had off the shelf mortgages to manage the transaction. This has made this type of investment considerably easier. My advice to you is be creative look for bargains, consider buying property in whatever way you can. Buy as part of a team or buy to let in an area you can afford and rent to others, if the area you live in is too expensive. There will possibly be a correction but I wouldn't count on it, the current indications don't have it being likely. I think it's probably wishful thinking on those that want to get into the market. Might sell a lot of papers if someone predicted it but think the economy is heading towards even greater stability into the future. I want one too and I own property already but i don't think it will happen.

Answer 3

You can't know the answer to this question because it depends on many complex factors interacting with each other. If interest rates go up, and earnings follow the rise then people will still be able to afford their repayments. If earnings don't go up in line with rates, then there is a possibility of a crash. A situation that brings a lot of houses onto the market (say, increased repossessions because of mortgage payment defaulting) could drive prices down if the demand for the houses is lower than the supply. If potential buyers get a whiff of a possibility of a slide, they won't want to commit to buying and the demand will dry up. At the moment, a lot of the demand has been from people buying-to-let. As long as the return on investment is maintained, then these people will carry on investing but if the return becomes doubtful, either because of interest rate hikes or because of doubts about future price rises, then these investors wil stop buying and the supply-demand thing gets out of balance.
All the so-called experts are saying that they don't believe there will be a crash this year. Are they right?

Answer 4

don't think there will be any price crash but house prices may well stabilise for a couple of years. of coarse in some local area's there may be small decreases in value but on the whole i think that it is still a good investment.if you remember the big crash a few years ago everyone panicked but in the long run if you had stayed where you were then you will have found that all the houses have gone up in value.
secondly i also don't think that inflation is out of control like it was a few years ago.

Answer 5

House prices don't crash. I think this is a myth.

It's not like people can just quit buying them and live in cars. As long as the population is growing, home prices will generally continue an upward trend in any economic conditions with some temporary dips.

You live on an island for Crikey sake! (I got that from a brit!)

Take a look at Japan some time on Google's satellite photo maps. There is no farmland left except for tiny 1-3 acre plots! That's where you're headed!

Answer 6

The UK housing market has been over heating for quite some time now, all the economic indicators point to a down turn in the housing market.

If you look at the housing sector graph since records began there has always been big up's followed by big downs, its just gone on longer this time.

Answer 7

My thoughts exactly. it is going to happen in 3-5 years is the expert thinking. How can you sustain a market at an artificially high price that excludes a large proportion of the buying market in anything?
People who have taken out massive mortgages will tell you it won't happen, but then wouldn't you if you were them? They will still have their debt, but not their house or its former value.

If you inflate something beyond its capacity it has to burst, and if it dont in 5 years im emigrating somewhere cheaper.
If you are willing to emmigrate then it is win, win for none mortgage people at the moment, and win, worry for those that have them.

Also we all know EVERYTHING that happens in the states happens here 5 years later!

Answer 8

Yes I seen this on the news few months back- I really hope house prices do drop my area is far to expensive to bar in. Just drop for a month so I can buy then rocket back up once Ive braught please.lol.i wish

Answer 9

i think so because mortgages already held are becoming impossible to meet due to interest increases , so homes are being repossessed , as the situation worsens more houses will become available and availability reflects on price , if there is only one house on the market in your home town and 40 potential buyers it will sell at a premium but if there are 40 houses and only one buyer prices will plummet .

Answer 10

Yes I'd say there is going to be a crash. You look like someone I used to know called chris osborne,it's not you is it he will be 37.