made
for a happy day
UK house price crash - quiet before
the fall (2007)
There is an uncomfortable quiet right now. Like in the film Zulu,
it is the quiet just before the embattled British soldiers catch sight
of a massed army rising up across the horizon. It's the quiet before the
fall.
Of course, I hope I'm wrong on this, but for some UK residents the battle
for financial survival appears to have already begun. Of 179 properties
recently up for auction in Covent Garden, 52 were repossessions.
The Financial news of the last 8 weeks adds little cheer. Banks have stopped
lending to each other. Investors aren't buying up commercial debt. There's
a rush to sell investments in house-builders, commercial property funds
and any mortgage lenders suspected of being exposed to subprime loans.
In fact, a recent survey finds confidence in the UK financial sector at
its lowest since 1990 - the time UK house prices last went into freefall.
We've just seen the first run on a British bank since the 1800s. Queues
of anxious savers were kept waiting outside Northern Rock branches. Then
the contagion. Both Alliance & Leicester and Bradford & Bingley
took hits on their share prices . Even Barclays looks to be feeling the
heat.
Up on the horizon stands a looming threat - the end of 2-3 year fixed
rate mortgage deals. This means that 2 million UK households are about
to be hit with 7.5% interest on their loans - this at a time when our
personal savings are at a 47 year low and already twice as many Brits
are missing mortgage repayments as in 2006.
A cause for concern? 60% of the UK's wealth is now said to be tied up
in housing, so the dramatic increase in speculative buy-to-let ownership
(up by a factor of at least 33 in the last 10 years) doesn't inspire confidence.
Following a series of interest rate hikes, landlords now find that rental
incomes have fallen below their own mortgage repayments. This is forcing
landlords to sell. Brand new buy-to-let flats up North can already be
found being auctioned off at 60% of the price they were bought for in
2006.
Record numbers of Brits are now seeking debt advice. In London, where
property prices peaked at 15 times average earnings, some young couples
are spending a barely conceivable 50% of their post-tax income on mortgage
repayments.
We should be worried. All this suggests to me that talk of a 1989 style
house price correction would actually be to understate how bad today's
bust could be. Our disposable income has fallen below 1990 levels under
a mountain of debt. Outstanding household loans currently stand at £1.3
trillion in the UK, double the outstanding debt just 7 years ago.
That's a lot of money to pay back, particularly when people find themselves
with negative equity. At minimum, rational homeowners with interest only
mortgage deals might be tempted to hand back the keys. If this happens,
it may force banks to auction off properties for whatever they can get
for them... further depressing prices.
But the inevitability of falling house prices isn't the whole story. According
to the Memorandum of Understanding between the government and the Bank
of England, the Chancellor's bailout of Northern Rock should only have
happened if the bank's troubles constituted "a genuine threat to
the stability of the financial system".
Therefore, taking the Chancellor's actions at face value, it tells us
that the entire banking system is in a jam. It's a lot more serious than
a few borrowers, banks and shareholders getting their fingers burned.
So how should we be preparing for the worst?
Firstly, we need to recognise that now really isn't the time to be buying
a house or taking on debt. If you stick to renting you won't feel hard
done by or under siege should you see house prices falling and interest
rates continuing to rise (as Alan Greenspan just predicted, incidentally).
Secondly, things could get really bad, like losing your job bad. It's
a sobering thought. But look around. Jobs are already being shed in the
financial and building sectors. The retail sector is also worried about
what domestic belt tightening will mean for Christmas sales. Have a plan
B.
Thirdly, the demand for cash isn't about to dry up. If the banks are crying out for cash today, you can bet that the rest of us will be crying out for it tomorrow. Make sure you can lay your hands on enough of it.
Ends | 5 Oct 2007 | The Leg
comment
| back to top
| thoughts
Essential Reading:
UK financial crisis 2007 | 2008.
Where to next?
Related viewing:
Graph: 3 possible scenarios for the future movement of UK house prices
suggested by the New
Economics Foundation. Click image to enlarge.
Graph: Nationwide's affordability index suggests the house price to earnings
ratio is still at a historically unsustainable high.
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Ireland:
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2012:
Aug:
Halifax index says house prices have fallen 20% in 5 years
Jun:
Net mortgage lending falls for first time in 15 years
Adamstown - empty
new town near Dublin where prices down 57%
May:
London prices hold up, elsewhere prices falling steeply
Real
risk of mortgages becoming unaffordable when base rate rises
2011:
Average
UK house price is down 2.5% year on year in July
Why
US real estate may stay weak for another 10 years - will UK follow?
Shelter
maps repossession hot spots - Corby, Barking, Daganeham....
February:
UK house prices fall for fifth time in six months
2010:
Construction
in Central London falls to lowest level in 20 years
Nationwide
reports 0.7% house price fall in October
September
mortgage lending slumps to lowest level in a decade
Halifax
reports 3.6% house price fall in September - biggest drop since '83
State
safety net for homebuyers who lose jobs cut back
UK
house repossessions climb to 46,000 in 2009, highest in 14 years
2009:
16
Oct: Banker's bonus expectations lift interest in prime homes
27
Aug: Weak pound creating demand for London prime homes?
21
Aug: Japanese land prices are 58% below their 1991 peak
14
Aug: B&B repossessed 50% more homes in 1st 6 mths of '09
19
July: Government: av. house price fell 12.5% in year to May
8
July: Help for movers stuck due to potential losses on property
22
June: Negative equity traps 1 in 10 UK borrowers
20
May:House buyers negotiating 6.5% discounts on asking price
15
May: 12,800 UK homes repossessed in Q1
13
May: Land Securities' portfolio fell in value by a third in 08/9
12
May: Available buy-to-let mortages just fell by 95% in 2 years
6
May: House price falls by region to Q1 09 - from the Halifax
30
Apr: Oversupply of flats has resulted in falling rents
3
Apr: Banks start to pile pressure on buy-to-let portfolio holders
26
Feb: Nationwide: house prices down 18% in 12 months
25
Feb: Fall in rents as unsold home flood the market
21
Feb: 40,000 repossessions in 2008, up from 25,900 in 2007
13
Feb: Number of UK house buyers the lowest for 35 years
1
Feb: Lenders demand 50% deposit for mortgage on a new flat
30
Jan: Housebuilders offer frenzy of freebies to attract buyers
6 Jan: Nationwide:
UK house prices fell 15.9% in 2008
2008:
Graph: Halifax's statistics, September 2008
'talk of a 1989 style house price correction would actually be to understate
how bad today's bust could be'...
Dec:
Bailiffs get power to use force on debtors
Dec:
Estate agent jumps on sale bandwagon
Dec:
Last month house prices fall at fastest pace in 25 years
Dec:
UK's construction sector shrinks at fastest pace on record
Nov:
New Star property fund shares just fell 94% in 12 months
Nov:
11,300 UK home repossessions in Q2
Nov:
RICS warn of mounting oversupply of rental properties
Nov:
Taylor Wimpey has lost 98% of its share value in 12 months
Nov:
650,000 buy to let properties standing empty in the UK?
Nov:
Average interest on UK tracker mortgage in Oct was 6.84%
Nov: UK house prices reported to be falling by £900 a week
Oct:
Nationwide: UK house prices 14.6% lower than year ago
Oct:
UK home repossessions up by 71% as unemployment soars
Oct:
1.2 million face negative equity in UK
Oct:
Nationwide: UK house prices 12.4% lower than year ago
Oct:
Barratt deal: 43% discount when you buy 5 flats or houses
Sep:
Halifax - UK house price have fallen 12.7% in 12 mths
Aug:
Nationwide - UK house prices have fallen 10.5% in 12 mths
UK
estate agents are selling just one property a week
Nationwide:
average house £17,000 cheaper than 12 mths ago
UK
developers offer 25% of new house value free for 10 years
UK
house price decline is now swifter than the crash of '89
New
build flats selling at 45-50% of 2006 price at auction
Brown
Adviser believes UK house prices won't recover until 2015
House
sold in 3 mths to June almost a third lower than year ago
Property
index anticipates 50% fall in UK house prices to 2011
Buy
to let mortgage reset could make landlord's costs leap 36%?
House
prices sliding faster than in 1990s recession
A
sign that the buy to let boom is over
Negative
equity hits 250,000 in UK while mortage costs rise again
Nationwide
reports 2.5% fall in UK house prices in May
First-time
buyers spend half of income on mortgage
Council
of mortgage lenders foresees 7% fall in prices in '08
Average
rate for 2 year mortage now at 6.64% vs 4.34% in 2006
95%
of UK surveyors reported falling house prices in April
May:
Reposssession orders up 16% vs 12 months ago
Nationwide:
average house £7500 cheaper than 6 mths ago
Up
to 33,000 borrowers expected to lose homes this year
More
houses for sale than there are buyers over last 3 months
Surveyors
report widespread house price falls in March 08
House price falls reported by
chartered surveyors March 08
"had
no idea idea how difficult it would be to sell this house"
Prices
falling in half of postcodes of England and Wales
Halifax
reports biggest monthly drop in house prices since 1992
Will
lowered capital gains tax trigger buy-to-let sell-off?
1.25%
added to average new mortgage offer in last 9 months
Spain:
40k Estate Agents close, developers unable to refinance
Florida:
Bargain hunters hop on foreclosure express
Average
annual mortgage bill now £1464 more than 2 yrs ago
Nationwide
raise interest on two year tracker mortgage to 7.1%
Nationwide
survey reports fifth monthly fall in UK house prices
Miami:
House prices have now fallen 19% in last 12 months
Manchester:
Repossessed flats sold for 50% of 2005 price
Failure
to keep up card repayments could cost your home
Falling
house price valuations & tighter credit block remortgaging
Remortgaging
is going to seem expensive now
44%
of net salary spent on mortgage, up from 34% 5 years ago
35%
more people asking CAB for advice on mortage arrears
UK
lenders cancel mortgage deals with just 10 minutes notice
UK
Housebuilder Bovis' order books are down 20% in 2008
RICS
surveyors report similar rate of house price falls to 1990
Buy-to-let
investment firm to end seminars and make staff cuts
2
in 100 mortgage borrowers in the US are losing their homes
US
house owners hand back the keys as cheap rates end
Recession
and repossession - surviving a great fall
European
house price gains are starting to fade
Miami:
In just 12 months, house prices have fallen by 17.5%
US
house prices may still fall 25%, losing gains since 2000
What
happens when a million amateur landlords get cold feet?
Nationwide
survey reports fourth monthly fall in house prices
Those with 125% mortgages won't be able to refinance them
100%
loans no longer an option for those (re)mortgaging now
Labour
raked in £31bn in stamp duty over the past ten years
Not
enough young urbanites to buy or rent all these new flats
7.3%
of outstanding US mortgages in default, 4% in arrears
UK
home reposessions rise by 21% to highest since 1999
£1.4bn
wiped off the value of British Land's property portfolio
Average
US house prices set to fall at least 25% further
Nationwide
survey reports third monthly fall in UK house prices
Surveyors
predict 123 homes a day will be repossessed in 2008
What's
your Plan B if you get made redundnant?
Spectre
of negative equity haunts Britain
Downhill:
more surveyors are seeing price falls than price rises
Families
face mortgage bills 20% higher than 2 years ago
Spain:
shares in 2nd largest property firm fall 40% in 2 days!
House
Prices fell 30% in a few years after 1948, 1979, 1988...
Graph: Over the cliff? % month on month increase/decrease in house prices
in the UK.
Graph: Relative increases in house prices in Great Britain, France and
the US since 1970. Note the precarious position of the UK where prices
are much more over-inflated than elsewhere.
2007:
Landlords
face office rent crisis in 2008
How
low will it go?
Nationwide
survey reports second monthly fall in house prices
UK
house prices fall again this month - as does job security
Friends
Provident suspends withdrawals from property fund
UK
commercial property prices have already fallen by 10%
Growing
numbers of landlords selling as rental contracts end
"A
thousand flats lie empty in Leeds..."
40%
of UK mortgage products have disappeared
US:
5.5% of homeowners are late with mortgage repayments
Crashing
back to 1991
Funds
which insure US mortgage repayments coming unstuck
Halifax
reports 1.1% fall in house prices during November
Crash
that 'won't happen here' looms large
663,000 UK homes (3% of all
dwellings) stood empty in 2006
Mortgage
arrangement fees double from £441 to £827 in 2yrs
Nationwide:
average house price fell by 0.8% in November
Building
materials supplier sheds 6000 jobs as US profits slide
1
in 3 UK mortage holders 'will suffer financially'
City
bets on 7% fall in UK house prices in 2008
House
price crashes usher in, rather than follow, hard times
95%
mortgage @ 6.5% fixed rate may mutate to 80% @ 9.5%
Safety
net which reduced 1990's repossessions is not there
Monthly
mortgage approvals sink to lowest in at least 10 years
UK
savers pour millions into 'safe haven' Nationwide
21
Nov: UK interbank lending rate hits 2 mth high of 6.49%
Over-supply
in buy-to-let sector sees developers delay building
Buy-to-let
specialist Paragon may have to stop trading
UK's
biggest agent hit by number of sales falling through
5%
of borrowers spend 50% of gross salary on mortgages
Nationwide:
house prices will fall across much of England in 2008
British
Land eyes up 'distressed' sellers
Surveyors
report house price drops of 8pc in 3 mths in N.Ireland
Life
just got harder for those that have to borrow to buy
Shares
of UK's top 7 housebuilders dropped 42% since April
Council
of Mortgage Lenders predicts 50% rise in repossessions
Fred
Harrison on House Prices: "Expect the worse"
Property Snake maps downward trend in UK asking prices
UK
all set for a crash. 2m in USA may lose homes
UK
house prices fell in October, even in expensive areas
As
fixed rates reset, mortgage approvals fall to 7 year low
Repossessions in
Wales are set to go on rising
18
Oct: 'Unusually high stock level...unusually low buyer levels'
Vulnerable
are using credit cards to cover mortgage or rent
IMF:
UK house prices overvalued ... by as much as 40%
Vulture
fund will prey on 'distressed assets or forced sellers'
Panorama:
Sub-Prime Suspect reveals mis-selling of mortgages
Fire
sales of assets on the way?
What's spooked the fat controller?
A
quarter of UK first time buyers can no longer afford to buy
Fall
in UK house prices now may hit harder than crash of 1990s
Halifax
says UK house prices fell by 0.6% in September
Buy
to let flats in UK being auctioned for 60% of original price
Landlords
find rental returns falling below mortgage repayments
Confidence
in UK financial sector drops to lowest since 1990
Hedge
funds bet on fall in UK house prices
US:
housing market frozen - recession likely says Freddie Mac
US:
2.5m households' mortgages likely to reset at around 10%
Banks
tighten lending as their own borrowing costs rise
Bank
of England not so independent of government after all
Assurances
fail to halt run on UK mortgage lending bank
UK
property crash possible says RICS's chief economist
Greenspan:
Double digit interest rates on the way
Greenspan:
UK mortgage holders will experience 'difficulties'
16
Sep: UK housing market's bull run comes to an end
The
average asking price for a UK home fell in September
Ninth
consecutive monthly drop in new house buyer inquiries
Fear
of retail bloodbath as rising interest rates hit home
Average
standard variable UK mortgage rate rises to 7.69%
Rising
mortgage costs encourage London landlords to sell
Britons
seeking debt advice hits a record
Unemployment
rises in US - 12,000 home lender jobs to go
UK house prices
1997-06 rose 4 times faster than average pay
UK
mortgage rates will rise as bank borrowing costs rise
UK
media provides late advice on surviving a housing crash
Mortgage
eats 51% of young London couples' post-tax income
Major
Landlord says UK buy-to-let figures no longer add up
"Release
cash in your home while you've still got time"
A nation (re)possessed?
[The vultures close in...]
Higher
UK mortgage rates hit lower income earners
Young
homebuyers contend with £20k additional debt
Filings for
repossessions in US up 93% vs a year ago
'slow
down in [UK] house price inflation could turn into a slump'
New
house buyer enquiries down and unsold stock up (July)
Near
1m UK buy-to-let mortgages now, up x 33 from 28k in '98
10
Aug: The parties over - City hit by biggest crisis in 10 years
10
Aug: stock markets tumble as sub-prime contagion spreads
BNP
freezes funds in sub-prime shock
UK
property fund outflows surge
Bank
of England signals interest rates rise to 6% and beyond
Repossessions
up 30% on 12 mths ago as squeeze continues
City
millionaires are sending UK farmland prices soaring
UK's
house prices are second most overvalued
US:
housing suffering its worst recession since 1992
Houses
now account for 60% of UK's 'wealth' - a record high
Of
179 properties at Covent Garden auction, 52 reposessed
Oversupply
of houses for sale creates buyers market in UK
UK
mortgage lenders call for interest rate freeze
Americans
could default to the tune of $100bn
2
European Insurers face $8bn of sub-prime mortage exposure
UK
commercial property funds start to nosedive
How
US borrowers were caught out
720,000
expected to have home repossessed this year in USA
Twice
as many Brits missing mortgage payments as in 2006
UK
housebuilders hit by stagnating house market
US
sub-prime mortgage ills infect UK markets
First
time buyers spend up to 48% of income on debt repayment
200
businesses launched to capitalize on UK mortgage arrears
FSA
sounds alarm on UK sub-prime lending
London
house price rises mask falls elsewhere
UK household
disposable income dips below last 1990 low
UK
housing market sentiment 'may' be turning, survey warns
UK's
personal savings rate hits 47 year low
US:
mortgage defaults already at highest level in 37 years
Are the planners really to
blame for lack of affordable housing?
Bubbling
under...unsold homes lead to unlet homes lead to...
Housebuilding
market 'may not' be working well for consumers
US:
average mortgage interest rate hits 6.74% in June 07
Cheap
fixed-rate mortgage will end for 2m Brits later this year
£1,300,000,000,000
in debt
Housebuilders
own enough unused land to build 225,000 homes
ABN
fears world housing crash
First-time
buyers in UK face highest mortgage costs in 15 years
Bonds
sell-off suggests rising interest rates are here to stay
The
return of negative equity?
The
C-word that remains taboo
Repayment
shock ahead as 2-3yr fixed mortgage periods expire
Buy-to-let
landlords start sell-off as demand dries up
May
07 - house prices freeze or fall in 2/3 of UK districts
Do
we need a housing market crash in the UK?
How developers maintain
profitability as land prices inflate
UK buy-to-let has grown
by factor of 26 since 1998 (c.section 6)
UK
homebuyers now at full stretch
2020 Vision to end the boom & bust
cycle
How
soon will UK repossessions hit their 1991 peak of 75,540?
Spain: property
firm shares plunge 60% in 6 days
Loan
standards for buy-to-let slide
Up
to our eyes in debt we can't see
Fixed
mortgage deals vanish as UK inflation rises
'Buy
to leave' investors keep thousands of homes empty
Property
prices 15 times earnings in London
UK Faces £459BN
Housing Crash
France:
housing bubble set to burst
US:
housing slump may set off full-scale global crisis
World stocks
tumble on US fears
US: repossessions
hit their highest in 37 years
US:
mortgage crisis goes into meltdown
