Will there be a house price crash?

Is there going to be a house price crash? Can house prices keep rising?

Considering the national obsession with property - and the potential effects of any looming house price crash – it came as no surprise when more than 4,000 people voted in a This is Money poll on house prices.

What was a surprise was that almost 60% reckoned prices will either fall or remain static over the next year.
Of the 4,100 people who responded: 47% said prices would fall; 41% said they would rise; and 12% said they would stay the same.

House prices long ago stopped being a noteworthy topic of conversation - but recently the subject has gone from hot air to hot potato, with wild claims made for and against rising prices. But is a house price crash a possibility?

If you listen to the property industry experts, the answer is no. The commentators generally agree that current growth of more than 10% per year - according to Halifax, Nationwide, government and Land Registry figures – cannot continue. However, they have wheeled out the classic ‘soft landing’ phrase and talk of growth slowing to between 3% and 5% per year.

On the other hand, those who have developed an obsession, often unhealthy, with property pessimism claim a crash is just round the corner – pointing to the kind of bubble mentality that sees a dilapidated scout hut go on sale for £250,000.

The important thing though is that it doesn’t really matter what the experts or the doomongers think – house prices are dependent on what the public thinks.

It is the general public purchasing the majority of homes in this country and if they think property is on the up, they will stretch themselves and pay more with prices subsequently continuing to rise. And that’s why our poll result was so interesting.

Our April – May poll showed 41% thought prices would rise over the next year. When we asked a similar question in November – December 2006, 55% said prices would rise in the next year.

While the difference between 55% and 41% may not seem huge, that is a substantial drop in confidence of 14%, during a six-month period when house prices have continued to rise at a steady pace, and demand has failed to slow.
So what’s knocking confidence?

Two interest rate rises since January have not helped, but those responding to the question in December had also seen two rate rises in the previous six months. Meanwhile, even property bears question exactly how big an effect previous rate rises have on confidence when the cost of borrowing is still relatively cheap and 80% of new mortgages are on fixed rates.

It is future prospects that affect housebuying confidence and there are two black clouds on the horizon - warnings of more rate rises and an affordability crisis. Confidence is being dented by fears the Bank rate will hit the magic 6% barrier and the belief house prices can’t just keep going up - because people simply can’t afford them.

So will prices crash? It’s unlikely when there are still 41% of people out there who think they’ll rise. But if confidence takes the same hit in the next six months and another 14% lose their faith, then there would be only be 27% believing prices will rise and that could spell a serious problem.

- Simon Lambert, This is Money

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Comments

[Scott]

Hi Carol

I'm sure G J Edwards will be along soon to tell you house prices aren't crashing as it was impossible. There is a long way to go yet to get back to averages. 15-20% off in 2009 and then another 10% in 2010. Brace yourselves!

[Carol]

Can someone tell me there is no enormous house price crash! FACT In February 2008 bought my house in a west London Borough for £230,000, valued in August at £200,000, now in December it is valued at £170,000!

[Scott]

Hi GJ, what are your thoughts about the future of house prices over the next 12 months? Regards Scott

[A.S. Gregory]

GJ Edwards
Would you revise your estimate if interest rates increase drastically? The Forex markets are already pricing a 1/2% hike in UK rates as a minimum. The UK relies on foreign buyers of government securities to survive. The UK (like the US) runs a budget deficit and has to compete in global markets for cash (just like any business in the red). Cheap money has gone for now and UK rates are headed sharply upwards leading to at least a 405 correction in the housing market. By the way I am RICS so I have a "little" inside knowledge.

[Scott]

Oh well GJ, looks like RICS got it wrong last year then? I think you have to agree that sentiment has changed now and there is only one way this baby is going, and that is down. I'm now thinking of revising my 40% drop in house prices up to 50%, what with all the bad news lately. Regards Scott

[Tony Gordon James]

The housing is going to crash in near future. This has happened before and it will happen again for the same reason as it did in the last crash.

[G.J.Edwards. Gerrards Cross]

In September, RICS came up with with the incisive and brilliant analysis that there is only a 10% chance of a 1990's style house price crash.

If that is the best they can do then I fear that Nick Irvine will have no choice but to carry on working until he is 90.

[Nick Irvine]

Having experienced 1973 and 1990 first hand, the next thing to look out for is when Northern Rock cannot pay HMG back the £40 billion Darling has lent them courtesy of the tax payer.

Then comes a full scale run on all primary banking and funding sources, with all the secondary "banks" and these ludicrous funds going bust as per 1974 i.e no liquidity and the Bank of England lifeboat sinking before it is launched.

On to 1990 when all commercial and residential valuations were impossible to carry out and the whole sector will collapse. Aged 64 I am renewing my membership of the RICS, as I and a few others will be the only parties left with the experience to value property on a sensible basis.

Roll on 2008 and the inevitable collpse, I shall be working again until I am 90!

[G.J.Edwards. Gerrards Cross]

Good comment from Mark of today, full of commonsense observations.

This thread started on the 24th may this year and could go on until 24th May next year.

By then of course, there will be a huge crash in property prices, how do I know?

Well, the "experts" including, A.Greenspan, the Fed,IMF,EU,BOE,Capital Economics, et al, have all been predicting an imminent price crash for at least the last six years.

They can't all be wrong, can they?

[Mark]

Following the ongoing heavyweight contest between G.J.
and Scott. jolly good mashup.

Must say I think their are some unique features in the current UK property market.

1) Firstly I cannot remember a time when millions of
ordinary people began to invest all of their additional income and any leverage they could obtain to buy property portfolios. Most people of G J's generation if they bought a house at all stuck at one. As the mortgage declined they either upgraded or saved they did not all try to become mini Rachmans.

2) I cannot remember a time when people viewed property as their best or indeed only investment, foregoing shares, bonds and cash.

3) There has never been a generation like mine who are so desperate to get onto the property ladder. I mean I have read recently of young Brits who cannot afford anything in the UK staying at home with parents but buying a property in Bulgaria.

So long as we remain property obsessed, so long as we carry on leveraging ourselves to the limit and so long
as the economy grows this bubble will continue.

Will there be a crash - one economist once said it is easy to predict what is going to happen - it's the when
that is difficult. In my view houses are good for a couple more years, not sure about these horrendous apartment blocks though.

[Pip H]

House price drop? The sooner the better as far as I'm concerned! The obsession with house prices in this country is a bore. It's only really great news if the value of your house rises if you're going to sell it. Just like shares. People are in denial,they don't want to accept that the value of their house WILL drop. Sell it now,before it drops too much, pocket the profit and rent for a year. Then move into somewhere smaller and you've got a nice fat bank balance.

[geoff k]

Well here goes, hold on tight this is going to be one hell of a ride, if you think a crash is not coming you really should hand over all your wealth over to your wife as what's coming is one hell of a lesson for greedy people, they will be chasing the market all the way down with their nice buy to let portfolios. This one will be ugly, oh and well done Abbey with your 125% morgages, you deserve all the keys back.... bring it on

[G.J.Edwards. Gerrards Cross]

beeceeuk, it looks like a three horse race now, I think Scott and I have frightened off everyone else.

I am pleased that you are feeling smug and self-satisfied with your investment portfolio, just keep working at it, at a nano level and work and worry yourself yourself into an early grave.

Don't quite see your point about lack of liquidity, this country is awash with Global liquidity, Mid-East and Russian petro dollars, plus others, huge Chinese, Japanese and German trading surpluses, plus others.

Is it a coincidence that money from these countries is being pumped into the London prime property market?

[beeceeuk]

Well this is almost a two horse race, but can I join in?
I've owned property in SW1, SW6 SW11, now it’s the sticks and have in 37 years seen so far three 'corrections' in house prices. Dont talk to me about 'the secondary banking crisis’ etc, so I feel I'm cognise to comment.

It's coming, whatever it is, but when, as I've been saying for 3 years if I knew I'd be a very wealthy man! But with mainly my SIPPS (out of Equitable Life amongst others) I do my own thinking. I don't trust what I just hear, I go down to the nano level for the SP and read for hours! I hold 90% in Gold, Resources & Mining. If I could convince myself to sell the house (and maybe convince the Madam that France or Italy was a goer I’d move over there) and maybe I will! As I kept on saying earlier this year, we WERE awash with liquidity, but now the tide has gone out. You know when there is a lull when the shore seems to go out for ever, before (whatever size it is) the wave comes back.
I hear that rumble, somewhere I'm sure. The longer they keep printing those paper IOUs and M3 inflates, the day of reckoning may be postponed, but some day?

Till that day I stay with my position, I've worked hard refining and pruning my portfolio. I'm not saying its bullet proof, but I've gone conservative, with some small mining punts, that could pay of sort of well, like Uramin, that was nice. Just reduce your debts, that should be most people’s focus, and this government should be taking the lead. But not like when Gordon who sold 4 billion of gold reserves - 415 tonnes in ’99 at approx $280 (£175). Nice one Gordon, not what I would expect from a prudent Exchequer. I wonder how many schools and hospitals that would pay for at today’s price? Oh the London Fix on Friday PM £737, nice one mate!
Cheers
BeeCee
PS And he bought some dollars with the cash from the proceeds, yeah cool move.

[Scott]

Well, GJ, the % of take home pay towards mortgage costs is the same as it was in 1992, so no I don't agree with your 12% point.

Unemployment - depends if you believe the government figures. There are a lot of people who are not classed as unemployed, but also are not classed as employed.

Supply and demand - yes, didn't stop Japan dropping 90% 13 years ago, and they have many more problems with supply than we do. Oh and they still haven't recovered. And it looks like they're just about to go into another recession, having just come out of their last (all the while the rest of the world was hunky dory - or so they have us believe).

City bonuses - yes that may inflate prices this year but I can't see the bonuses being anywhere near as good next time around.

And I'll eat my hat if Northern Rock don't go to the wall. Yes, they may get bought, but I doubt it.

And then let's see what happens with Bradford & Bingley, Alliance and Leicester, et al.

Merv did a good job today too. Thought they might have got him as their scapegoat, but it doesn't look like that plan worked.

Interesting times ahead GJ!!!

[G.J.Edwards. Gerrards Cross]

Scott, I have visited housepricecrash, the problem it is one-sided, full of comments from people trying to find every last shred of news to reinforce the view that prices will crash, at least with this forum and others like it, it is possible to find a broader spread of opinion.

We still have to go back to fundamentals, my view is for there to be a significant drop in prices, we need three factors:-
a) massive unemployment, at least 4mio+ based on the current employment ratio,
b) huge rise in interest rates to at least 12%, which will put mortgage payers under pressure
c) an over or at least neutral supply of property, not likely at current build levels.

I don't see any of these on the horizon let alone imminent, but maybe 5/10/15 years hence, things may be different but I doubt it.

In addition to wealthy foreign cash buyers at the top end, we now have an influx of immigrants who are cash buyers of average priced property, both groups are not doing anything to depress prices.

The City bonus season starts in November, this time estimated to be ca.£14b in total, where will all that money go? I can make good guess.

[Scott]

Well GJ, not lost anything yet as prices have plateaued. But now that the BoE have just injected a load of money it looks like an election is imminent (I would say within 3 months). So, no crash yet. Just a bigger one later. The UK sheeple have had a shot across their bows, which I doubt many noticed. They will vote Gordy back in because he guaranteed their savings, he's a nice man you know. But he's made the economy worse by doing so. Guess I'll have to wait at least another 3 months for my crash, but who knows, Northern Rockinahardplace may yet surprise us! Come on GJ, join me at housepricecrash.co.uk I enjoy our little discussions. You can also take a look at the lovely graph I have as my signature on the forums (my forum name is scott too!). Hope to see you soon.

[G.J.Edwards. Gerrards Cross]

The Northern Rock panic seems to have petered without too much damage being done to the housing market, the reason the Government guaranteed deposits is because they know they will not have to pay out.

Is there anyone out there who is prepared to predict what and when the next financial crisis to have a devastating effect on property prices will occur?

The Royal Institution of Chartered Surveyors has recently reported that there is a 10% chance of a 1990's style price crash.
What a totally pointless piece of information, it tells us absolutely nothing.

My own prediction is that there is a 90% chance that there will not be a 1990's style crash.

Scott, I think you are winding me to keep the debate continuing, I am sure you have long since gone back into the market as you do not want to lose any more money.

[G.J.Edwards. Gerrards Cross]

I am still here Scott, if the world-renowned Economist, ex-Federal Reserve Chairman, 81 year old Alan Greenspan, who presided over the US sub-prime mortgage fiasco, can predict that our base rate will rise to 10% and property prices will fall by 40%, then I feel I am qualified to say the exact opposite. But then I do not have a book to sell.

How much money have you lost by being out of the market while waiting for the price crash? My guess is that you will need to see a reduction of at least 50/60% just to break even, but those wealthy foreign cash buyers and City bonuses are still making it a bit difficult for you.

[Scott]

Where are you now GJ Edwards? Are you turning bearish yet? Northern Rock is just the start. Rightmove report is released on Monday, showing drops in house prices!!! Credit crunch is still full on. Any bulls left out there who think property is still gonna go up? Meet us over at housepricecrash.co.uk and take a look at the forum, it makes interesting reading!

[Gavin]

Its funny reading all these comments about if house prices will crash or not. Being an economist and accountant and having worked in the UK, US, Astralia and lived in Africa for quiet some time I have witnessed some interesting forms of greed. I am afraid that this housing market is in a boom and if you look all the indicators point to a down turn.

You only need to look at the stock exchange and see companies like the Royal Bank of Scotland having a PE ratio of 8. That means that it earns over 15% pa before tax on your investment with profits growing at 10% currently. Houses, well I own a property in the UK which gives me just under 5% - I have no mortgage. One thing I have learnt through my years is the difference between shares and property is that share prices in downturns fall a lot quicker than property due to the liquidity. So if you don't think there is going to be a downturn shares like RBS, Barclays, Northern Rock, Lloyds, HBOS etc (all the banks) are probably about 50% undervalued. So rather invest in stocks in the current market - however I think I will wait a little longer because I do think that a correction is overdue.

[Barrie Lloyd]

Before buying a house have a hard look at maintaining it.If you are not into DIY you could be facing serious financial problems.

[Peter Vuorela]

Affordability is often ignored. The fact that people are opting for shared ownership schemes and buying with friends (or even with strangers!) clearly indicates that properties are too expensive and over-valued. Also, the fact that more and more people are now on interest only mortgages supports this view.

Eventually the market will correct itself. Be it next year or in 2020, the longer it takes to materialise the worse the impact. Eventually, there will be just too many people who have just paid the interest on their mortgages, with the original debt still outstanding. If inflation was running at 10%+ a year this wouldn't be such a problem. But it's not. Perhaps it's the general inflation we need.

However, I don't understand why some people are saying that there possible couldn't be a crash, correction or whatever? Well, that's precisely what most people were saying on the other side of Atlantic just 12 months ago and look at them now!

[marco]

im a young lad from cornwall who is in a position to buy within a very expensive market. but i just dont know what to do. ive been told by some not to buy as to buy now would be financial suicide, while others tell me if i do not do it now, it may be to late. any advice would be appreciated.

[mike]

i have read negative comments re 'propertysnake', but surely it gives an insight to the market?
A number of (more expensive £1,000,000-odd) homes being reduced by up to 38% in Oxfordshire and elswhere
and of course 100s of homes being reduced by less etc
this just cannot be down to silly pricing alone- all agents/sellers will try it on - but within reason.
The majority of people wish their homes to be priced within a 'sell' range albeit often/always?? optimist in expectations

[Royston Amphlett]

If you look at history, house prices tend to go in cycles, we all know prices have risen,that is not the clever bit, the clever bit is knowing when they are going to drop, for that you need a crystal ball, however as sure as eggs are eggs, there will be a down turn and that down turn will be proportionate to the dis-proportionate rise, ha! ha! but when?

Roy

[G.J.Edwards]

Congratulations to J.Snodgrass (aka G.Brown), at last a reasoned, well thought out and incisive analysis of the property market.
The lessons are clear, whatever you think is going is going to happen to property prices, it is safer to be in property than out.
To paraphrase Richard Nixon, it is better to be inside the Wigwam spitting out than to be on the outside spitting in.

[J.Snodgrass]

If anyone else mentions interest rates hitting 15% I'm gonna cry. When that happened in the late 80's interest rates were a political tool. They are not anymore. Changes are now made more for economic reasons than political ones.

If the market starts to falter then the economic reaction of raising rates has been achieved. People spend less (as their mortgages cost more) and save more. Money goes out of circulation and inflation is averted. Rates do not then continue to rise as the objective is already achieved.

And you must also remember that this market is "sticky upy". People remember what there house was valued at and either market it at that amount (or near) or don't move. And as most house moves are not a neccessity but a choice, the market dries up as people stay put. Less supply keeps prices high as choice is limited.

As long as this country is fascinated with ownership then property will be a steady option for investment. I know people who jumped out of the market 2 years ago saying it was unsustainable, they've now lost out. It does seem to be a market that is more dangerous NOT to be in.

[Robbo from Wales]

It's obvious that as the interest rate continues to rise that demand to buy property will decrease. Also, some people will have to sell up or risk losing everything. It's not good when a manual grade worker in the city where I live is only earning 10 - 11k pounds per year and needs 10 x their earnings to buy a starter home. For those that choose to keep cost down and get an interest only mortgage it isn't worth it. With interest only mortgages your debt is constant and if houses prices do fall you will be left in negative equity. You might as well rent and wait and see.
I feel so sorry for youngsters who want to get on the housing ladder. I can see future issues with not enough kids being born because both the potential parents have to keep working in order to afford to buy a house.

[G.J.Edwards]

I totally agree with Karen, but I have no idea what the answer is.

I was born and bred in inner city London and have seen it change over the years beyond recognition.
I would love to live in one of my old stamping grounds, even in an area which years ago was considered to be beyond the pale, Islington, Somers Town, Camden Town, Kentish Town even good old Crouch End but any half decent property is way past my means although I own property in one of the most expensive places in the whole country.

I have been driven out of my home town by ludicrous prices.

The only way I could go back there now, is to sell my property and rent something using my capital, in the hope that I fall off my perch before the money runs out.

[karen]

I read your blogging with interest. With passion such as that demonstrated in the blog, the property owning UK public just cant' bear to lose. House price levels are so arbitrary, they are just what people want to pay, and with people seeing houses as an investment game, they will hang on, and on until they think they can get the best possible price.
Persoanlly, I am a single woman, dying to buy my own place, finding it extraordinary that I grew up in a beautiful city called London, have lived, worked and contributed to its economic success for 20 years, but I can't afford to stay here any more....I wonder if there are more like me? There are many many more coming to this beautifiul place that will be happy to pay anything to live here, enjoy it' opportunities and beauty, and maintain house price levels. Can we look at what has happened to New York, Manhatten?

[Scott]

GJ, something we agree on. Good old Gordon. Not only has he messed up our pensions (yep, mine's in the same state as yours!) but his miracle economy is not so good either. Have you heard the latest. He's told the BoE to ignore inflation!

Now I could have sworn the BoE was independent!!! ;-)

Thing is he is now powerless as the markets seem to be dictating what needs to happen, taking control away from the BoE. Interesting times!

Come on GJ, we need you at www.housepricecrash.co.uk I've enjoyed my debate with you thus far, let's continue it there along with others far cleverer than I. They know about things like the carry trade, equity markets, etc.

And once we hook up there I'll have a 10-pint bet with you that house prices will fall by the middle of 2008. And by then a pint will cost a lot more, both due to rising inflation and NuLabour taxing it more in the next budget.

[Scott]

BTW GJ, you should get yourself over to www.housepricecrash.co.uk. We need some bulls like yourself to keep the heated debate going. The bulls seem to be diminishing to the point that the debate is looking a bit one sided. Unless you're already there of course? ;-)

[G.J.Edwards]

Well done Scott, I am impressed that you have made £200K profit speculating on the property market.

Would you like to guess how much "profit" I (just a poor boy from the back streets of Kings Cross) have made from owning but not speculating on property?

Would you like to guess what my Inheritance tax liability is (and increasing MONTHLY)? I am afraid that £200K would not be anywhere near enough.

Why not take the advice of Archie JC, buy one property just in case and hedge the rest of the money on pork belly futures, a Post Office savings account, an internet start up company or whatever.

Incidentally, who was it who abolished income tax relief on mortgage interest (MIRAS)?, yes the same genius who has messed up millions of people's pensions, including mine.

I might join the pessimists, sell up and live abroad.

[Scott]

I'm not interested in 'I told you so'. All I am interested in is having a nice house with no mortgage in a few years (when I will be entering my 40's).

And I am getting on with my life, just keeping a very keen eye on all of the markets. I will be renting for the foreseeable future as that is still way cheaper than paying a mortgage on a comparable property.

And if prices do carry on rising I think they will be such minimal increases that I will not worry.

History also dictates that there will be boom and busts. Well, we've had our boom and I think it's time for the bust. And to say 'it's different this time' is true. It's much worse as the later BTL people will want to get out quick when the brown stuff hits the whirring cooler!

[G.J.Edwards]

Just one last comment perhaps, unless you want to continue the debate, for Archie JC, who was it that said that there are two sorts of economic forecasters, those that don't know and those who don't know they don't know (shades of Donald Rumsfeld).
I just do not understand those people who are predicting a massive drop in property prices, it will not happen, there has always been in history, prophets of doom, they just want to have the satisfaction of saying "I told you so". Carry on predicting doom and disaster while the rest of us just get on with our lives.

[Scott]

GJ - I have made money from both my BTL's and my own property. Did you not see my original blog where I stated I have £200k? All from property!!! I still believe a 40% drop is probable, but I guess only time will tell. And I don't think I'm being pessimistic, just a realist. One of us will be proved right, only time will tell. It will certainly be an interesting next few years and if I'm proved to be wrong, well then I'll be kicking myself that I got out of the market at the wrong time. But if I'm right, boy will I have a nice house with no mortgage!!!

[G.J.Edwards]

I agree, markets are not rational, they contain a lot of elements that can't be measured, like sentiment and expectation, they are driven by fear and greed, the fear of losing money and the greed to make more, not an easy equation to analyse. How many people forecast the Stock market crashes of 1987 and 2000?
Trying to make a short term profit on property speculation is a risky business as Scott has found out.
The property boom of the late eighties was driven by Nigel Lawson removing double tax relief on a single property (does anyone remember that?) and the early nineties bust was caused by 3mio unemployed (many of them in "safe professional jobs) and 15% interest rates, I do not see any of these factors at work today.
What we have is a continuing demand, a shortage of supply and many more affluent people.
The total personal wealth of the UK at least doubled in the decade of the nineties and what has happened in this current decade, I do not know, but it has not gone down, that's for sure.
We won't even begin to talk about the need to house immigrants, the influx of rich people who are buying with nothing to sell, City bonuses,(£10billion last year) of which at least 60% goes into property, people investing in property instead of poor value pensions, I could go on, there are more positives than negatives, they will keep driving property prices.

[Archie JC]

"Three factors and only three factors determine property prices, supply, demand, and affordability" - so property is a special kind of market - which always operates along rational lines? This is a classic error. Any market is driven by a combination of underlying economic trends (measurable) and market confidence (unmeasurable). It's your guess how much of recent growth in UK property is due to one, and how much to the other - and expert opinions differ widely.

Whenever a market performs well for a sustained period it is increasingly perceived as operating outside of normal market rules, ('it's different this time') and we are told the growth is based entirely on measurable and solid underlying trends. Factors such as high expectations of future growth and market confidence, which in themselves are well known to drive up markets, are increasingly ignored.

You can read about this psychological model of how markets work in any standard text on markets. I am surprised that so many people who have such large sums of money invested in property seem to have no insight into this.

My position is: never rule out a property crash and spread your investments.

[Jack O'Kelly]

The last crash in 1989/90 saw prices drop by 34%. Which according to a leading economist is typical of bubbles bursting. The number of IVAs and backruptcies has increased dramatically. The effect of gearing at the £100,000 mortgage level is so open to the effect of interest rises; look at the effect in take home pay of the average worker when rates move by 1% and then another. Try 15% of 100,000 and watch the keys being handed in.

[G.J.Edwards.]

The website propertysnake is totally meaningless, try and understand the difference between an unrealistic asking price (aspirational price) and the price that someone is prepared to pay (real price).
If I put my property on the market for £2mio one day and then the next day reduce it to £1mio, does that mean property prices have crashed by 50%?

[G.J.Edwards]

Do you know something? Scott is such a pessimist that I am willing to bet the value of my house on the fact that he also hates the new London 2012 brand ident (please do not call it a logo).

You have got the property market completely wrong and you don't like it.

[Archie JC]

Supply, demand, affordability... if only markets were that simple. What about 'expectation'? Your equation removes the human element - as if markets were rational. Unfortunately they aren't, because people are not rational.
Could house prices crash? Markets can make fools out of commentators, they can defy all the logic, and most importantly...they can turn in an instant - when this was not thought possible. And property is, after all, just another market.

[Scott]

Ah yes, supply, demand and affordability.

Supply - lots coming onto the market in the last few weeks.

Demand - well, I'll agree that one's still there, for the time being.

Affordability - hmmmm. Lots of FTB's buyers priced out of the market. Not sure it's as good as all that.

Swap rates are saying fixed rates are gonna go up. Take a look at http://www.swap-rates.com/UKSwap_extended.html

These are the rates the lenders borrow at. Once they re-lend it to you folks it will be higher again (well, they need to make a profit you know)!

[G.J.Edwards]

The answer to Scott's questions is "none of the above".

Go back in history to the forties, when property prices were in hundreds of pounds (not even thousands) but how many people could afford to buy then? Yet today we have prices in hundreds of thousands with millions people able to pay the price.

Supply, demand, affordability.

[Angelo]

House prices are already falling. Look at this website:

http://www.propertysnake.co.uk/

[Scott]

Yeah, stretch yourselves in a market where there is likely to be a crash. That makes lots of sense and is called 'negative equity'.

GJ Edwards and K Luke - now you're either estate agents, mortgage advisers, property investors or just kidding yourselves. Now which is it?

[G.J.Edwards]

Three factors and only three factors determine property prices, supply, demand, and affordability and I can't see much change in any of them.

What happened to all those clever people when faced with negative equity in the early nineties, posted their house keys through the lenders door and walked away?
What happened to all those fools who faced with the same problem, put their heads down and continued to pay the mortgage?

[k Luke]

i agree with G j Edwards if you can stretch yourself to buy then now is the time it will be no good kicking yourself in a year's time saying i wish we should have bought last year because now they have gone up by 5% to 7%

[Scott]

G.J.Edwards - I do not get my information from anyone. Why does a 40% drop defy logic? A 300% rise over the last ten years defies logic. A 40% drop will bring us back to where house prices should be if they had grown at inflation. And no, I have just sold my 3 BTL's and now personally rent too. And I'm old enough to remember the last crash when my brother and my dad lost their houses because they'd maxed their mortgages too much in an environment just like this one!!!