The return of negative equity?
"Negative equity" was one of the most over-used
phrases in the UK media between 1990 - 1995. After a 12 year
over-extended, mega-rally get ready to start
hearing it again.
The following is a round up of some of the many articles in the
media in the last fortnight about house prices and potential
negative equity!
House prices dip 1.1% in November (BBC, 5-12-2007) - Biggest
monthly drop since Dec. 2006. 1st time since 1995 that the Halifax
figures have shown house prices falling for three successive months.
Nervousness about the economy is hitting consumer spending.
End of an era in the Housing market (Video - BBC News, Business,
5-12-2007) Property prices have fallen for the third month in a row,
prompting fears about the state of the economy.
UK home affordability hits 15-year low - (FT.com December 11
2007) - Affordability for people with new mortgages reached its
lowest level for 15 years in October. First-time buyers spent 20.6%
of their income on mortgage interest. Home movers paid out 17.6% of
their income to cover mortgage interest. Mortgage approvals have
fallen sharply in the past two months
House prices fall 'fastest for 12 years' (This is Money 29 Nov
2007) - Nationwide Building Society house price index, shows 0.8%
fall in house prices during the month - a fall of almost £1,500 for
the cost of an average home. Council of Mortgage Lenders warn that
tight credit conditions for banks and building societies could lead
to borrowers facing a smaller selection of home loans.
30 second guide to house price crash - Repossessions (The
Guardian, December 5 2007). Repossessions jumped from under 16,000
in 1989 to over 75,000 in 1991, nearly 1% of all mortgaged
properties. Widespread negative equity. Repossessions hit a low of
8,000 in 2004, but rose to 22,700 in 2006.
House prices fall for third month running - (The Guardian,
December 5 2007) dropping by 1.1%, annual inflation in house prices
at 6.3% in November down from 11.4 in August 'shortage of supply and
a sound UK economy would prevent a market crash'.
Halifax predicts zero house price growth in 2008 - (Reuters
December 7 2007). The housing market will stagnate in 2008. House
price inflation would fall to zero next year, even if interest rates
were to fall to 5 percent. Forecast based on two further
quarter-point rate cuts during 2008. Derivatives contracts show
investors are betting on falls of up to 8%.
North-south house price divide looms - (Telegraph.co.uk, 9
December 2007). HBOS expects that the biggest falls in house prices
will occur in the north, with a 2%, followed by the Midlands where
prices are expected to decline by 1%. HBOS also said the B.of.E
would make just two more interest rate cuts, bringing the base rate
down to 5pc. Sales, rather than prices, will fall by 15pc in England
and Wales, 1m transactions in 2008 compared with 1.17m in 2007. But
a lack of housing supply would also support house prices.
December 09 2007, © DCE
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