Property market to suffer another forty percent fall
Well here we are again, another ‘buying frenzy’ about to go badly wrong, thousands upon thousands of buyers suffering ‘post purchase remorse’ inflation through the roof, interest rates on the rise and the energy price cap to rise from £1,227 before April, to as much as £3,300 this October, a rise of 269%
As usual, those in the property industry are desperately scraping the barrel for reasons why the property market will continue to rise and why you should keep borrowing more and more, but sadly, the writing is on the wall.
We have seen the best of them make predictions about the market continuing to rise, or remaining strong, or recovering soon. One of the best ways to demonstrate the futility of predicting the market is to look at previous predictions. In this case, I have dug up some quotes by the big daddy of broadsheets, the royalty of the press………..The Times.
Despite the clearly obvious economic factors, they continued to declare the market as buoyant, rising, or about to recover. Those of us who were around in those dark days at the end of the eighties and the early nineties, know different.
The Sunday Times
SUN 05 NOV 1989
House prices may rise next spring
BRITAIN’S depressed housing market could pick up much sooner than expected, according to a forecast to be published this week. The Morgan Grenfell bank believes the housing market has reached a point where recovery is in sight. It says rising income…
WRONG!
The Times
THU 09 NOV 1989
House prices ‘to rise’
Property prices in London, the south-east and East Anglia will recover next year and begin to increase by about 10 per cent a year, according to Morgan Grenfell, the merchant bankers, in a report on the housing market published yesterday. The recover…
WRONG!
The Times
WED 04 APR 1990
10% fall forecast for house prices
HOUSE prices will fall by between eight and 10 per cent this year, according to two surveys published yesterday. In London, however, the prospect was more optimistic as prices only fell by 2.6 per cent in the first quarter. The most depressing foreca…
WED 11 APR 1990
House prices are still falling, Halifax says
HOUSE prices are either static or still falling slightly, the Halifax Building Society reported yesterday. The annual rate of house price inflation, which was more than 34 per cent a year ago, fell to zero by the end of last month, with prices unchan…
WED 06 JUN 1990
Halifax predicts prices will keep falling;
THE fall in house prices is accelerating nationally and is expected to continue for the rest of this year, Britain’s biggest building society reported yesterday. But a firm recovery is forecast for next year. The Halifax monthly
survey showed that p.
SUN 14 OCT 1990
House prices bottom out
THE long slide in house prices could be nearing its end. The Halifax’s latest quarterly survey of the property market shows that prices in general rose by 0.5% in September, and the indications are of a definite bottoming-out. Last week’s cut in the…
WRONG!
SUN 18 NOV 1990
House prices set to take off in spring
THE worst slump in Britain’s housing market for more than a decade will end next spring, an authoritative report will forecast this week. Prices will rise by an average of 20% within two years, Lower interest rates and higher wages will combine to s…
WRONG!
SAT 29 DEC 1990
Two-point cut in bank rate ‘could revive house prices’
A CUT in interest rates by 2 points in the next few months could signal a recovery in the housing market and an increase in house prices of 5 per cent by the end of 1991, the Halifax Building Society predicts today in its annual review of the housing…
WRONG!
The Times
THU 08 AUG 1991
Halifax building society revises its forecast on house prices
The Halifax building society yesterday revised its forecast of a 5 per cent increase in house prices this year. Britain’s biggest building society said it now expected prices to rise by less than 3 per cent this year due to the recession and soaring…
WRONG!
Those of us who remember, will know that the market remained in gutter for the next 3 or 4 years, but even though this last post from the 08 August 1991 predicts a ‘5% increase next year’ we now that on the 16th of September 1992, we all woke up to catastrophe, ‘Black Wednesday’
Interest rates went through the roof, the country was on its knees and a steady stream of homeowners began to trickle in to banks and building societies, handing back their keys, in one of the greatest periods of repossessions in history.
Whilst I am not predicting anything of the sort, I wouldn’t be prepared to predict anything either way, but there comes a time, when the facts become so obvious, they cannot be ignored.
The stamp duty holiday began in July 2020 and ended in June 2021. In no time, the property market was in yet another reckless buying frenzy, which gained momentum as time went by, with property rising to unjustified levels. With the cost of borrowing falling to unprecedented levels, thanks to a reduction in the base rate to 0.1% things could not look better, but did these people stop and think?
With fixed rate deals being offered below 2% throughout 2021, things could not look better, but perhaps there should have been a little thought given to the fact that with lower interest rates, comes greater gearing.
Example
When mortgages were around 8% an increase in interest rates of 2% would only represent a rise of 25% on the total interest payable. However, when mortgages are less than 2% the same rise would represent an increase of 100% and we are well on the way there already, currently the cheapest fixed deals have risen to over 3.5% and rising, with more increases on the way.
Most mortgage brokers steer people towards two year fixed deals, whilst I’m not saying that it is so that their clients need to return every two years, as there are other factors, this must not be ruled out. That means that the first of those who bought during the stamp duty holiday are finding that their deals are ending now, with their new fixed deal being as much as DOUBLE the original amount. For those who bought a few months later, the worst is yet to come, as interest rates will invariably rise by at least another one or two percent and that is without any major crisis, which could potentially send them in to outer orbit. Where that is concerned, nobody knows for sure, but one thing is for certain, inflation has not peaked, the rise in energy has not peaked and could potentially rise significantly more, depending on many different factors around the world, including the war in Ukraine.
In the midst of this crisis, the children in Westminster, chose to remove the PM, good, bad or indifferent, there is no doubt that this has caused uncertainty in the markets, which are already fragile, the war could escalate amongst this and that would send us in to troubled waters.
Whilst I cannot predict what will happen, I will go so far as to say that interest rates will definitely rise further, inflation will probably rise further and more than likely, we will enter a recession soon.
When the property market moves downwards, it does not happen slowly, when it falls it is actually instant, despite the fact that many properties remain on the market at their existing prices, that is just sellers refusing to accept, or even not understanding what has happened, but the availability of buys suddenly shrinks, with the prices they are prepared to pay plummeting. What actually happens is that people gradually accept reality and either reduce their selling prices, as they will pay less for the property that they are buying, or they take their property off the market and stay put. It is in this situation, where millions of people can suddenly find themselves in negative equity, something we have not experienced for around thirty years.
Final thought, when you hear the next person attempt to demonstrate why the market will remain strong, why you should borrow even more, why the property market will not fall through the floor…………take it with a pinch of salt!