Will house prices fall off a cliff? Will first-timers rejoice in the rubble?
The boom may be over, says Laura Howard, but whether we're in for blip or bust depends on who you talk to
Sunday 14 October 2007
The most recent surveys could finally be proof of what homeowners have been dreading and first-time buyers praying for.
Both the Halifax bank and the Royal Institution of Chartered Surveyors say house prices are falling – not by much but falling all the same. Meanwhile, Nationwide building society says prices rose slightly last month but well below the trend of recent months. What's more, surveyors report fewer enquiries from potential buyers, and mortgage firms are seeing fewer applications from new purchasers in the wake of the Northern Rock crisis. The signs are that the UK housing market – after years of spectacular growth – is finally on the turn.
The doomsayers are adamant. Jonathan Davis at website Housepricecrash says: "Any monthly rises still continuing are misleading, as they are largely derived from independent bubbles that distort the figures."
In particular, he points to property prices in Northern Ireland, which he believes have distorted the overall UK statistics. Partly thanks to the peace dividend, average prices in the province have risen by an unprecedented 42.6 per cent in the past year, according to Nationwide. This boom has been especially stark in Belfast, where increases over the past year stand at 50 per cent, taking the price of the average property in the city to a whopping £312,637.
Mr Davis's prediction for the UK is bleak: a fall of 30 to 40 per cent over the next four to six years. He adds that while the recent credit crunch may yield one more rate cut, the cost of borrowing will be higher than it is now by 2009. This combination, he believes, could lead to up to a million homes being repossessed.
But such doom and gloom is out of kilter with the views of other industry observers. "We are certainly undergoing a big slowdown in the housing market and prices are flatlining, but you need to get beyond national prices to obtain an accurate picture," says Ray Boulger at mortgage broker John Charcol. "While some areas will see falls of 5 per cent, others will continue to rise by 10 per cent."
Martin Ellis, chief economist at the Halifax, says: "The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage of properties available for sale, will continue to support house prices."
By contrast, Mr Davis claims that after more than 10 years of buoyancy, the economy is now standing on a precipice. "The only reason a market crash is not already well under way is that the Bank of England irresponsibly reduced interest rates by a quarter point to 4.5 per cent back in August 2005. And so, despite five rises since, positive sentiment has continued."
But for each overstretched homeowner, there are surely several more first-time buyers raring to seize the day when they are able to get on the first rung of the ladder. James Cotton, mortgage manager at broker London & Country, says of the slowdown: "It could mean first-timers get a breather during which they have time to put a deposit together. This has not been the case to date as house prices have been increasing faster than buyers are able to save. Flattening prices may also result in a switch to a buyers' market where first-timers have room to negotiate on price."
But the kind of decline forecast by Mr Davis is what it would take to make a real difference, says Helen Adams at the website First- RungNow. "A price drop of at least 20 per cent would be needed before any critical mass could be gained. And remember that while cheaper property would make houses and flats more affordable to first-time buyers, landlord-investors would also enter the market. I don't think property prices would stay low for very long even if there was a significant price drop."
But Mr Davis says some 250,000 landlords will have had their homes repossessed by 2009 anyway. "Be warned – the next few years are not going to be pretty."
Six to view in the West Midlands
Detached five-bed house; large gardens and view overlooking farmland
Period family home; six bedrooms, lovely mature gardens
Fernhill Heath, Worcester
Four-bed, detached Victorian home with gardens and cellar area
Four-bed terrace home, full of character and with large rear garden
Two-bed barn conversion with open-plan lounge/diner; has own garage
Three-bed, semi detached; has front and rear gardens; quiet cul-de-sac location
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Customers paying up to £250 more on energy bills than they should every year
10 tips for taking out a personal loan
Has your Premium Bond won the £1million jackpot?
There are 'dark corners' of the investment and pensions industry, says Pension Minister
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 What happens to your body when you give up sugar?
- 2 Ed Miliband less influential than One Direction's Louis Tomlinson by official Doncaster power list
- 3 Japanese island overrun with cats after population explodes
- 4 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...
£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads