[guide.chat] u k houses to fall
- From: vanessa <qwerty1234567a@xxxxxxxxx>
- To: "GUIDE CHAT" <guide.chat@xxxxxxxxxxxxx>
- Date: Sun, 15 Jan 2012 19:28:07 -0000
According to the latest Halifax House Price Index, a typical UK home cost
£160,063 in December 2011. A year earlier, this price tag was £163,665, so the
average value of a property has fallen by £3,602 (2.2%) in 12 months.
What's more, most economists and property pundits predict further falls for
2012. For the record, I also expect house prices to decline yet further this
year, because of this toxic cocktail of problems for property prices (in no
particular order):
1. Higher unemployment
In the three months to October, UK unemployment rose by 128,000 to 2.64
million, or 8.3% of the workforce. Although this the highest level since 1994,
unemployment is expected to continue to rise throughout this year, before
peaking at 2.85 million in 2013.
Obviously, weaker employment puts house prices under strain, as people don't
buy homes when they've lost their jobs or fear this could happen in the near
future.
2. Feeble pay rises
In the three months to October, average earnings growth was 2% a year.
Excluding bonuses, average incomes rose by just 1.8% in 12 months. What's more,
real (inflation-adjusted) wages have fallen in the past two years, making homes
less affordable.
3. Elevated inflation
Inflation is the tendency for the prices of goods and services to rise over
time. The Bank of England's target for the Consumer Prices Index (CPI) measure
of inflation is 2% a year. Alas, CPI inflation was 4.8% in November, which
squeezes disposable incomes and, in turn, harms house prices.
4. Government austerity
At present, our Government is spending £10 billion a month more than it earns.
Faced with this deadly deficit, the coalition is cutting public-sector spending
and lifting taxes. As well as pay freezes, we can expect 120,000 job losses in
the public sector in 2012.
Again, these spending cutbacks will hit individuals and companies across the
UK, making them less likely to put more money into property.
5. Credit crunch II
The Bank of England's latest survey of credit conditions revealed the worst
squeeze on funding availability since the near-collapse of Northern Rock in
September 2007. The ongoing problems in the eurozone make it increasingly hard
for banks to borrow money in wholesale markets.
This forces banks to ration their lending to home-buyers and businesses,
worsening the long-standing 'mortgage famine'.
6. Higher mortgage rates
Also, the Bank of England is gradually withdrawing two support schemes for
lenders, known as the Credit Guarantee Scheme (CGS) and Special Liquidity
Scheme (SLS). Thanks to this new leg of the credit crunch, lenders' funding
costs will surely rise. Indeed, mortgages and loans to businesses have already
started to become more expensive.
7. Safer home loans
The UK's financial watchdog, the Financial Services Authority (FSA), is poised
to tighten the rules governing mortgage lenders and brokers. Proof of income
will be needed for all home loans, finally killing off self-certified and
similar 'liar loans'.
Other regulations governing affordability and income multiples will prevent
borrowers from taking on loans they cannot afford.
8. A double-dip recession
Many economists and financial forecasters predict a double-dip recession for
the UK in 2012. What this means is that they expect our economy to shrink for
at least two quarters in a row. Even if we avoid this fresh downturn, our
economy will still be smaller than it was in 2007, thanks to the deep recession
of 2008/09.
9. Negative equity
At least one in 12 homes in the UK (8%) suffers from negative equity.
This is where the outstanding balance of a mortgage is greater than the value
of the property on which it is secured. With few options to refinance, these
troubled homeowners are forced to sit tight, sell at a loss or give up their
homes ? thus weakening the housing market.
10. Rising arrears and repossessions
The Council of Mortgage Lenders (CML) expects 45,000 homes to be repossessed
this year, up 8,000 from the 37,000 estimated to have been seized in 2011. In
addition, the CML expects more borrowers to fall behind on their mortgage
repayments in 2012, thanks to mounting pressures on household budgets.
11. Record insolvencies
According to one debt-management firm, 137,500 Brits will become bankrupt or
insolvent in 2012. This works out at 375 insolvencies for each day of the year,
which is a tenth (10%) higher than 2010 and the highest number since records
began in 1960. This 'boom in busts' could lead to more forced or 'distressed'
property sales.
12. Weak sales
In the 2006/07 tax year, 1,853,000 properties changed hands in England and
Wales. In the latest tax year (2010/11), only 981,000 transactions took place.
Given that the property market is running at half its peak level, I firmly
believe that this 'phoney market' indicates more weakness to come.
In short, for house prices to rise in 2012, the market must overcome these
?dirty dozen? problems, as well as other negative trends. Frankly, I don't see
this happening, which is why I expect house prices to continue falling across
the UK, with the possible exception of 'Fortress London'!
from
Vanessa The Google Girl.
my skype name is rainbowstar123
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