wallcoatings.org.uk: The NPA home improvement & paint Blog.

It’s All doom and gloom in the news about the UK housing market, so I thought i would add my 2 cents worth to the debate. The UK labour government has created a false economy based on irresponsible lending. Now the chickens are coming home to roost.

This is what I think will happen.

1) The uk will see dramatic drops in house prices and dramatic increases in repossessions, just as been happening in the USA, and is starting to happen in other countries, Australia being the one that springs to mind…………… and will be followed by other countries. Spain is the current one to watch. Could be some absolute bargains to be had there soon for the canny investor (me included)

2) With huge increases in living costs, fuel, food and taxation, no-one will be able to afford a house at current price levels, so the market will see values drop drastically back to WHAT THE HOUSES ARE REALLY WORTH!!!!!!!

3) many mortgage companies are WITHDRAWING products, so it will be harder to get a mortgage based on current house price levels.

4) Buy to let is no longer an attractive and relatively risk free investment, in fact, its now quite the reverse.

5) The ratio of earnings to house prices is now no longer sustainable and there are NO first time buyers, who up until recently, had been replaced by landlords, and but that is not going to happen anymore, so no-one will be “feeding” the market as before.

So what will happen?

House prices will drop SUBSTANTIALLY, maybe even back to the values seen around 1999. Banks will then be able to start lending RESPONSIBLY again, so a mortgage on a 3 bed house in 1998 would have been maybe £70,000. Thats a lot less RISK for both owner and mortgage provider, than granting finance for the same house today at £250,000

As our economy is now global, wider forces are at stake. both from the point of view of protection, and the point of view of risks, the uk being affected by what’s happening 1,000’s of miles away in the USA is a prime example.

Winners and losers………

winners

Home improvement companies, tradesmen etc (hooray! editor)

First time buyers.

Losers

Investment banks, hedge funds and so on, and serves them right for being greedy and naive.!

Landlords, and serves them damn well right too, and i speak from experience.

++++++++++++++++++++++++++++++++++++++++

So in summary, property market investments and property investment will, in the short term, be hit VERY hard, but will eventually re-appear years down the line. Houses prices will drop SUBSTANTIALLY to normal levels again, creating an even field and the market will allow new people to come into the market. Banking will recover during 2009 and will be lending in a more prudent fashion with sustainable levels of debt. The housing market will after the above, slowly rise again but at a much lower rate. My top tip is to save a BIGGISH deposit in a high interest account, then wait until the impending property market crash, WHICH EVIDENCE STRONGLY SUGGESTS THAT THIS IS NOW HAPPENING.

As there will be up to 50% less money in the money markets, as predicted by top economists, after the recent G7 summit, houses will HAVE to be cheaper. For examples, a 3 bed semi for 200,000, banks will be unable to lend that amount, however if AND WHEN the market crashes, and the same house is 100,000 to buy, the banks will lend as there is less money and therefore less risk. Simple as that!

Then when prices have stabilised, then and only then, BUY. …..and don’t think you’re gonna make a quick buck, once the crash happens, it will take at least 6 years for the market to bounce back.

I would very much value other peoples opinions on the above. Are you affected? What do you think about what I have said? Please post a comment (moderated)

Guy Bell

Editorwww.neverpaintagain.co.uk

This entry was posted on Friday, April 4th, 2008 at 10:45 am and is filed under housing market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.