Time for prospective house sellers to cut their losses and sell for what they can get?

Ofcourse selling out is really painful,but if they can get a buyer at a reasonable price that is the thing to do.I would be happy to bet my own house that the falls to come will be massive.Prices were crazy two years ago never mind now.Get out while you can

I think the 35% suggested is bonkers. My personal feeling is 20% maximum as an average. The current figures are based on a very small number of property transactions and therefore may not be representative of the whole property market.

An active rental market may lead to people retaining their properties but renting it out whilst renting themselves where they need to be. If this works reasonably well then the need to sell and take losses is much reduced.

As in the boom market one is left with the cynical view in whose interests is it to spook the market. Estate Agents, surveyors ... financial writers.

At least in this one the lenders are not in collusion with the previously mentioned

Does anyone really want to rent a flat in LONDON at market value ? I receive from L.B.LEWISHAM £276 per week for a three bedroom ex-council flat for a single mother & three children. Thats £14,391 a year !!! Yes of course property prices went too high in 2007 as they did in 1988/89/90. NotASSET CLASS goes up continually forever.. However there is a housing crisis in UK ..because there are just not enough properties to house people in particulary in the LONDON BOROUGHS. Young people coming to LONDON & starting their careers need decent housing,young people starting families need housing . No person earning a decent wage really wishes to rent & many people resent it. But of course demand & supply economics overide all factors & prices rise over time.

Remember in DECEMBER 1990 the VARIABLE MORTGAGE RATE was 15.4% now its around 7.5% less than half..........The recession of 1991 was a very tough time for millions. We didnt have the millions of workers we have now from the new EU states but we survived & things got better eventually.

I dont think we have got to recession yet & perhaps we wont because INDUSTRY/JOBS/PEOPLE & SITUATIONS have changed since the nineties. Yes of course there are more people living in credit,there are more bankruptcies but there are also a lot more people more financially astute than the financial press give credit to.

At present we are all being spooked by the financial media. If banks,building societies ramped up their lending to reponsible individuals then things would be a lot better,easier & fluent.........Instead the banks are punishing EVERYBODY for their lending tactics over the last decade.i.e. lending to everyone irrespective of status... SUB-PRIME,NO ACCOUNTS,SELF DECLARATION...........Who actually checked these people out ?

END OF MESSAGE.Down the pub for me...

Someone has just written that people are more financially astute than they were in the 90's.What planet is this person on.I repeat as far as property investment is concerned--this time it will be a disaster.Get out now!!

Home owners' reluctance to cut their prices in the face of falling demand is a classic example of a psychological bias known as loss aversion. This is now widely recognised in finance and investment firms spend a lot of time trying to iron it out of their traders instincts. It can be summarised as a tendancy among investors, and gamblers, to take profits too soon and hold onto losing positions too long. In other words asymmetric behaviour when faced with a profit, or loss of an equal magnitude. If you google the words "behavioural finance" and "loss aversion", or "framing", you will find lots of articles that explain this phenomenon in much more detail than I can here.

My point is, the reluctance of home-owners to take losses is entirely predictable, based upon what is well established knowledge in psychology and behavioural finance. The consequences are likely to be that anyone contemplating selling their home now, will have need to take a much bigger loss later, unless they can delay their sale for a very long time indeed. In fact, according to the Financial Times Lex Column of about one year ago. House prices in Japan fell 70% from the 1980s peaks. Now just think about that, 70%, in a small crowded island, with a wealthly population and low unemployment, does that sound familar?

"Bulging Japanese banks dwarfed their European and US counterparts and threatened to dominate the City and Wall Street. Most spectacular of all was the Tokyo property market. In 1990, the land upon which the imperial palace in Tokyo was built was valued at more than the entire real estate of Canada, the second largest country in the world."

Just for those who would like to point to the 15year long term Japanese decline in property prices. If you start from a stupid postion then the decline will be astronomic.

In Germany only 42% own their own property so you can see rental based property market can be a viable option.

With regard to risk aversion this is undoubtably true however where your asset is functional - a house you can live in , or rent out and keep the asset then I am not sure conclusions based on trading and gambling studies are necessarily correctly applied.

Living in your asset may not be a bad decision even if the value drops away as in the end you have to live somewhere. Realising a loss only makes sense if you have a better alternative use for the money.

Its all very well saying to sell the property at a low price, but the fact is people are not even making bids. I put my property on the market 3 months ago 10% less than the valuation in December, I have had very few people look at it and zero offers. Problem is people who actually seriously want to buy, cannot get the money anyway! Until lenders begin to give people mortgages again, dropping house prices is a knee jerk reaction and will just be damaging to the economy.

After 10 years of house price inflation which has far and away outstripped earnings growth and inflation it isn't surprising that the market is now contracting. Isn't it funny that prices thunder ahead for years, completely defying economic gravity, increasing by circa 200% and nobody bats an eyelid. Then all of a sudden we have a (perfectly reasonable) prediction of a 35% fall and arms are flailing.

This time, unlike the 1990's we have the real threat of deflation. Deflation usually occurs after a massive boom which has been fuelled by cheap and easily available credit. The amount of debt floating around western economies is now frightening. What is worse is that because of the opaque nature of cdo's the banks STILL don't know precisely what they are exposed to. What is certain is that the banks will look after themselves, and as personal/corporate defaults increase, credit will become more scarce. BOE will strip rates to the bone to try and reinflate the economy but by then demand will have been sucked out of the economy.

Deflation has all sorts of implications(principally widespread unemployment) but in the context of the housing market it means that because unemployment is rising and credit is contracting house prices have far to fall. On this basis 35% or even beyong isn't at all fanciful.

If you want a textbook example look at Japan from circa 1989 to 2003 (or even now). At one point property had fallen 80% and is still way down on it's 1988 value when adjusted for inflation.

This is an interesting article, it seems to defy the predictions of a strong rental market.

http://www.ft.com/cms/s/0/b8d0ba90-6005-11dd-805e-000077b07658.html

House prices could fall until either the market picks up or the component and labour cost of building a new house is reached. There is also the opportunity of "doing up " houses left vacant. After that the market will be at worst stationary. More people may live together or/and leave this country. If some people did not get their rents given them then the rent marketiers could also further likely have to fall anyway back to a reasonable level. The above has all been bank/Society initiated with uncontrolled overlending. What has been created... What are we doing? Can't we all learn from the past and from this?

the writer should be commenting about auctions where u can already get 30-50% off market prices with almost half remaining unsold, that should tell you everything you wanted to know about the property market.

The good old view of the British investor is alive and kicking - buy high - sell low and whinge for five years - whilst those who buy low and sell when they feel they have made sufficient profit always win.

Current property values are based on valuers using forced sale values so they don't get sued if the market takes any further bad turn.

At the end of the day a house is worth what someone will pay for it - for example a one bedroom city centre rabbit hutch = absolutley nothing.

There are too many flats and not enough houses in this country - well done to John Prescott that great statesman of our time.

Anthony O'Grady said

After 10 years of house price inflation which has far and away outstripped earnings growth and inflation it isn't surprising that the market is now contracting. Isn't it funny that prices thunder ahead for years, completely defying economic gravity, increasing by circa 200% and nobody bats an eyelid. Then all of a sudden we have a (perfectly reasonable) prediction of a 35% fall and arms are flailing.

My response would be to point out that M4 money supply has also increased 200% since 1995. Official inflation rates are spin. The Labour Government has deliberately ignored M4 growth. This has been facilitated by cheap imports which enable the government to claim that inflation is under control. The prices of all quality manufactures goods however and also houses have increased in line with M4. growth.

I accept that there are pockets where house prices are ludicrous eg horrid Inner London two-up two-downs for £750,000 but many 'over-valued' houses elsewhere would cost even more to re-build at today's prices. Why can't Persimmon sell houses at a profit if they are so 'over-priced?' The land is a small component of cost.

I don't accept that the majority of houses are particularly over-valued if one considers scarcity caused by planning and the sheet cost of construction today. If houses do fall in value this will be an artifical result of mortgage scarcity.

I would like to add that I was unaware that some building companies have been bidding up the price of land to levels of up to 50% of the sale price of the house. A Persimmon man pointed this out to me. Normally it has been a third of the price.