UK house prices slip lower

‘Nearly a third of sales agreed are falling through due to problems securing mortgage finance at the business end of the transaction,’ - So correct!! Without lending the market will not improve.

House prices are far too high and need to fall. When I was young a modest house was 3 to 4 years of a middle class salary. Now it is 7 to 10 times. This is only sustained by a chronic housing shortage, exacerbated by overpopulation on the one hand, and artificially low interest rates which have allowed buyers to over-borrow to bid up prices . We have an unsustainable situation where the cure (higher interest rates) risks causing massive problems of bankruptcy among the over-borrowed, including the government. Past governments and the Bank of England bear a heavy responsibility for their abject failure to deal with this problem when they could have done so without causing massive disruption.

Re Nigel's comment this is actually a good thing!!!

This is only the start of the full 20% correction required to make having a roof over your head affordable again. The real price of a typical 3 bed pre war semi in Birmingham should be approx 4 times average earnings (long run average house price ) i.e. approx £100 000 but these important family homes are still changing hands at a ridiculous price of £135 000.

This means a young family in Birmingham has to borrow £35 000 over the odds and saddle them selves in £35 000 of unnecessary debt unnecessary debt just to have a roof over their head.

This will dramatically reduce their purchasing power over the duration of the mortgage therefore harming the economy for 25 years or more to come!

It appears to be commonly accepted that the problem with the world economy in general and the UK economy in particular is too much debt!!

Today's 20% over priced houses are only adding to this debt and filtering out money that the economy need to be spent in the shops and on goods and services that create jobs.

How can young family members make a healthy contribution to the economy when all their earnings are being filtered off on unnecessarily large loans to pay unnecessarily large house prices just to have a roof over their heads.

Renting will not help because rents are at an all time high so young families are stuck between a rock and a hard place. Something will have to give.

Who is partly responsible for getting the country into this mess - the banks - because they over lent to drive house prices to crazy artificially high prices way beyond the long run average of 4 times salary for a typical family home.

I'm very pleased to see them taking some more responsibility with their lending mortgage lending now and if they lend less then they can make a valuable contribution to driving down house prices back to affordable levels again.

If young families can both buy home and also spend in the shops this will create jobs and further boost the economy.

The quicker house prices drop back on long run average track the quicker the economy will recover and this can't come soon enough.

The economy should be for people of all ages not only the over 45's who purchased their home before the banks through irresponsible over lending created their devastating property bubble in 2007.

The whole economy is still suffering from this over lending induced property bubble because interest rates are so ridiculously low now trashing our currency to give a softer landing to the people who purchased overpriced housing.

This is harming savers - a triple whammy for young families - over priced house buying, over priced rents and low interest rates make getting a deposit more difficult..

When house prices correct themselves by 20 % interest rates can increase to a more realistic level helping savers and boosting the pound and making things more affordable in the shops.

The economy should work for savers, borrowers young and old alike and the banks can bring this about by lending less to buy houses and forcing a "phased" correction in house prices to bring the UK economy back into equilibrium.

I completely agree with private invester

Likewise. The quicker they hit the bottom, the better.

A crash in house prices will result in millions with negative equity and cause further damage to our economy. Those wishing for a crash in the property market should be careful what they wish for.

The current UK overpriced housing is already damaging the economy too. A sustained incremental reduction in house prices would be less damaging to those who purchased at the peak rather than a crash. I don't think millions purchased at the peak in 2007. Most people would have purchased at lower prices either before or after the peak.

Maybe a minority of buyers may suffer a period of negative equity but the advantage of thousands of young families being able to both have a roof over their head and have money to spend on job creating goods and services would more than out way the cost of the unlucky people buying at the peak incurring a period of negative equity.

The net effect of affordable housing would be more positive than negative on the economy.

House prices cannot defy the laws of supply and demand - due to restrictive planning laws there are too few houses to accomodate a growing population and thus the price of houses are artificially high and will remain so until many more houses are built. As this will take considerable time prices will remain high in the interim.

The 1960's baby boom population would have been buying their homes probably from around 1990 to the crash in 2007 (a time of sustained incremental price rises) and this may have contributed along with irresponsible bank lending to house prices rising way above the historical average of 4 times earnings for a typical family home.

Assuming these baby boomers all now have a home the current demand must surely be dropping as there were far fewer births in the 70's and 80s than there were in the 60's.

Therefore if the population boom multiplied by bank irresponsible lending created the 2007 poperty price bubble then surely the current drop in domand (60's boomers are all housed now) multiplied by more responsible lending from the banks will create the opposite effect, i.e. sustained incremental house price reductions.

Then surely economy boosting more affordable house prices are on their way?

For once I find myself in agreement with everyone to some extent.

History is what it is and can't be denied. It is true that whether to buy or rent was a choice open to you in the 60s and 70s as long as you were capable of saving the deposit of around 5% to 10% of the purchase price + expenses. A maximum mortgage was typically 2.5 times a single salary or 3 times a joint applications combined salary. This was enough to get you on the property ladder if you wished to and was just a little MORE than the rent you would pay for a similar house at that time.

The rot seemed to start with the massive inflation experienced in the late 70s coupled with the relaxation of lending restrictions in the 80s, 90s and early 00s.

Banks were irresponsible and Government turned a blind eye (predominantly the Labour Gov. as it fuelled their high spending policies - although I can't recollect any warnings coming out of the opposition either).

Never the less we are where we are and it would be catastrophic to now try to reverse the position over night. The reality is that there is a shortage of property. Baby Boomers are providing support to their children to a far greater extent then they were at a similar stage in life so allowing them to continue to support what is an unsustainable long term position. This may not be a bad thing if it allows a controlled correction of house prices over a 15 to 20 year term. After all it took longer than that to get us in this mess.

In a delicate economic environment where job security is at best questionable and many instances down right vulnerable sudden significant negative adjustments leading to significant negative equity in turn could spell disaster for a significant section of the population without a rental market available to take up the slack.

In other words - "Slowly, slowly, catchy, monkey!!"

I agree with EXPAT. I bought close near the peak but will avoid negative equity by the simple fact that I paid a deposit and repay my mortgage each month. In summary I am not one of those who only rent their house from the Bank (100% LTV Int only!)and so have should have no complaints about negative equity (if you can't afford to pay for something don't buy it).

I see falling house prices as positive as the ladder is broken, not just because FTB's can't get on but also people like me (with an expanding family) can't move up. I own an average 3 bed semi in a nice part of a nice town. However to buy a 4 bed house in the same town will cost me >£100k more. This makes absolutely no sense. I'd have to repay my mortgage then borrow again. The only ones who can afford these houses are those moving sideways.

What I am seeing now is that these houses are falling much faster than mine. Down 10%-15% pa compare to those in my street down 1-2%.

All the property boom did was transfer wealth from the young to the old and my generation had to borrow to pay for it. While I hope not too many people get hurt the market needs to collapse for the good of my kids.

Nigel B

‘Nearly a third of sales agreed are falling through due to problems securing mortgage finance at the business end of the transaction,’ - So correct!! Without lending the market will not improve.

----------------------

Why is rising prices an improvement?

We need a reality check here...The reason that prices will continue to fall is because there was excessive lending in the first place. That pushed prices far higher than they shoud have got to.

Banks simply cannot (and they should not even if the could, but that's another story) lend at those levels again. It would need having more money available, and despite the creation of artificial - not backed by real value assets - amounts of cash by the Bank of England, that sort of money does not exist.

Before 2007, it only existed because banks were able to secure short term funds from the global financial markets. But when they wised up that so much of the finacial products they were buying from banks were either: worth a lot less than they had thought, or worse, were incalculable due to their complexity and so got marked down to near zero value, they stopped buying.

Those markets are not coming back any time soon, and when they do they will be far more cautious for two reasons. 1. They were burnt once. 2. Regulators will eventually not allow such financing to be made.

Only very high inflation - which destroys the value of money - will allow these crazy asking prices to be met.

Private investor:

Past governments and the Bank of England bear a heavy responsibility for their abject failure to deal with this problem when they could have done so without causing massive disruption.

---------------------

We should not stop at blaming them.

What about the property porn TV programmes, which helped to maintain and even intensify the mania and irrational exuberance?

What about all the investment commentators exorting you to get on board?

Why not blame also BTL landlords, who are being protected from their terrible investment decisions by a government and central bank that is artificially keeping interest rates down out of fear that those same terrible investments would otherwise destroy the economy for a decade?

And the banks for their reckless lending not only on interest free mortgages or no deposit, but also via self-cert "liar" loans? They became the most popular applications after 2005.

And what about the widespread adoption of an economic philosophy - laissez-faire - which demanded that governments and regulators leave off the banks?

Amazing in Parliament recently.

The Prime Minister admonished the previous government for its lax regulation of the banks. What a Nerve! He and his chancellor had called for yet lighter regulation of the banks when in Opposition, and in 2006 told City grandees that the country's prosperity was down to government's deregulation of finance, and that New Labour was merely implementing Tory policies. And that, therefore, the Tories should take the credit.

We hear precious little of that.

The house I pulled out of buying in the spring of last year when I came to my senses and realised it was overpriced, had been on the market for 11 months, and is still on the market now, with its 3rd EA and an increased asking price! They had bought in 2006 and would have been looking at a nice £31k profit had they accepted my £10k lower first offer. Until people accept that a house is only worth what someone is prepared to pay for it, I can`t see prices falling to any great extent.

It about time the young population must be given the chance to create wealth and keep their asset with steady but careful increase in their savings attributed to the property value. So it about time this government must stop allowing foreign Asian buyers coming here and outright create this price spiral having considered that there are no restriction for them. They should not be able to bus these properties for speculation. So get this government to understand GIVE young hardworking people a chance to make them proud to build their own small castle in UK. This will make them proud Englishmen.........RJ

Far too much personal income is going to serve mortgage debt even at historically low interest rates and this is having a drag on the economy and will delay any recovery. House prices are arithmetically unsupportable when expressed as a multiple of earnings. The vested interests in the residential property market are in complete denial and house prices are so politically sensitive that no-one in Westminster will tackle the real issue.

The title should really be "Great news, house prices continue to fall towards reasonable levels, but still much farther to go"

I'm sure that would be the title if the article was about falling oil prices.