April 10, 2009
Don't be fooled by 'green shoots' in housing market
There is still some way to go before house prices stabilise and we are a very long way from a recovery
Andrew Ellson
Facts, Mark Twain once observed, are stubborn things. But statistics, he noted, are more pliable. It is with this caution that we should observe the latest data on the housing market.
Last week Nationwide reported that house prices rose by 0.9 per cent in March. The Bank of England, meanwhile, said that mortgage approvals jumped 19 per cent in February. Some commentators, including the Centre for Economics and Business Research, interpreted these statistics as evidence that the housing market is near the bottom. The same commentators even put a positive spin on separate figures from the Halifax showing that prices actually fell 1.9 per cent on the month - an annualised rate of 25 per cent - by arguing that at least the pace of decline was slowing.
The truth, sadly, is that we still have some way to go before house prices stabilise and we are a very long way from a recovery.
Apart from the folly of looking at a single month's statistics in isolation, it should be noted that the Nationwide and Halifax measures are no longer as reliable because the volume of home sales has fallen so much. Neither lender will reveal exactly how many customers their figures are based on, but the Land Registry reports that property transactions are down about 60 per cent on their long-term average, suggesting that the sample size of both surveys has reduced significantly. As any statistician will tell, you, the lower the sample size, the greater the chance of error.
Related Links
Mortgage rates fall to five-and-a-half year low
HSBC drops interest on low-deposit mortgages
Are property and shares recovering again?
Given that the customer base of each lender is also geographically skewed - with the Halifax traditionally lending more in the North and Nationwide in the South - the figures are far from a reliable indicator of what is happening in any one town. Perhaps a better reflection of the state of the housing market are the figures from Hometrack that show that vendors are receiving an average of only 88 per cent of asking prices and that it takes a record three months to sell a home.
Nor should anyone be fooled into thinking that a recovery is imminent because of what appears to be a large increase in lending. The total number of mortgage approvals may have risen by 19 per cent in February, to 37,937, but this was from a low of 31,791 and is still 44 per cent down on a year ago and 67 per cent down on the year before that. Lending still needs to increase substantially before there is a positive impact on house prices, and that is before rising unemployment is taken into account.
That is not to say that there are no positive signs. As we report on page 74, a number of banks, including HSBC, Abbey and RBS, have slowly started loosening their lending criteria by reducing the size of deposits needed to qualify for loans. Though these developments reflect lenders' growing confidence in the housing market, they should be viewed in perspective. With the notable exception of the HSBC deal, the rates remain prohibitively high and first-time buyers would still need to raise an average deposit of more than £15,000. Even the HSBC deal has a series of tough conditions attached that make the loan more attractive to higher earners. The bank knows that these borrowers are better placed to cope if house prices fall farther, so the deal is hardly a huge vote of confidence in the housing market.
Buyers must still beware.
Pension savers can ill-afford another blow
Would you accept a cut in your employer's pension contributions to save your job? The answer, most likely, is yes. Sadly, increasing numbers of workers could soon face such a demand as companies try to cut costs as the recession bites.
Employees of Aon, the insurer, became the first to suffer this fate when the company cut contributions by half this week. The move was doubly significant because Aon is the UK's leading pensions consultant, advising other big companies.
But as lower employer contributions are equivalent to a pay cut, nobody should accept this lightly. Reducing pension benefits ought to be a last resort, taken only to save a business from going bust. Employees who find that cuts are unavoidable would be wise to try to make up the shortfall by increasing personal contributions, not least because stock markets are now exteremely low by historic standards.
There is little that the Government can do to stop companies from such action. However, with saving for retirement facing this new assault, now would be entirely the wrong time to cut tax relief on pension contributions, as some believe may happen in the Budget. Pension saving needs more support, not less.
Showing posts with label 2009. Show all posts
Showing posts with label 2009. Show all posts
12 April 2009
10 March 2009
Take it Seriously!!!!!!!!!
Taking a Depression Seriously
By DAVID BROOKS
Published: March 9, 2009
The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.
David Brooks
The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.
If the Republicans wanted to do the country some good, they’d embrace an entirely different approach.
First, they’d take the current economic crisis more seriously than the Democrats. The Obama budget projects that the recession will be mild this year and the economy will come surging back in 2010. Democrats apparently think that dealing with the crisis is a part-time job, which leaves the afternoons free to work on long-range plans to reform education, health care, energy and a dozen smaller things. Democrats are counting on a quick recovery to help pay for these long-term projects.
Republicans could point out that this crisis is not just an opportunity to do other things. It’s a bloomin’ emergency. Robert Barro of Harvard estimates that there is a 30 percent chance of a depression. Warren Buffett says economic activity “has fallen off a cliff” and is not coming back soon.
Stock market declines are destroying $23 trillion in wealth, according to Lawrence Lindsey. Auto production is down by two-thirds since 2005. In China, 20 million migrant laborers have lost their jobs. Investment in developing countries has dropped from $929 billion in 2007 to $165 billion this year. Pension systems are fragile. Household balance sheets are still a wreck.
Republicans could argue that it’s Nero-esque for Democrats to be plotting extensive renovations when the house is on fire. They could point out that history will judge this president harshly if he’s off chasing distant visions while the markets see a void where his banking policy should be.
Second, Republicans could admit that they don’t know what the future holds, and they’re not going to try to make long-range plans based on assumptions that will be obsolete by summer. Unlike the Democrats, they’re not for making trillions of dollars in long-term spending commitments until they know where things stand.
Instead, they’re going to focus obsessively on restoring equilibrium first, and they’re going to understand that there is a sharp distinction between crisis policy-making and noncrisis policy-making. In times like these, you’d do things you would never do normally. When it’s over, we can go back to our regularly scheduled debates.
Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.
If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them. Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.
Fourth, Republicans could get out in front of this crisis for once. That would mean being out front with ideas to support the wealth-creating parts of the economy rather than merely propping up the fading parts. That would mean supporting President Obama’s plan for global stimulus coordination, because right now most of the world is free-riding off our expenditures. That would mean eliminating all this populist talk about letting Citigroup fail, because a cascade of insolvency would inevitably lead to full-scale nationalization. It would mean coming up with a bold banking plan, rather than just whining about whatever the Democrats have on offer.
Finally, Republicans could make it clear that that the emergency has to be followed by an era of balance. This crisis was fueled by financial decadence, and public debt could be 80 percent of G.D.P. by the time it’s over. Republicans should be the party of restoring fiscal balance — whatever it takes — not trillion-dollar deficits as far as the eye can see.
If Republicans were to treat this like a genuine emergency, with initiative-grabbing approaches, they may not get their plans enacted, but voters would at least give them another look. Do I expect them to shift course in this manner? Not really.
By DAVID BROOKS
Published: March 9, 2009
The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.
David Brooks
The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.
If the Republicans wanted to do the country some good, they’d embrace an entirely different approach.
First, they’d take the current economic crisis more seriously than the Democrats. The Obama budget projects that the recession will be mild this year and the economy will come surging back in 2010. Democrats apparently think that dealing with the crisis is a part-time job, which leaves the afternoons free to work on long-range plans to reform education, health care, energy and a dozen smaller things. Democrats are counting on a quick recovery to help pay for these long-term projects.
Republicans could point out that this crisis is not just an opportunity to do other things. It’s a bloomin’ emergency. Robert Barro of Harvard estimates that there is a 30 percent chance of a depression. Warren Buffett says economic activity “has fallen off a cliff” and is not coming back soon.
Stock market declines are destroying $23 trillion in wealth, according to Lawrence Lindsey. Auto production is down by two-thirds since 2005. In China, 20 million migrant laborers have lost their jobs. Investment in developing countries has dropped from $929 billion in 2007 to $165 billion this year. Pension systems are fragile. Household balance sheets are still a wreck.
Republicans could argue that it’s Nero-esque for Democrats to be plotting extensive renovations when the house is on fire. They could point out that history will judge this president harshly if he’s off chasing distant visions while the markets see a void where his banking policy should be.
Second, Republicans could admit that they don’t know what the future holds, and they’re not going to try to make long-range plans based on assumptions that will be obsolete by summer. Unlike the Democrats, they’re not for making trillions of dollars in long-term spending commitments until they know where things stand.
Instead, they’re going to focus obsessively on restoring equilibrium first, and they’re going to understand that there is a sharp distinction between crisis policy-making and noncrisis policy-making. In times like these, you’d do things you would never do normally. When it’s over, we can go back to our regularly scheduled debates.
Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.
If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them. Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.
Fourth, Republicans could get out in front of this crisis for once. That would mean being out front with ideas to support the wealth-creating parts of the economy rather than merely propping up the fading parts. That would mean supporting President Obama’s plan for global stimulus coordination, because right now most of the world is free-riding off our expenditures. That would mean eliminating all this populist talk about letting Citigroup fail, because a cascade of insolvency would inevitably lead to full-scale nationalization. It would mean coming up with a bold banking plan, rather than just whining about whatever the Democrats have on offer.
Finally, Republicans could make it clear that that the emergency has to be followed by an era of balance. This crisis was fueled by financial decadence, and public debt could be 80 percent of G.D.P. by the time it’s over. Republicans should be the party of restoring fiscal balance — whatever it takes — not trillion-dollar deficits as far as the eye can see.
If Republicans were to treat this like a genuine emergency, with initiative-grabbing approaches, they may not get their plans enacted, but voters would at least give them another look. Do I expect them to shift course in this manner? Not really.
Spain's depressed!!!
Clear signs of global depression: Spanish minister
Tue Mar 10, 2009 6:45am EDT
MADRID (Reuters) - There are clear signs of a global economic depression , Spanish Industry Minister Miguel Sebastian said on Tuesday.
The global financial crisis has caused a generalized fall in economic confidence, industrial production, trade and led to job destruction, Sebastian said in a speech to Spain's Congress.
"These factors are unmistakable symptoms of a global depression that demands a combined and coordinated response by all countries," Sebastian said.
(Reporting by Andrew Hay; Editing by Victoria Main)
Tue Mar 10, 2009 6:45am EDT
MADRID (Reuters) - There are clear signs of a global economic depression , Spanish Industry Minister Miguel Sebastian said on Tuesday.
The global financial crisis has caused a generalized fall in economic confidence, industrial production, trade and led to job destruction, Sebastian said in a speech to Spain's Congress.
"These factors are unmistakable symptoms of a global depression that demands a combined and coordinated response by all countries," Sebastian said.
(Reporting by Andrew Hay; Editing by Victoria Main)
UK housing trends ~ Down, Down, Down......
House Price Reports
UK house prices continue to crash at an alarming pace
Well that was short lived, no sooner had the "green shoots of recovery" appeared last month (in relation to house price growth) then the true overall trend re-emerges, downwards...
House prices have fallen 17.7% year on year and approx. 20% from their peak - in September 2007. It's also useful analysing the 'swing' from positive to negative; from 15% positive to 17.7% negative has taken twenty months, this is unprecedented during the (circa) twenty five years of house price data collation.
With falls now accelerating it's more important than ever that first time buyers remain increasingly vigilant ensuring they buy at future 2010 prices; perhaps negotiating a discount of 15% off the asking and or valuation price in order to insulate themselves from further falls.
Martin Ellis;
"The average UK house price declined by 2.3% in February. This monthly decrease more than offset January's 2.0% increase. Prices in the three months to February compared to the previous quarter, which provides a better indicator of the underlying trend, were 3.6% lower...
Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio - a key measure of housing affordability - has fallen to its lowest level for six years.
Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market."
LLOYDS BANKING GROUP HOUSE PRICE INDEX
Ket Statistics
February 2009 (seasonally adjusted)
Annual change
-17.7%
Monthly change
-2.3%
Average Price
£160,237
.
Key facts
House prices declined by 2.3% in February. This fall more than offset January's 2.0% increase (revised from 1.9%). Historically, house prices have not moved in the same direction month after month even during a pronounced downturn. For example, prices fell for seven successive months in 1989 but subsequently increased in three of the first ten months in 1990 even though the overall trend in prices was downwards.
Prices in the three months to February compared to the previous three months - an indicator of the underlying trend - were 3.6% lower. This is slightly below the quarterly rate of decline of 5-6% recorded consistently between June 2008 and January 2009.
House prices in February were 17.7% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) fell from 17.2% in January to 17.7%. The UK average price has returned close to the level in August 2004 (£159,799).
-The house price to earnings ratio - a key affordability measure - is at its lowest for six years. The house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.42 in February 2009; a fall of 24%. The ratio is at its lowest level for six years (February 2003: 4.41). The long-term average is 4.0.
-Tentative signs of a stabilisation in activity albeit at a very low level. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase was unchanged between December 2008 and January 2009. Approvals in January, at a seasonally adjusted 31,000, were also identical to the monthly average recorded in the second half of 2008.More details about UK house prices continue to crash at an alarming pace (opens a new window)
UK house prices continue to crash at an alarming pace
Well that was short lived, no sooner had the "green shoots of recovery" appeared last month (in relation to house price growth) then the true overall trend re-emerges, downwards...
House prices have fallen 17.7% year on year and approx. 20% from their peak - in September 2007. It's also useful analysing the 'swing' from positive to negative; from 15% positive to 17.7% negative has taken twenty months, this is unprecedented during the (circa) twenty five years of house price data collation.
With falls now accelerating it's more important than ever that first time buyers remain increasingly vigilant ensuring they buy at future 2010 prices; perhaps negotiating a discount of 15% off the asking and or valuation price in order to insulate themselves from further falls.
Martin Ellis;
"The average UK house price declined by 2.3% in February. This monthly decrease more than offset January's 2.0% increase. Prices in the three months to February compared to the previous quarter, which provides a better indicator of the underlying trend, were 3.6% lower...
Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio - a key measure of housing affordability - has fallen to its lowest level for six years.
Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market."
LLOYDS BANKING GROUP HOUSE PRICE INDEX
Ket Statistics
February 2009 (seasonally adjusted)
Annual change
-17.7%
Monthly change
-2.3%
Average Price
£160,237
.
Key facts
House prices declined by 2.3% in February. This fall more than offset January's 2.0% increase (revised from 1.9%). Historically, house prices have not moved in the same direction month after month even during a pronounced downturn. For example, prices fell for seven successive months in 1989 but subsequently increased in three of the first ten months in 1990 even though the overall trend in prices was downwards.
Prices in the three months to February compared to the previous three months - an indicator of the underlying trend - were 3.6% lower. This is slightly below the quarterly rate of decline of 5-6% recorded consistently between June 2008 and January 2009.
House prices in February were 17.7% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) fell from 17.2% in January to 17.7%. The UK average price has returned close to the level in August 2004 (£159,799).
-The house price to earnings ratio - a key affordability measure - is at its lowest for six years. The house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.42 in February 2009; a fall of 24%. The ratio is at its lowest level for six years (February 2003: 4.41). The long-term average is 4.0.
-Tentative signs of a stabilisation in activity albeit at a very low level. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase was unchanged between December 2008 and January 2009. Approvals in January, at a seasonally adjusted 31,000, were also identical to the monthly average recorded in the second half of 2008.More details about UK house prices continue to crash at an alarming pace (opens a new window)
01 February 2009
Newsweek's Clift Bemoans Media Sexism Against Hillary, and Even Palin
By Tim Graham (Bio Archive)January 31, 2009 - 22:02 ET
A Commemorative Inaugural Edition of Newsweek arrived at the office in the mail this week, and it included a column by Eleanor Clift titled "Suffrage, Hillary Style" which touted Hillary Clinton’s "18 million cracks in the glass ceiling" and sang the same old song about how sexism is still more acceptable than racism:
Hillary’s campaign illustrates how far we’ve come and how far we haven’t come. The tone and tenor of the debate around Hillary, and around Sarah Palin, was far more personal and mocking than toward their male counterparts. Maybe the material was richer, but there was no attempt to dance around gender issues the way there is with race. As a society, we still condone sexism; we view it as a part of nature, a given that isn’t worth bothering our pretty heads about.
Bringing Palin in for sympathatic treatment on sexism is a little strange for Eleanor, since this is how she greeted the choice on The McLaughlin Group last year:
This is not a serious choice. It makes it look like a made for TV movie. If the media reaction is anything, it's been literally laughter in many places across news....In very, very many newsrooms.
Clift complained that the media clearly favored Obama over Hillary when she was "equally serious," but she didn’t ponder whether Hillary was equally smooth or equally appealing:
Older women whose lives and careers were constrained by sexism felt disrespected by a media captivated by a serious black candidate in a way they weren’t by the prospect of an equally serious woman contending for the job. Younger women who haven’t experienced as much sexism wondered why their mothers thought it was such a big deal;’ if not Hillary, there’ll be someone else.
Earlier, she illustrated the generation gap among women Clift knows: "A Hillary campaign worker who objected to a Hillary nutcracker with its stainless-steel thighs was chided by her own grown daughters for not having a sense of humor. "
Clift began by recounting the American history that recalls Obama reaching the White House before a woman:
The fact that she lost out to a black man recalls the hurt felt by the early suffragists when the 15th Amendment passed after the Civil War extended the vote to freed black males. Women were told it was "the Negro’s hour," and they should step aside. Allowing former slaves to vote while denying educated women the same right enraged suffrage leaders and divided the movement between those who accepted the disparity and those who raged against their second-class status. The rift last for 20 years, with bitterness far more deep-seated than the hard feelings exhibited by Hillary’s hardiest campaign supporters.
—Tim Graham is Director of Media Analysis at the Media Research Center
By Tim Graham (Bio Archive)January 31, 2009 - 22:02 ET
A Commemorative Inaugural Edition of Newsweek arrived at the office in the mail this week, and it included a column by Eleanor Clift titled "Suffrage, Hillary Style" which touted Hillary Clinton’s "18 million cracks in the glass ceiling" and sang the same old song about how sexism is still more acceptable than racism:
Hillary’s campaign illustrates how far we’ve come and how far we haven’t come. The tone and tenor of the debate around Hillary, and around Sarah Palin, was far more personal and mocking than toward their male counterparts. Maybe the material was richer, but there was no attempt to dance around gender issues the way there is with race. As a society, we still condone sexism; we view it as a part of nature, a given that isn’t worth bothering our pretty heads about.
Bringing Palin in for sympathatic treatment on sexism is a little strange for Eleanor, since this is how she greeted the choice on The McLaughlin Group last year:
This is not a serious choice. It makes it look like a made for TV movie. If the media reaction is anything, it's been literally laughter in many places across news....In very, very many newsrooms.
Clift complained that the media clearly favored Obama over Hillary when she was "equally serious," but she didn’t ponder whether Hillary was equally smooth or equally appealing:
Older women whose lives and careers were constrained by sexism felt disrespected by a media captivated by a serious black candidate in a way they weren’t by the prospect of an equally serious woman contending for the job. Younger women who haven’t experienced as much sexism wondered why their mothers thought it was such a big deal;’ if not Hillary, there’ll be someone else.
Earlier, she illustrated the generation gap among women Clift knows: "A Hillary campaign worker who objected to a Hillary nutcracker with its stainless-steel thighs was chided by her own grown daughters for not having a sense of humor. "
Clift began by recounting the American history that recalls Obama reaching the White House before a woman:
The fact that she lost out to a black man recalls the hurt felt by the early suffragists when the 15th Amendment passed after the Civil War extended the vote to freed black males. Women were told it was "the Negro’s hour," and they should step aside. Allowing former slaves to vote while denying educated women the same right enraged suffrage leaders and divided the movement between those who accepted the disparity and those who raged against their second-class status. The rift last for 20 years, with bitterness far more deep-seated than the hard feelings exhibited by Hillary’s hardiest campaign supporters.
—Tim Graham is Director of Media Analysis at the Media Research Center
Happy New Year ~ Not in Ireland!
Best to ignore the cheerleaders for the property sector
By Proinsias O'Mahony Saturday January 31st, 2009
Proinsias O’Mahony doesn’t share the optimistic assertions of some in the property business about recovery in the housing market
HAPPY new year? Not really. The banks are at death’s door. Unemployment is rocketing. Cuts much more severe than those proposed in the recent budget are inevitable. The recession is deepening, with fears that Ireland is on the verge of a so-called ‘lost decade’ growing increasingly realistic.
We’re up the creek. Auctioneers and developers, however, have a different vision for 2009, one where ever more affordable homes will be snapped up by a willing populace.
After all, construction firms cannot cut prices further as they are “down to their bottom line” on prices, according to one builder recently. Indeed, those who are “stupidly waiting” for prices to fall further should cop themselves on and realise that prices are bottoming. This stupidity has been disappointing developers for some time now. In August, property tycoon Derek Quinlan noted that first-time buyers must be given the confidence to buy as “negative media commentary force them to sit and wait, believing that prices have not yet bottomed out”. Impartial ‘experts’ have been beating this drum for some time now.
Tom Parlon, former minister and now Director General of the Irish Construction Industry Federation, warned last March that “there’s not much more scope for further cuts” and that “now is the time to buy, there is real value out there”.
Politicians, too, are puzzled by this ignorant penny-pinching. “If I was to give advice to people, I would say, go out and buy some property now”, said Galway TD Frank Fahy last May. Frank has a pretty extensive property portfolio, as does his Fianna Fáil colleague Donie Cassidy. Donie, perhaps better known for his masterful management of Foster and Allen and other show-band giants than his political accomplishments, said last April that there was “unbelievable” value in the marketplace, something he would remind us all of in 12 or 18 months “when prices have again increased by 25% or 30%”.
That didn’t quite pan out. A mule could have told you that Donie was in la-la land but he wasn’t the only one. “The time to buy is now”, said estate agent Pearse Wyse last April, warning that the “great value” didn’t “mean people can dilly dally.” “It makes little sense to hold off making a purchasing decision”, said another in summer 2007, when the bubble had already burst. “There is no better investment than Irish property at present”, said high-profile estate agent Ken McDonald in the same year, going on to ask why “we allow scaremongers and doomsayers with unfounded pessimism and unbridled negativity” to talk down the economy. Never mind, said Ken: “the Irish love affair with property will continue undaunted despite the knockers.” Hmmm. Of course, this love affair was encouraged by good old Bertie, our dearly departed Taoiseach.
“The boom is getting boomier”, he said in 2006. “We should have an examination into why so many people got it so wrong”, adding that people “should have bought last year.”
By April 2007, he was predicting a “soft landing”.
By July, he asked why those who sit on the sidelines “cribbing and moaning” don’t “commit suicide”.
Two months later, we were told that there “is no place for politically motivated attempts to talk down the economy and the achievements of our people across all sectors.” What a crock. It’s one thing to have to listen to such garbage from those in the property sector.
It’s another thing entirely when the leaders of our country were encouraging one of the greatest housing bubbles in history, a bubble whose bursting has plunged Ireland into a crisis of incalculable proportions.
Ahern is famously pally with developers, whose one-dimensional thinking seems to have informed government policy. Take Bertie’s buddy Sean Dunne, who said just last month that he was “prudent” when he splashed out almost $600 million for a 5 acre site in Ballsbridge at the height of the boom. In 2006, Dunne lashed out at the economists who had “mistakenly forecast the end of the housing and property boom in Ireland” for the last six years. This deluded bunch of “hyenas”, those “harbingers of doom and gloom”, included the Economist magazine, the IMF and the OECD. “The hyenas have stopped laughing…each and every one of them was wrong.”
They weren't wrong though – just early. David McWilliams, who had been warning for years that the housing bubble couldn’t last, likes to use the analogy of a doctor who advises a patient to change his lifestyle. Smoking 20 fags a day, the patient ups it to 40 as the years pass. After all, the doctor’s been warning him for years and nothing’s happened. By 2007, our patient is puffing on cigars aplenty and downing a daily bottle of whiskey into the bargain. Why not? Sure he’d been hearing the same old warnings for the best part of a decade… It was obvious that a serious property bust was a question of ‘when’, not ‘if’, just as it was obvious to decent economists that a financial crisis would likely be triggered by this bust. Study after study has confirmed as much. 2007 was full of guff about a soft landing even though studies of international housing bubbles show that there has never been such a thing. Bubbles are followed by crashes just as day is followed by night. The global financial crisis hit the headlines in 2007, creating a perfect storm for Ireland in the process. And yet, politicians and regulators appear to have been taken unawares. When UCD economist Morgan Kelly published a study showing that house prices typically fall by between 40-60 percent in a crash, he was dismissed as a scaremonger (it’s now very likely that Irish falls will be even greater). Also dismissed were his comparisons with Finland, which saw unemployment rocket from 3 to 20 percent and house prices halve in the aftermath of its housing crash in the early 1990s.
It wasn’t rocket science. Between 2000 and 2006, house prices doubled relative to income and rents. Construction accounted for nearly a fifth of our economy (the international norm is just 5 percent). First-time buyers became priced out of the market so banks invented 110 percent mortgages to be paid back over a forty-year period. The signs of an unsustainable bubble were everywhere. And yet, politicians trumpeted that the fundamentals were sound. What were they smoking? Other countries, of course, also had their fair share of paid housing cheerleaders. Take David Lereah, former chief economist with America’s National Association of Realtors. Lereah, author of the 2005 bestseller, Why the Housing Boom Will Not Bust and How You Can Profit From It, used to routinely trot out wildly bullish forecasts that mirrored the hallucinatory abominations of his Irish counterparts. He left his job in 2007. Was he wrong to be so bullish, he was asked recently? “I worked for an association promoting housing, and it was my job to represent their interests”, he admitted. “I put a positive spin on it. It was easy to do during boom times, harder when times weren’t good”. And now? “I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop.”
Kudos for his new-found honesty, if nothing else. There are many David Lereahs in Ireland. Developers, estate agents, dizzy television presenters with their own property agendas, economists working for the banks – the same old clowns will trot out the same old claptrap, rabbiting on about ‘value’ and the dangers of waiting too long and how a bottom is near and how it’s a great time to buy. It’s not a great time to buy. It’s a great time to wait. Property remains over-priced by any conventional valuation yardstick, some places more than others (West Cork comes to mind). Property crashes play out over a period of many years, partly because sellers become anchored to old prices that are no longer relevant. There’s also a large element of wishful thinking involved – a recent US study found that people expected prices in their locality to fall but believed that their own house would appreciate in value or stay the same. The facts are, however, that house prices do not rise in real terms (after inflation) in the long run.
Countless international studies confirm this. A couple of booms aside, real house prices were flat or falling most of the time in the US in the 20th century. Booms occur periodically before prices revert to their historical mean. The bigger the bubble, the bigger the bust. We’ll still have to put up with the cheerleaders, however, even as the market deflates. Morgan Kelly puts it well. “We can start looking forward to estate agents telling us that the worst is over, a necessary correction to an overheated market has taken place, there has never been a better time to buy, and so on until most of them go out of business.”
By Proinsias O'Mahony Saturday January 31st, 2009
Proinsias O’Mahony doesn’t share the optimistic assertions of some in the property business about recovery in the housing market
HAPPY new year? Not really. The banks are at death’s door. Unemployment is rocketing. Cuts much more severe than those proposed in the recent budget are inevitable. The recession is deepening, with fears that Ireland is on the verge of a so-called ‘lost decade’ growing increasingly realistic.
We’re up the creek. Auctioneers and developers, however, have a different vision for 2009, one where ever more affordable homes will be snapped up by a willing populace.
After all, construction firms cannot cut prices further as they are “down to their bottom line” on prices, according to one builder recently. Indeed, those who are “stupidly waiting” for prices to fall further should cop themselves on and realise that prices are bottoming. This stupidity has been disappointing developers for some time now. In August, property tycoon Derek Quinlan noted that first-time buyers must be given the confidence to buy as “negative media commentary force them to sit and wait, believing that prices have not yet bottomed out”. Impartial ‘experts’ have been beating this drum for some time now.
Tom Parlon, former minister and now Director General of the Irish Construction Industry Federation, warned last March that “there’s not much more scope for further cuts” and that “now is the time to buy, there is real value out there”.
Politicians, too, are puzzled by this ignorant penny-pinching. “If I was to give advice to people, I would say, go out and buy some property now”, said Galway TD Frank Fahy last May. Frank has a pretty extensive property portfolio, as does his Fianna Fáil colleague Donie Cassidy. Donie, perhaps better known for his masterful management of Foster and Allen and other show-band giants than his political accomplishments, said last April that there was “unbelievable” value in the marketplace, something he would remind us all of in 12 or 18 months “when prices have again increased by 25% or 30%”.
That didn’t quite pan out. A mule could have told you that Donie was in la-la land but he wasn’t the only one. “The time to buy is now”, said estate agent Pearse Wyse last April, warning that the “great value” didn’t “mean people can dilly dally.” “It makes little sense to hold off making a purchasing decision”, said another in summer 2007, when the bubble had already burst. “There is no better investment than Irish property at present”, said high-profile estate agent Ken McDonald in the same year, going on to ask why “we allow scaremongers and doomsayers with unfounded pessimism and unbridled negativity” to talk down the economy. Never mind, said Ken: “the Irish love affair with property will continue undaunted despite the knockers.” Hmmm. Of course, this love affair was encouraged by good old Bertie, our dearly departed Taoiseach.
“The boom is getting boomier”, he said in 2006. “We should have an examination into why so many people got it so wrong”, adding that people “should have bought last year.”
By April 2007, he was predicting a “soft landing”.
By July, he asked why those who sit on the sidelines “cribbing and moaning” don’t “commit suicide”.
Two months later, we were told that there “is no place for politically motivated attempts to talk down the economy and the achievements of our people across all sectors.” What a crock. It’s one thing to have to listen to such garbage from those in the property sector.
It’s another thing entirely when the leaders of our country were encouraging one of the greatest housing bubbles in history, a bubble whose bursting has plunged Ireland into a crisis of incalculable proportions.
Ahern is famously pally with developers, whose one-dimensional thinking seems to have informed government policy. Take Bertie’s buddy Sean Dunne, who said just last month that he was “prudent” when he splashed out almost $600 million for a 5 acre site in Ballsbridge at the height of the boom. In 2006, Dunne lashed out at the economists who had “mistakenly forecast the end of the housing and property boom in Ireland” for the last six years. This deluded bunch of “hyenas”, those “harbingers of doom and gloom”, included the Economist magazine, the IMF and the OECD. “The hyenas have stopped laughing…each and every one of them was wrong.”
They weren't wrong though – just early. David McWilliams, who had been warning for years that the housing bubble couldn’t last, likes to use the analogy of a doctor who advises a patient to change his lifestyle. Smoking 20 fags a day, the patient ups it to 40 as the years pass. After all, the doctor’s been warning him for years and nothing’s happened. By 2007, our patient is puffing on cigars aplenty and downing a daily bottle of whiskey into the bargain. Why not? Sure he’d been hearing the same old warnings for the best part of a decade… It was obvious that a serious property bust was a question of ‘when’, not ‘if’, just as it was obvious to decent economists that a financial crisis would likely be triggered by this bust. Study after study has confirmed as much. 2007 was full of guff about a soft landing even though studies of international housing bubbles show that there has never been such a thing. Bubbles are followed by crashes just as day is followed by night. The global financial crisis hit the headlines in 2007, creating a perfect storm for Ireland in the process. And yet, politicians and regulators appear to have been taken unawares. When UCD economist Morgan Kelly published a study showing that house prices typically fall by between 40-60 percent in a crash, he was dismissed as a scaremonger (it’s now very likely that Irish falls will be even greater). Also dismissed were his comparisons with Finland, which saw unemployment rocket from 3 to 20 percent and house prices halve in the aftermath of its housing crash in the early 1990s.
It wasn’t rocket science. Between 2000 and 2006, house prices doubled relative to income and rents. Construction accounted for nearly a fifth of our economy (the international norm is just 5 percent). First-time buyers became priced out of the market so banks invented 110 percent mortgages to be paid back over a forty-year period. The signs of an unsustainable bubble were everywhere. And yet, politicians trumpeted that the fundamentals were sound. What were they smoking? Other countries, of course, also had their fair share of paid housing cheerleaders. Take David Lereah, former chief economist with America’s National Association of Realtors. Lereah, author of the 2005 bestseller, Why the Housing Boom Will Not Bust and How You Can Profit From It, used to routinely trot out wildly bullish forecasts that mirrored the hallucinatory abominations of his Irish counterparts. He left his job in 2007. Was he wrong to be so bullish, he was asked recently? “I worked for an association promoting housing, and it was my job to represent their interests”, he admitted. “I put a positive spin on it. It was easy to do during boom times, harder when times weren’t good”. And now? “I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop.”
Kudos for his new-found honesty, if nothing else. There are many David Lereahs in Ireland. Developers, estate agents, dizzy television presenters with their own property agendas, economists working for the banks – the same old clowns will trot out the same old claptrap, rabbiting on about ‘value’ and the dangers of waiting too long and how a bottom is near and how it’s a great time to buy. It’s not a great time to buy. It’s a great time to wait. Property remains over-priced by any conventional valuation yardstick, some places more than others (West Cork comes to mind). Property crashes play out over a period of many years, partly because sellers become anchored to old prices that are no longer relevant. There’s also a large element of wishful thinking involved – a recent US study found that people expected prices in their locality to fall but believed that their own house would appreciate in value or stay the same. The facts are, however, that house prices do not rise in real terms (after inflation) in the long run.
Countless international studies confirm this. A couple of booms aside, real house prices were flat or falling most of the time in the US in the 20th century. Booms occur periodically before prices revert to their historical mean. The bigger the bubble, the bigger the bust. We’ll still have to put up with the cheerleaders, however, even as the market deflates. Morgan Kelly puts it well. “We can start looking forward to estate agents telling us that the worst is over, a necessary correction to an overheated market has taken place, there has never been a better time to buy, and so on until most of them go out of business.”
24 January 2009
Oh to live in Japan......
From The Times
January 24, 2009
Taro Aso gives Japanese £100 each to spend way out of recession ................
For £200, a couple could have a sparkling day at the Yunessan spa
Leo Lewis, Asia Business Correspondent
With Japanese exports plunging and companies retrenching, the fate of the world’s second-biggest economy may now lie in an electronic cigarette, a ripe musk melon or a bag of dumplings shaped like the Prime Minister’s face.
Government efforts to stimulate the economy and insulate it from the ravages of recession have failed. The pace and scale of decline, say economists, has proved too big for the country’s creaking, deadlocked political system to cope with and deep recession is now a certainty.
But Taro Aso, the increasingly reviled Prime Minister, believes that he has hit upon a scheme that will solve the crisis in an orgy of consumer spending.
The move, which he has described as “the best economic measure of all”, involves a handout of at least 12,000 yen (£100) to every citizen over the age of 18. The prospect of the windfall has unleashed a national wave of speculation about how the money might best be spent, and the eccentric world of Japanese retail is pushing hard to attract the cash.
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Among the more extreme recommendations on how to spend the money is to applaud Mr Aso’s plan by buying a gift box of Aso-themed goods: Y12,000 would buy a magnificent spread including a coffee mug, dumplings, shopping bag, tummy-warmer and dog-sized T-shirt bearing his image.
The notoriously pricey Japanese fruit industry is also vying to be among the winners of an overnight sense of opulence. The price of a much prized Shi-zuoka Crown – the self-declared king of musk melons – has suddenly been brought down from Y30,000 to a convenient Y12,000.
The service sector, too, has a number of seasonal opportunities: taking advantage of a discount travel coupon, a couple could enjoy the romantic and antiageing effects of a day at the chocolate and wine baths of Yunessan, buy a souvenir and expect little change from Y24,000.
The same sum would also pay for a family to spend the night in sleeping bags on the floor of the Enoshima Aquarium on the outskirts of Tokyo. The presence of hundreds of rippling squid in their tanks offers purportedly healing effects – a Y24,000 necessity.
Meanwhile, offerings from the often imaginative world of Japanese electronics that fit the bill include a cigarette which glows and emits grapefruit steam into the user’s mouth.
The scheme, however, has plenty of doubters. Richard Jerram, the chief Japan economist at Macquarie Securities, believes that it is doomed to failure and is a sure sign that the Japanese Government “just does not understand how staggeringly the world has changed”.
The problem, says Naomi Fink, a strategist at Tokyo Mitsubishi, is not that the Japanese do not have cash, but that they are too scared to spend it. Japanese households are already sitting on cash savings estimated at Y778 trillion (£6.5 trillion).
Have your say
The truth is that, as a nation, Japanese people are undoubtedly some of the most frugal in the entire world. + They set a great example to the rest of the world in terms of their industrious nature and sense of patriotism. Mr. Aso will be perceived as being a kind man - who would argue that point?
NDG, Tokyo, Japan
Have your say
19 January 2009
Should Banks be lending at all????????
Should banks be lending to house buyers?January 19th, 2009 by Peter King
Should the UK government really be encouraging households to borrow money to buy houses in the current climate? And should it be encouraging banks to lend to them as part of the latest bailout package?
Clearly there is considerable pent up demand for housing and this will grow over time. But a responsible government would surely be telling first-time buyers and others to put off their purchases. What is the sense in taking out a mortgage to pay for an asset that is declining in value by 15% a year?
And instead of exhorting the banks to offer cheap finance so households can saddle themselves with negative equity, the government should be congratulating them for their entirely rational behaviour of limiting their exposure to the housing market.
Tags: bailouts, credit crunch, financial crisis, housing, Peter King
This entry was posted on Monday, January 19th, 2009 at 1:55 pm and is filed under Political economy. 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.
Should the UK government really be encouraging households to borrow money to buy houses in the current climate? And should it be encouraging banks to lend to them as part of the latest bailout package?
Clearly there is considerable pent up demand for housing and this will grow over time. But a responsible government would surely be telling first-time buyers and others to put off their purchases. What is the sense in taking out a mortgage to pay for an asset that is declining in value by 15% a year?
And instead of exhorting the banks to offer cheap finance so households can saddle themselves with negative equity, the government should be congratulating them for their entirely rational behaviour of limiting their exposure to the housing market.
Tags: bailouts, credit crunch, financial crisis, housing, Peter King
This entry was posted on Monday, January 19th, 2009 at 1:55 pm and is filed under Political economy. 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.
02 January 2009
UK Biggest hose price drop in History....
Biggest house price drop on record
House prices plunged by 16.2% during 2008 in the biggest drop for a calendar year on record, Halifax said.
Last year's price plummet, which came after the average value of a property in the UK fell 2.2% in December, was the biggest year-on-year fall since the Halifax began recording data in 1983.
Britain's biggest mortgage lender said the typical price of a property now stands at £159,896 - back to August 2004 levels.
The drop in annual house price inflation measures prices in the previous three months compared with the same period a year ago. But if house prices in December are compared with prices in December 2007, the fall is even more dramatic at 18.9%.
And Halifax warned that the property market will come under further pressure in 2009 as the financial crisis continues to restrict lending in the UK.
Bank of England figures on Friday revealed that just 27,000 mortgages were approved for new house purchases during November, which was a new record low.The Bank also said in its credit report that banks and building societies plan to cut back further on lending as the economic outlook worsens.
However, the Halifax offered hope that the downturn in the property market could be limited as housing affordability improves. The lender said the house price to earnings ratio - a key affordability measure - had declined to its lowest level for more than five-and-a-half years.
First-time buyers (FTBs) may also be in line for some relief, with the proportion of local authorities where housing is affordable for FTBs more than trebling in 2008, according to the Halifax.
Economist Howard Archer of IHS Global Insight cautioned that, despite the interest rate falls and property price reduction, the outlook for the housing market remained "bleak". He predicted house prices to fall by a further 15% on the Halifax measure in 2009.
This would see property prices plummet by 32% in nominal terms from their August 2007 peak of £199,612 to stand at £135,912 at the end of this year, he said. House price falls would then ease at the start of 2010 and flatten out in the latter months of the year, added Mr Archer.
Copyright (c) Press Association Ltd. 2009, All Rights Reserved.
House prices plunged by 16.2% during 2008 in the biggest drop for a calendar year on record, Halifax said.
Last year's price plummet, which came after the average value of a property in the UK fell 2.2% in December, was the biggest year-on-year fall since the Halifax began recording data in 1983.
Britain's biggest mortgage lender said the typical price of a property now stands at £159,896 - back to August 2004 levels.
The drop in annual house price inflation measures prices in the previous three months compared with the same period a year ago. But if house prices in December are compared with prices in December 2007, the fall is even more dramatic at 18.9%.
And Halifax warned that the property market will come under further pressure in 2009 as the financial crisis continues to restrict lending in the UK.
Bank of England figures on Friday revealed that just 27,000 mortgages were approved for new house purchases during November, which was a new record low.The Bank also said in its credit report that banks and building societies plan to cut back further on lending as the economic outlook worsens.
However, the Halifax offered hope that the downturn in the property market could be limited as housing affordability improves. The lender said the house price to earnings ratio - a key affordability measure - had declined to its lowest level for more than five-and-a-half years.
First-time buyers (FTBs) may also be in line for some relief, with the proportion of local authorities where housing is affordable for FTBs more than trebling in 2008, according to the Halifax.
Economist Howard Archer of IHS Global Insight cautioned that, despite the interest rate falls and property price reduction, the outlook for the housing market remained "bleak". He predicted house prices to fall by a further 15% on the Halifax measure in 2009.
This would see property prices plummet by 32% in nominal terms from their August 2007 peak of £199,612 to stand at £135,912 at the end of this year, he said. House price falls would then ease at the start of 2010 and flatten out in the latter months of the year, added Mr Archer.
Copyright (c) Press Association Ltd. 2009, All Rights Reserved.
01 January 2009
Bad in Wales
Slump is worst since 1930s - veteran estate agent
Jan 1 2009
by Nick Machin, South Wales Echo
THE current economic slump will be worse than the Great Depression of the 1930s, a South Wales estate agent has warned.
And Saul Magrill should know – because he was there.
Mr Magrill, 94, thought to be Britain’s oldest working estate agent, is shocked at the downturn in the housing market.
He blamed the banks for being “greedy” and spenders for lacking self-discipline.
Mr Magrill started work as a property consultant when he was just 17 in 1931, at the height of the pre-war economic downturn.
But Mr Magrill, who works one day a week for the Chris John Estate Agents in Pontcanna, Cardiff, as a consultant, says that was nothing compared to what Britain is going through now.
He said: “It’s much, much worse now than it was in the 1920s or 1930s.
“I started work when I was 17 in 1931 during the height of the Depression.
“But I have to say that I think 2009 will be much worse than 1931 because people don’t know the old-fashioned rules of budgeting.”
Mr Magrill said property prices had been too high for years and a slump was only a matter of time.
“I’ve been saying for a long time that the bubble had to burst. People were taking out mortgages more than 10 times their annual salary – which they just couldn’t afford.
“In the 1930s people mainly rented property anyway, which was more affordable than it is today, so there wasn’t this risk of lots of people losing their homes and having negative equity. The banks have been deviant. They have been very greedy.”
Mr Magrill added that people today would find it harder to adjust to budgeting.
“In the 1930s it was always hard and everyone struggled so you would stick together,” he said.
“But now people are buying things on credit they can’t afford and are being encouraged to by retailers.
“There was never that option or temptation in the 1930s – you had to make do with what you had.”
Jan 1 2009
by Nick Machin, South Wales Echo
THE current economic slump will be worse than the Great Depression of the 1930s, a South Wales estate agent has warned.
And Saul Magrill should know – because he was there.
Mr Magrill, 94, thought to be Britain’s oldest working estate agent, is shocked at the downturn in the housing market.
He blamed the banks for being “greedy” and spenders for lacking self-discipline.
Mr Magrill started work as a property consultant when he was just 17 in 1931, at the height of the pre-war economic downturn.
But Mr Magrill, who works one day a week for the Chris John Estate Agents in Pontcanna, Cardiff, as a consultant, says that was nothing compared to what Britain is going through now.
He said: “It’s much, much worse now than it was in the 1920s or 1930s.
“I started work when I was 17 in 1931 during the height of the Depression.
“But I have to say that I think 2009 will be much worse than 1931 because people don’t know the old-fashioned rules of budgeting.”
Mr Magrill said property prices had been too high for years and a slump was only a matter of time.
“I’ve been saying for a long time that the bubble had to burst. People were taking out mortgages more than 10 times their annual salary – which they just couldn’t afford.
“In the 1930s people mainly rented property anyway, which was more affordable than it is today, so there wasn’t this risk of lots of people losing their homes and having negative equity. The banks have been deviant. They have been very greedy.”
Mr Magrill added that people today would find it harder to adjust to budgeting.
“In the 1930s it was always hard and everyone struggled so you would stick together,” he said.
“But now people are buying things on credit they can’t afford and are being encouraged to by retailers.
“There was never that option or temptation in the 1930s – you had to make do with what you had.”
Gordo gets this one right!!!!
Brown warns 2009 'won't be easy' ~ True Gordo and you're to BLAME!!
pa.press.net
Gordon Brown has warned the country that 2009 "won't be easy" as it faces up to the economic crisis.
In the Prime Minister's traditional New Year message, he insisted that Britain would pull through - but admitted the challenge was "enormous". He wrote: "This coming year won't be easy, but I am determined that this government will be the rock of stability and fairness on which the British people can depend."
"The scale of the challenges we face is matched by the strength of my optimism that the British people can and will rise to meet them. Because we're not a do nothing people and we've always risen to every challenge. We can meet the security challenge, the environmental challenge and the enormous economic challenge."
Amid widespread pessimism about 2009, the premier sought to strike an optimistic note at the start of what will be a make-or-break year for the Labour government. The prospects for a fourth consecutive term in office are likely to turn on the eventual length and extent of Britain's first recession since the early 1990s.
But Mr Brown insisted the British people, and the Government, had demonstrated their ability to get through similar challenges in the past. He said the task for 2009 was to "build tomorrow", with jobs for the digital age and the green agenda, new transport and communications infrastructure and enhanced skills.
Working together with Britain's world partners, he said, such actions would ensure the UK would "hit the ground running" after the downturn. He wrote: "Today the issues may be difference, more complex, more global. And yet the qualities that are needed to meet them have been demonstrated in abundance by the British people before."
The Prime Minister also set out his ambition to see a new economic philosophy replace the "unbridled free market dogma" which has been discredited by the financial crisis, "I want 2009 to be the year when the dawn of a new progressive era breaks across the world," he said.
That would mean governments investing through economic lows and offering "real help" to families and businesses when they were most in need. In a swipe at the Tories, the Prime Minister insisted failure to act would lead to a worse downturn and a weaker economy in the future.
He portrayed the Government's response to the autumn banking crisis - such as the recapitalisation of high street banks - as a "decisive" strategy to quell people's fears. He said: "The scale and speed of the global financial crisis was, at times, almost overwhelming. I know that people felt bewildered, confused and sometimes frightened. That is why the response had to be swift and decisive."
Insisting that his "guiding principle" was the wellbeing of British families and businesses, he added: "What keeps me up at night, and gets me up in the morning, are the hopes and aspirations of the British people."
pa.press.net
Gordon Brown has warned the country that 2009 "won't be easy" as it faces up to the economic crisis.
In the Prime Minister's traditional New Year message, he insisted that Britain would pull through - but admitted the challenge was "enormous". He wrote: "This coming year won't be easy, but I am determined that this government will be the rock of stability and fairness on which the British people can depend."
"The scale of the challenges we face is matched by the strength of my optimism that the British people can and will rise to meet them. Because we're not a do nothing people and we've always risen to every challenge. We can meet the security challenge, the environmental challenge and the enormous economic challenge."
Amid widespread pessimism about 2009, the premier sought to strike an optimistic note at the start of what will be a make-or-break year for the Labour government. The prospects for a fourth consecutive term in office are likely to turn on the eventual length and extent of Britain's first recession since the early 1990s.
But Mr Brown insisted the British people, and the Government, had demonstrated their ability to get through similar challenges in the past. He said the task for 2009 was to "build tomorrow", with jobs for the digital age and the green agenda, new transport and communications infrastructure and enhanced skills.
Working together with Britain's world partners, he said, such actions would ensure the UK would "hit the ground running" after the downturn. He wrote: "Today the issues may be difference, more complex, more global. And yet the qualities that are needed to meet them have been demonstrated in abundance by the British people before."
The Prime Minister also set out his ambition to see a new economic philosophy replace the "unbridled free market dogma" which has been discredited by the financial crisis, "I want 2009 to be the year when the dawn of a new progressive era breaks across the world," he said.
That would mean governments investing through economic lows and offering "real help" to families and businesses when they were most in need. In a swipe at the Tories, the Prime Minister insisted failure to act would lead to a worse downturn and a weaker economy in the future.
He portrayed the Government's response to the autumn banking crisis - such as the recapitalisation of high street banks - as a "decisive" strategy to quell people's fears. He said: "The scale and speed of the global financial crisis was, at times, almost overwhelming. I know that people felt bewildered, confused and sometimes frightened. That is why the response had to be swift and decisive."
Insisting that his "guiding principle" was the wellbeing of British families and businesses, he added: "What keeps me up at night, and gets me up in the morning, are the hopes and aspirations of the British people."
And the Good news for Drinkers
Pub chain slashes beer prices...........What????? Tell me that again!!!!!!!!!!
Pub chain slashes beer prices.....Yes.....it's true!!!!!!!!!
pa.press.net
Leading pub chain JD Wetherspoon is to slash prices on some drinks and food, offering a pint of beer for less than £1, down to 1989 prices, the company revealed.
The company, which operates 713 pubs across the UK, said the price reductions on some beer, bottled lager, wine and spirits will run "indefinitely".
A number of meals will also be offered at £2.99, said the firm, which opened 20 new pubs in the last few months of 2008, creating hundreds of new jobs, despite the economic downturn.
Wetherspoon's chief executive John Hutson said: "People enjoy going to the pub. However, we appreciate that the economic downturn means that they now have to be more careful with their money.
"We believe that our new food and drink prices will allow people to enjoy a visit to a Wetherspoon pub without it costing them too much.
"Unlike most sales that start in January, our offers will not be ending within days, but will run indefinitely."
Greene King IPA will be cut to 99p a pint, as will a bottle of San Miguel, the company announced.
Pub chain slashes beer prices.....Yes.....it's true!!!!!!!!!
pa.press.net
Leading pub chain JD Wetherspoon is to slash prices on some drinks and food, offering a pint of beer for less than £1, down to 1989 prices, the company revealed.
The company, which operates 713 pubs across the UK, said the price reductions on some beer, bottled lager, wine and spirits will run "indefinitely".
A number of meals will also be offered at £2.99, said the firm, which opened 20 new pubs in the last few months of 2008, creating hundreds of new jobs, despite the economic downturn.
Wetherspoon's chief executive John Hutson said: "People enjoy going to the pub. However, we appreciate that the economic downturn means that they now have to be more careful with their money.
"We believe that our new food and drink prices will allow people to enjoy a visit to a Wetherspoon pub without it costing them too much.
"Unlike most sales that start in January, our offers will not be ending within days, but will run indefinitely."
Greene King IPA will be cut to 99p a pint, as will a bottle of San Miguel, the company announced.
New Year Newish Problems.....Welcome to 2oo9
1,600+ retailers expected to go bust in 2009
REUTERS
January 01 2009
LONDON (Reuters) - The downturn in consumer spending will drive over 1,600 retailers out of business in 2009, triggering thousands of job losses and leaving more than one in ten shops empty, a report said Thursday.
Market researchers Experian said trading conditions for survivors would be the worst for at least 30 years and there would be knock-on effects at suppliers, manufacturers and service providers.
"There is no doubt that the impact on retail will resonate through the entire economy," said Jonathan de Mello, Director of Retail Consultancy at Experian.
Retailers are slashing prices as indebted shoppers curb spending amid rising unemployment, sliding house prices and fears of a deep recession.
Experian said big discounts had lured some consumers back into stores, with shopper numbers leaping 12.8 percent in the last week of December. But that was not enough to prevent a 3.1 percent drop in footfall for the month as a whole.
"The last minute surge in shoppers came as a relief to retailers but for most it was not nearly enough," de Mello said.
"The boost in numbers was driven by massive unprecedented discounting all at the expense of retailer margins."
Some retailers have not survived, with sweets-to-DVDs chain Woolworths and furniture group MFI falling into administration, a form of creditor protection, in the run-up to Christmas and several smaller companies following suit in recent days.
Experian said 1,137 non-food retailers went out of business in the year ended December, up 21.2 percent on the year, and forecast 440 more would become insolvent over the next four months and the total for 2009 as a whole would be about 1,400.
Some 194 food retailers failed in 2008, up 10.9 percent, and Experian predicted that number would rise to about 230 in 2009.
"The collapses we've seen so far are just the tip of the iceberg," de Mello said.
"At the moment there is too much space in the market and not enough demand. Many retailers are either making no margin or losing money. We anticipate that January will be the toughest for 30 years."
Experian said the vacancy level on shopping streets was around 7 percent, but with a flurry of businesses recently going into administration that would rise to about 10 percent -- "a figure which is likely to increase as more retailers go into administration in January."
"This large scale retail business failure is expected to have a significant impact on high street returns, affecting everything from investors' yields on rents to revenues to local authorities," it said.
"This is not to forget the devastating impact on people's jobs and livelihoods," de Mello. "Britain is still a nation of shop keepers and the retail sector is one of the UK's largest employers."
(Reporting by Mark Potter; Editing by Mike Nesbit)
REUTERS
January 01 2009
LONDON (Reuters) - The downturn in consumer spending will drive over 1,600 retailers out of business in 2009, triggering thousands of job losses and leaving more than one in ten shops empty, a report said Thursday.
Market researchers Experian said trading conditions for survivors would be the worst for at least 30 years and there would be knock-on effects at suppliers, manufacturers and service providers.
"There is no doubt that the impact on retail will resonate through the entire economy," said Jonathan de Mello, Director of Retail Consultancy at Experian.
Retailers are slashing prices as indebted shoppers curb spending amid rising unemployment, sliding house prices and fears of a deep recession.
Experian said big discounts had lured some consumers back into stores, with shopper numbers leaping 12.8 percent in the last week of December. But that was not enough to prevent a 3.1 percent drop in footfall for the month as a whole.
"The last minute surge in shoppers came as a relief to retailers but for most it was not nearly enough," de Mello said.
"The boost in numbers was driven by massive unprecedented discounting all at the expense of retailer margins."
Some retailers have not survived, with sweets-to-DVDs chain Woolworths and furniture group MFI falling into administration, a form of creditor protection, in the run-up to Christmas and several smaller companies following suit in recent days.
Experian said 1,137 non-food retailers went out of business in the year ended December, up 21.2 percent on the year, and forecast 440 more would become insolvent over the next four months and the total for 2009 as a whole would be about 1,400.
Some 194 food retailers failed in 2008, up 10.9 percent, and Experian predicted that number would rise to about 230 in 2009.
"The collapses we've seen so far are just the tip of the iceberg," de Mello said.
"At the moment there is too much space in the market and not enough demand. Many retailers are either making no margin or losing money. We anticipate that January will be the toughest for 30 years."
Experian said the vacancy level on shopping streets was around 7 percent, but with a flurry of businesses recently going into administration that would rise to about 10 percent -- "a figure which is likely to increase as more retailers go into administration in January."
"This large scale retail business failure is expected to have a significant impact on high street returns, affecting everything from investors' yields on rents to revenues to local authorities," it said.
"This is not to forget the devastating impact on people's jobs and livelihoods," de Mello. "Britain is still a nation of shop keepers and the retail sector is one of the UK's largest employers."
(Reporting by Mark Potter; Editing by Mike Nesbit)
16 November 2008
Nick Louth predicts on housing
More house price falls to come
By Nick Louth, exclusive to MSN
November 13 2008
The big rise in unemployment this week and the Bank of England's admission that Britain is in recession are clear reminders that those hoping for a quick end to falling house prices are likely to be disappointed.
Whether we look at other housing booms in the UK, experience in other countries, or the relationship between the economy and house prices, evidence suggest we are still a considerable way from the bottom.
The UK economy in depth
Recession for real"It is very likely that the economy entered a recession in the second half (of 2008)," Bank governor Mervyn King said. He said that the economy could shrink by 2% next year, compared with the broadly flat forecast the bank had previously. Earlier, a 140,000 rise in the jobless total in September put unemployment at 1.82 million, the highest in 11 years.
Those who lose their jobs are of course under immediate pressure on mortgage payments, but those who merely fear their jobs are under threat are more likely to act more cautiously too. That means fewer new buyers, delays in transactions and a temptation for sellers to lower asking prices.
Why the recession is needed immediately
Average prices drop, more to comeAverage UK house prices peaked at just under £200,000 in August 2007, according to the Halifax. Prices in October, at £168,000 were 16% down from this, matching levels last seen three years ago.
Nationwide, the largest building society in the country, reckons prices will fall by 25% in total, and there may be no bounce-back before 2010, according to chief executive Graham Beale
Based on the Halifax index, that would put average prices down to £150,000. However, it could easily be a lot worse because of the size of the bubble that preceded the August 2007 peak and the severity of the current economic downturn.
Bubbles past and presentThe last slide in UK house prices was a rather modest affair, though it lasted six years from May 1989 to July 1995. House prices as measured by the Halifax fell by 13%, from an average of £70,000 to £61,000 over the period. That might be a comforting precedent, except that it is already clear that the UK has in one year experienced a house price fall which took six years to occur in the 1990s. And it is still getting worse.
The difference this time is that we have had a major banking crisis which has rationed credit, while a recession is building which looks to be in a different league to the modest economic slowdown of the early 1990s.
Research by professor Morgan Kelly of University College Dublin shows that house price bubble across the world have similar characteristics. On average prices lose 70% of the gains made from trough to peak before bottoming out. This research is backed up by an international study made by the Bank of International Settlements in 2004, which found a strong positive correlation between the size of a housing bubble and the subsequent fall.
The doomsday scenario?So if Professor Kelly's 70% figure is accurate, where would that leave UK house prices? The last downturn in the housing market ended in July 1995, when average prices according to the Halifax were £61,000. That gain, trough to peak over 12 years, is £139,000. So if this is a typical bubble, the fall would be 70% of that, £97,000, taking the price of the average house at the low to just £103,000.
There are plenty who would see this as too much of a doomsday scenario, especially as houses would become affordable long before such low prices were reached. House prices have averaged 4.0 times average earnings over the long term, and since prices peaked the ratio has already dropped from 5.84 to 4.92 in August.
"Housing affordability is improving significantly," said Martin Ellis, chief economist at the Halifax. "The house price to average earnings ratio has fallen below 5.0 for the first time for four and a half years. We expect a further improvement in the ratio over the coming months."
Affordability issueIf average earnings do not change, which is itself a hefty assumption given the recession we are entering, prices would hit the long-term affordability average with a further 20% fall.
The trouble with this argument is that once houses became an investment asset, with the buy-to-let boom of the late 1990s, they became subject to the same speculative forces that drive share prices.
Instead of being guided by "fundamentals" such as the ratio of income to price, they were driven by price expectations. What that implies is that we can expect an overshoot, in which prices having been way above typical affordability averages for several years, then spend some time well below them.
Mortgage troubles drag onOne additional difficulty this time around is in mortgage finance. Though the Bank of England has cut interest rates sharply, stubbornly high inter-bank rates mean that rates offered to borrowers have yet to fall significantly. With buyers having to stump up larger deposits too, and credit generally harder to come by, this augurs badly for those who expect prices to soon stabilise.
Weakening activity underlines this. The Royal Institution of Chartered Surveyors said its sale-to-stock ratio, which measures transactions as a proportion of homes offered for sales, fell in October to the lowest level since December 1992. This seems to reflect a mis-match between the asking prices of sellers, and what buyers are willing or able to spend.
Some commentators, however, see the gloomy headlines as far too alarmist. One is Stuart Law, chief executive of property investment specialist Assetz.
"Our view is that house prices will drop by around a total of 10 to 15% from the peak this time last year, based on the Financial Times house price index data," he said. "We therefore think that prices will fall no further than a further 5% or 10% at most."
The FT Index, which uses the actual mix of property in England and Wales, rather than the mix based on sales, has recorded only a 4.3% fall in the year to September, less than half that recorded by most other indices.
Law noted that the complexities of the housing market produce some temporary pricing effects. "Auction pricing and distressed house builders are selling for much greater discounts than is visible within the house price indices," he said. "Even today we are sourcing property from house builders at greater than 30% discount to current valuation, never-mind from peak value last year."
The good news for most...The one piece of good news is that for most people, most of the time, house prices don't matter. You need a home to live in, and higher or lower prices are reflected both in the home you sell and the one you purchase. For first-time buyers, where they have job security, falling prices remain good news to be taken advantage of.
However, for those who have purchased recently, over-stretched buy-to-let investors, those who are having trouble making mortgage payments and those who have lost their jobs, price falls mean trouble. The fear of negative equity - in which the value of the home sinks below the size of the mortgage - ensures a cash loss if the home has to be sold.
The more prices fall in the months and years to come, the more people are going to be facing that anxiety.
By Nick Louth, exclusive to MSN
November 13 2008
The big rise in unemployment this week and the Bank of England's admission that Britain is in recession are clear reminders that those hoping for a quick end to falling house prices are likely to be disappointed.
Whether we look at other housing booms in the UK, experience in other countries, or the relationship between the economy and house prices, evidence suggest we are still a considerable way from the bottom.
The UK economy in depth
Recession for real"It is very likely that the economy entered a recession in the second half (of 2008)," Bank governor Mervyn King said. He said that the economy could shrink by 2% next year, compared with the broadly flat forecast the bank had previously. Earlier, a 140,000 rise in the jobless total in September put unemployment at 1.82 million, the highest in 11 years.
Those who lose their jobs are of course under immediate pressure on mortgage payments, but those who merely fear their jobs are under threat are more likely to act more cautiously too. That means fewer new buyers, delays in transactions and a temptation for sellers to lower asking prices.
Why the recession is needed immediately
Average prices drop, more to comeAverage UK house prices peaked at just under £200,000 in August 2007, according to the Halifax. Prices in October, at £168,000 were 16% down from this, matching levels last seen three years ago.
Nationwide, the largest building society in the country, reckons prices will fall by 25% in total, and there may be no bounce-back before 2010, according to chief executive Graham Beale
Based on the Halifax index, that would put average prices down to £150,000. However, it could easily be a lot worse because of the size of the bubble that preceded the August 2007 peak and the severity of the current economic downturn.
Bubbles past and presentThe last slide in UK house prices was a rather modest affair, though it lasted six years from May 1989 to July 1995. House prices as measured by the Halifax fell by 13%, from an average of £70,000 to £61,000 over the period. That might be a comforting precedent, except that it is already clear that the UK has in one year experienced a house price fall which took six years to occur in the 1990s. And it is still getting worse.
The difference this time is that we have had a major banking crisis which has rationed credit, while a recession is building which looks to be in a different league to the modest economic slowdown of the early 1990s.
Research by professor Morgan Kelly of University College Dublin shows that house price bubble across the world have similar characteristics. On average prices lose 70% of the gains made from trough to peak before bottoming out. This research is backed up by an international study made by the Bank of International Settlements in 2004, which found a strong positive correlation between the size of a housing bubble and the subsequent fall.
The doomsday scenario?So if Professor Kelly's 70% figure is accurate, where would that leave UK house prices? The last downturn in the housing market ended in July 1995, when average prices according to the Halifax were £61,000. That gain, trough to peak over 12 years, is £139,000. So if this is a typical bubble, the fall would be 70% of that, £97,000, taking the price of the average house at the low to just £103,000.
There are plenty who would see this as too much of a doomsday scenario, especially as houses would become affordable long before such low prices were reached. House prices have averaged 4.0 times average earnings over the long term, and since prices peaked the ratio has already dropped from 5.84 to 4.92 in August.
"Housing affordability is improving significantly," said Martin Ellis, chief economist at the Halifax. "The house price to average earnings ratio has fallen below 5.0 for the first time for four and a half years. We expect a further improvement in the ratio over the coming months."
Affordability issueIf average earnings do not change, which is itself a hefty assumption given the recession we are entering, prices would hit the long-term affordability average with a further 20% fall.
The trouble with this argument is that once houses became an investment asset, with the buy-to-let boom of the late 1990s, they became subject to the same speculative forces that drive share prices.
Instead of being guided by "fundamentals" such as the ratio of income to price, they were driven by price expectations. What that implies is that we can expect an overshoot, in which prices having been way above typical affordability averages for several years, then spend some time well below them.
Mortgage troubles drag onOne additional difficulty this time around is in mortgage finance. Though the Bank of England has cut interest rates sharply, stubbornly high inter-bank rates mean that rates offered to borrowers have yet to fall significantly. With buyers having to stump up larger deposits too, and credit generally harder to come by, this augurs badly for those who expect prices to soon stabilise.
Weakening activity underlines this. The Royal Institution of Chartered Surveyors said its sale-to-stock ratio, which measures transactions as a proportion of homes offered for sales, fell in October to the lowest level since December 1992. This seems to reflect a mis-match between the asking prices of sellers, and what buyers are willing or able to spend.
Some commentators, however, see the gloomy headlines as far too alarmist. One is Stuart Law, chief executive of property investment specialist Assetz.
"Our view is that house prices will drop by around a total of 10 to 15% from the peak this time last year, based on the Financial Times house price index data," he said. "We therefore think that prices will fall no further than a further 5% or 10% at most."
The FT Index, which uses the actual mix of property in England and Wales, rather than the mix based on sales, has recorded only a 4.3% fall in the year to September, less than half that recorded by most other indices.
Law noted that the complexities of the housing market produce some temporary pricing effects. "Auction pricing and distressed house builders are selling for much greater discounts than is visible within the house price indices," he said. "Even today we are sourcing property from house builders at greater than 30% discount to current valuation, never-mind from peak value last year."
The good news for most...The one piece of good news is that for most people, most of the time, house prices don't matter. You need a home to live in, and higher or lower prices are reflected both in the home you sell and the one you purchase. For first-time buyers, where they have job security, falling prices remain good news to be taken advantage of.
However, for those who have purchased recently, over-stretched buy-to-let investors, those who are having trouble making mortgage payments and those who have lost their jobs, price falls mean trouble. The fear of negative equity - in which the value of the home sinks below the size of the mortgage - ensures a cash loss if the home has to be sold.
The more prices fall in the months and years to come, the more people are going to be facing that anxiety.
04 August 2008
House Prices ~ How low can they Go?
Think of a number........say 10%
Think again..............say double it to 20%
Think again and compare it to the latest projection of say HBOS .........say 30%
That's probably not far out over the next 2 years!
Think again..............say double it to 20%
Think again and compare it to the latest projection of say HBOS .........say 30%
That's probably not far out over the next 2 years!
Are you about to become NEGATIVE?
Negative Equity To Hit 1.7m UK Homeowners?
Wednesday 30th July 2008
One in seven UK homeowners may face the threat of negative equity throughout the next year as the UK housing market takes a stranglehold, according to a report conducted by Standard & Poor..
The world’s largest credit rating agency’s findings suggest that around 70,000 of the UK’s 12m borrowers currently find themselves in negative equity mainly due to house prices falling in value at an alarming 26%, leading to a further 14% of homeowners slipping into negative equity due to their outstanding mortgages.
Such depressing figures could replicate the dark days of the 1990’s housing crash, where huge numbers of home owners were left financially crippled due to house price declines. Never has establishing the best financial mortgage package been so imperative.
The 70,000 predicted to suffer is already a far larger sum than first envisaged and this figure is expected to rise further with the news that the house price slump has upped its speed, falling 9% on last year, judged on S&P’s Nationwide and Halifax figures.
The ratings agency calculated that for with every percentage point drop in house price from now on, around 60,000 to 80,000 borrowers could realistically enter the dreaded realms of negative equity, with the high loan-to-value mortgages most at threat.
While Standard & Poor’s report agreed that prices are currently heading in a downward direction, with a further 17% fall forecasted, many experts predict a more optimistic outlook with many home owners taking up a mortgage worth more than 90% of the value of their home, allowing the chances of going into negative equity slim, even if house prices fell a realistic 10%.
The report declared, “The current run of house price declines raises the prospect of negative equity for a large number of homeowners, a situation not seen since the 1990’s house price recession.”
Wednesday 30th July 2008
One in seven UK homeowners may face the threat of negative equity throughout the next year as the UK housing market takes a stranglehold, according to a report conducted by Standard & Poor..
The world’s largest credit rating agency’s findings suggest that around 70,000 of the UK’s 12m borrowers currently find themselves in negative equity mainly due to house prices falling in value at an alarming 26%, leading to a further 14% of homeowners slipping into negative equity due to their outstanding mortgages.
Such depressing figures could replicate the dark days of the 1990’s housing crash, where huge numbers of home owners were left financially crippled due to house price declines. Never has establishing the best financial mortgage package been so imperative.
The 70,000 predicted to suffer is already a far larger sum than first envisaged and this figure is expected to rise further with the news that the house price slump has upped its speed, falling 9% on last year, judged on S&P’s Nationwide and Halifax figures.
The ratings agency calculated that for with every percentage point drop in house price from now on, around 60,000 to 80,000 borrowers could realistically enter the dreaded realms of negative equity, with the high loan-to-value mortgages most at threat.
While Standard & Poor’s report agreed that prices are currently heading in a downward direction, with a further 17% fall forecasted, many experts predict a more optimistic outlook with many home owners taking up a mortgage worth more than 90% of the value of their home, allowing the chances of going into negative equity slim, even if house prices fell a realistic 10%.
The report declared, “The current run of house price declines raises the prospect of negative equity for a large number of homeowners, a situation not seen since the 1990’s house price recession.”
03 April 2008
Dramatic house price falls in UK
House prices likely to fall by a quarter in two years
Richard Wachman, City editor
The Observer,
Sunday March 30 2008
Article history
About this articleClose
This article appeared in the Observer on Sunday March 30 2008 on p1 of the Business news & features section. It was last updated at 09:16 on March 31 2008.
House prices in Britain could crash by 25 per cent before mid-2010, forecasters at Capital Economics have warned. That would wipe £45,000 off the value of an average house, currently worth £180,000.
Ed Stanford, property economist at Capital, said it was 'entirely plausible' that house prices would fall by between 20 per cent and 25 per cent in the next two years, particularly if the economy continued to be buffeted by the credit squeeze, financial markets' turbulence and sliding consumer confidence.
Capital has already published forecasts that flag a 5 per cent fall in house prices in 2008 and 8 per cent in 2009. It also expects unemployment to rise from 5.3 per cent of the working population to 7.5 per cent.
Last week, Nationwide building society revised its forecast of no change in prices this year to a modest fall. It changed its prediction after publishing figures that showed UK house price annual inflation at its lowest rate for 12 years. Prices fell for the fifth month running; March was down 0.6 per cent on February. If the trend continues Britain's housing market will soon record annual falls for the first time since 1996.
Other UK housing bears include David Miles, chief UK economist at Morgan Stanley. He reckons the market is due a 20 per cent correction. If he and Capital are broadly correct, a significant number of people who bought two years ago will find themselves in negative equity by 2010.
Not everyone is as pessimistic: JP Morgan's Malcolm Barr envisages a 6 per cent fall in 2008, but then a slow recovery.
The Royal Institution of Chartered Surveyors reports that new buyer inquiries at estate agencies are sharply down.
The market is being depressed by the credit crunch, with banks hoarding cash and demanding that borrowers put down huge deposits.
Richard Wachman, City editor
The Observer,
Sunday March 30 2008
Article history
About this articleClose
This article appeared in the Observer on Sunday March 30 2008 on p1 of the Business news & features section. It was last updated at 09:16 on March 31 2008.
House prices in Britain could crash by 25 per cent before mid-2010, forecasters at Capital Economics have warned. That would wipe £45,000 off the value of an average house, currently worth £180,000.
Ed Stanford, property economist at Capital, said it was 'entirely plausible' that house prices would fall by between 20 per cent and 25 per cent in the next two years, particularly if the economy continued to be buffeted by the credit squeeze, financial markets' turbulence and sliding consumer confidence.
Capital has already published forecasts that flag a 5 per cent fall in house prices in 2008 and 8 per cent in 2009. It also expects unemployment to rise from 5.3 per cent of the working population to 7.5 per cent.
Last week, Nationwide building society revised its forecast of no change in prices this year to a modest fall. It changed its prediction after publishing figures that showed UK house price annual inflation at its lowest rate for 12 years. Prices fell for the fifth month running; March was down 0.6 per cent on February. If the trend continues Britain's housing market will soon record annual falls for the first time since 1996.
Other UK housing bears include David Miles, chief UK economist at Morgan Stanley. He reckons the market is due a 20 per cent correction. If he and Capital are broadly correct, a significant number of people who bought two years ago will find themselves in negative equity by 2010.
Not everyone is as pessimistic: JP Morgan's Malcolm Barr envisages a 6 per cent fall in 2008, but then a slow recovery.
The Royal Institution of Chartered Surveyors reports that new buyer inquiries at estate agencies are sharply down.
The market is being depressed by the credit crunch, with banks hoarding cash and demanding that borrowers put down huge deposits.
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