'House prices to fall a quarter'

Have we no two economists who think alike?
Are things so complicated that these highly paid marvels just can't find the right answers.
Having messed everthing up so far it doesn't surprise me that none of them will put their head over the parapet.
I bet there is more than one Tory ex-chancellor who knows exactly what to do.
Clarke Lamont and Howe and not forgetting Nigel Lawson. What a formidable team to get us through this mess.
When will Gordon get the message he doesn't really have what it takes.
And will the rest of his cabinet please take note. Nor do they.

In some places have prices already fallen a quarter?

When anyone from the industry speaks you can guarantee they are understatring the problem. More like 40% if the financial system keeps together, a lot more if things go badly.

Robert, when you mention bail-outs and government help can you please make sure you point out how these aren't cost free - as with what has happened in the US this weekend, the press seem to talk as if the bail out is free of charge. As we head into recession billions of Northern Rock loans will never been seen again, possibly trillions of dollars for the US version.

This is really scary stuff if things turn out badly and the taxpayers being put on the line need to be told quickly before our government tries to create its own Fannie of Freddie.

We need to let house prices collapse if necessary and base our economy on something useful like making (even designing!) things for people. Not ever-increasing debt just to keep the show on the road.

House prices falling a quarter, equates with the governments interest free negative equity stake of 30 %, now being proposed to help purchasers and sellers living in cloud cukoo land carry on the pretence that the mperrors are not in their birthday suits ,whilst they manufacture fig leaves to cover their diminutive assets

I for one hope the Bank of England win.

Most of us will cope with the next years if we stay in work. Its unemployment that causes the real financial problems for people, not negative equity. Its also unemployment that depresses people (life is more than money but not being able to support your family doesn't make for happiness).

I believe that more peoples' income is dependent on the number of transactions in the housing market rather than the absolute value of the transaction.

Transaction totals won't increase until potential buyers think that the market is near bottom. The market won't be near bottom until affordability returns. For most first time buyers we haven't had real affordability for three to five years (they may have got properties but only by borrowing more than was really affordable - eg 6 x income, interest only over 25 years etc). Real affordability for a buoyant market is where the first time buyer is looking in the region of 10% deposit, 3.5x salary on a repayment mortgage. And that's a long way down from last summer, quite possibly 40% down on last summer's prices.

Only when affordability returns will the banks be able to securitize the loans again, so only then can lending restart. That is of course if potential investors have an appetite for housing loans even at realistic prices and the Banks have managed to get many of the current losses out of the system.

The sooner we get there the sooner the building trade resumes, the sooner estate agents can earn a living, the sooner mortgage advisors can earn commissions etc. And if mortgages were affordable the more people would have to spend on other things.

The losers of course are those holding assets as they will be worth less. But someone is going to lose whatever happens.

So I believe that the market should be allowed to fall quickly without interference or artificial support, which will just prolong the pain. (The pain is likely to be 5 to 10 years anyway, we don't need the government making it any longer).

Robert
While it's unusual to hear a man in Graham Beale's position go on record as expecting a peak to trough drop in house prices as big as 25% I would love to hear you push harder on two questions;
1. The current rate of negative growth is already over 22%, and we have already had 6 months of this. What makes anyone think we are half way to the bottom of the trough? What news is going to slow down this rate of decrease? The symptoms of recession have not even started to bite yet. At current rates we will have dropped 25% peak to trough already -do we really see growth within 7 months?
2. Could someone comment on what the "right" price is, v historical norm. What we need to do is to get to the right price - and growth from there should track average earnings, otherwise the bubble will not have been completely deflated, or will be starting again.

I remember not long before prices started coming down a study by the IMF showing that UK house prices were roughly 30% above the level they should be at according to the fundamentals.

Given that confidence is now much lower and immigration is in decline / reverse presumably the potential for falls is even greater?

On a more positive note prices will definitely recover as we don't have enough housing to meet population growth in the mdeium term. What it should mean is real (relative) bargains for anyone who can time a purchase perfectly. How exactly will we know when we reach the bottom of the market?

Prices have already fallen by over 12% from their peak in just 10 months, and the rate of decrease appears to be accelerating. A total fall of only 25% from peak seems like an extreme case of wishful thinking on the basis of Nationwide's own monthly reports. 40% is a more realistic figure, but it could be a lot worse even than that. I suspect there are a lot more nasties lurking in the woodwork of the financial sector which those "in the know" are trying their hardest to hush up.

Britain has since WW2 reduced its manufacturing base and repalced it with a service economy focused on money. The City earns around 20% of our GDP each year.

As consumers, easier credit has enabled us to spend and spend and forget the virtues of thrift and savings. Even our regulations and law have discriminated against this - removal of mortgage interest relief, abolition of tax credits on dividends - the lifeblood of our pension funds, increased marginal taxes and of course IHT - the nasty double tax on earned after tax income. Bankers have not been regulated enough and have switched their allegiance from the customer, with prudent, if boring ways to lend money to become super salesmen with bonuses to sell us fancy products highly complex in their risk structures, that clearly, nobody fully understood and more worringly, nobody seemed to care as long as it paid and worked.

Building our economy on sand is not clever thinking. Now the tide has come in. We have no liqudity in the West. The emerging markets, have stuck to knitting and just made shed loads of cash by trading and manufacturing and kept their money safe. It is they who are the inheritors of the best jewels in the Western Economies, and at knock down prices too.

Our recession here is entirely of our own making, and when the patient is ill, the remedy is slow and painful and many innocent people will suffer from the folly of our leaders.

Perhaps we should all learn some lessons in humility and get back to more traditional values, which should be rewarded, like the family, respect, and monetise these by good UK legislation and without foreign interference.

What are the Government/FSA doing, if anything, to make sure that the bankers who created this enormous mess are being trained in managing risk. With Triple A ratings being handed out like confetti and buyers of the securities not bothering to do due diligence as it took time up and reduced their bonus earning potential the whole banking market seems to have forgotten that managing risk is what its all about.
I can't see what the government can do unless they behave like the bankers and throw good money at people who have already made poor decisions. That won't help in the short term or long term.
Negative equity is painful but stay put and learn from the mistakes and in a few years the value will return.

Close to a quarter off and the monthly rate being around zero for two-months in a row in 2010 was the most likely impression of what was going to happen that I got when this all kicked off. Not sure where I picked that up from. There was of course the chance it would be quickly cleared up and also the chance that things could go horrifically wrong with CDS unravelling.

I think the government need to start thinking about how they can help those who where first time buyers in 2007 and have short-term fixed mortgages that will flip to the variable rate before 2010, as they may have been relying on the ability to re-mortgage but they'll owe more than their property is worth and that won't be possible.

It's getting serious. Prices will soon be pre 2004 levels!

In London the market has already dropped by 15-20% in some areas FROM the Peak- the speed of response from sellars is totally unlike the period of longterm denial experienced in the Nineties and should be regarded as a market responding healthily to change.
Volumes are low partly because of nervous buyers and partly because very few people will consider moving at below this price.
The number of new build properties is likely to be one fifth of the Government's target next year and even if finance is available to developers the number of Brownfield sites which are viable at current price levels is very small. It seems likely that we will hit a shortage of supply before 2010.
The bad decisions of last year were generated by fear of further rises and greed to make money. The same fear and greed in reverse is stopping people today. It is hard to predict whether this time next year prices will be up or down 5% but it is certainly unlikely that there will be such good choice, and being able to choose from a reasonable selection is extrmely valuable.

I watched Robert Peston last night on the nationalisation of the two big mortgage companies in the USA and bet that he wouldn't relate it to the UK Govt's similar action with Northern Rock, which surely was a question begging to be asked?
Why? Because at the time of Northern Rock he flew into one of his all too familiar rants about the Govt. and his reporting was more hysterical than informative - incidentally, does he always know that he is Business Correspondent and not Political Correspondent? And when are we going to get some analysis with perspective on the housing market? Has everyone in the media forgotten the really desperate situation that has been caused by the year on year inflation in house prices? Why did so many people need 95% -100% mortgages if it wasn't because they couldn't get near having a 10% deposit? And have we had enough reminders that the credit crunch is a result of massive, widespread, and unforgiveable incompetence by the private banking and finance sectors ... well, no we haven't, and certainly not from the BBC's Business Correspondent.

Why is it that the "experts" feel they have to come up with a quote about the housing market. The fact is people need somewhere to live, and prices in the long run will rise.
This negativity does not just effect homowners and builders but has a knock on effect on the economy as a whole. Those people gloating about the situation may want to reflect on the value of their savings, pension plans, ISAs and jobs when confidence is undermined.
The banks will return to lending, doing as they are cherry picking those with larger deposits in order to minimise their risk. They will eventually have to widen this out as the banks will need to show profits to their shareholders.
Let's have some sanity back in all of this.

What are home sellers and buyers going to do after Graham Beale's pronouncement?

I am deeply saddened by Mr Beale's comments. It is clear to me he has his own agenda and is using the media to get the Government to rescue his company/industry with bailouts. He is obviously not considering what his comments will do to the current market.

I have not read any comments by him from 15 to 24 months ago saying that we were in a mortgage and house price bubble which some commentators, principally Bill Bonner, Merryn Somerset Webb and others at MoneyWeek were warning us about and has been shown to be the case. Perhaps if Mr Beale and his colleagues at the Nationwide had acted then some of it's own customers would not have been in such a difficult situation today.

It could be argued that since the Nationwide were providing mortgages based upon surveys that were patently overpricing properties during a bubble. And, since the surveyors were paid for by the Nationwide perhaps these borrowers could make claims against his society for any shortfall when they come to sell there homes below this figure!

Furthermore, with such a strong statement has Mr Beale, can we assume, already taken the necessay steps to write down the value of his mortgage book to reflect his prediction. Has he discussed this with his fellow directors and his audits before making such an announcement?

Mr Beale should take care with his statements since we often get what we ask for. I personally think the housing market will contract to such an extent that average values will reduce by 35 to 40%. However, I'm not an expert and would expect your average reader to take little notice of my predictions. However, Mr Beale, is a seen as an expert and should therefore be careful in what he says to the media.

You are witnessing the fundamental failure of the free maket economy.

Karl Marx said Capitalism was unsustainable - he just got his timings wrong. He would be chortling to himself watching the worlds biggest Capitalist economy nationalising the two biggest financial institutions in the world.

P.s. Temporary?? - We'll see....

Sell ! Sell! Sell!

Graham Beale is in the business of selling mortgages but in he is saying it's not the right time to buy one.

I think 25% is sounding conservative.

'The two options being considered at the Treasury are to provide a taxpayer guarantee for mortgages packaged up as bonds for sale to investors'....Robert Peston

I thought that sort of thing got us into this mess in the first place?

For years people have been saying that house prices were unsustainable; had the cost of housing been factored in to the cost of living index maybe someone would have listened.

As it is some people may find they will no longer pay inheritance tax......but that won't help those who were actively encouraged to take out 125% mortgages by the very people who are now foreclosing on them.

I can't agree more with Tom B Jones in post 4.
The sooner that house prices are back to their affordable norm the better, for all the reasons he gives.

Unfortunately most people will be in denial about their situation, if staring negative equitty in the face.

A big problem though is hope.

Hope will stop the market falling as quickly as it should because people will refuse to believe that their assets were never really worth as much as they believed.

Hope will only delay the inevitable and actually make matters worse.

Praise A Darling for stating that this is the worse crisis for 60 years. This reduces hope.

Criticise AD for stamp duty holiday. this increases hope.

Only when all hope is gone can we get back to affordability.

By my calculations, prices need to fall 30 to 35% then a sensible housing market can start again with price rises matching the governments 2% inflation target.

Mervyn King is right...we must put this over-pricing behind us. Correct property valuations please gents, not based on crazy banking practises.

I assume Nationwide will now only offer 75 percent of the house value as a maximum mortgage!

[ To do otherwise is hypocritical!]

Once again,

Nobody asks these supposedly smart bankers what they are basing their theories on. How come they are all suddenly experts when they couldn't see what was going on a year a go.

I disagree with Robert - Nationwide are rather small fry. They have hardly been doing any mortgage business for months. They also fail to take into account that a lot of people buy cash.

Like everything, doom and gloom becomes a self fulfilling prophecy. Rather than pluck random figures out of the air these people would do best to keep their mouthes shut.

Robert, please can you ask these people some tougher questions rather than dumbing everything down.

Naturally, the doom and gloom is keeping you in a job. What will you do when it is over?

It almost looks like a mortgage guy talking sense, doesn't it. But hang on, this can't be. In fact he seems to state the obvious, only to add half a minute later that he expects the Freddie Mac and Fannie Mae institutions to get back to work after the US government is now officially in charge (they were never free) and create a new personal debt bubble in the near future that UK can then copy once again. Not only should we all try anything in our might to prevent that. It doesn't seem very likely that this will happen at all. And for the British house prices, a 25% total fall seems a little bit too pessimistic. I expect more than that (30-40%) and that is good, not bad.

Who cares what the Nationwide’s view is concerning house prices?

Graham Beale should keep his comments to himself - it’s just another meaningless prediction that makes everyone who owns a property feel down. Just as the markets start to rise the BBC puts yet another doom and gloom story at the top of it’s adgenda. Last week it was house prices have fallen by over 10%. When I checked my area on their website it was 0.6%.

When is everyone (sorry I mean the BBC) going to stop this negative reporting???

First the experts said prices would drop 5%. Then Rachel Flint let slip it could be 10%. Then it was 15%. Now we are told 25%

Anyone with any common sense can see it is going to be worse than 25%. 30% would be the absolute minimum and it could easily be as high as 40%, that's assuming we don't get a complete banking collapse.

Frankly I don't care a hoot what these 'experts' say. They are the idiots who got us into this mess in the first place.

No. 6.

Small mathematical point - a 30% overvaluation is fixed by a 23% reduction.

Either way I'd be a buyer at that level.

Expect the buy-to-let army to be back too.

I don't know what things are like on the other
side of the "pond," but if the UK property market
is following ours (and I don't know why you would
follow us in anything, but...) this interesting article
may provide some illumination.

I've read all the postings so far and the only one who has hit the nail on the head is TimBJones Post 4.

The sooner the market gets to the bottom the sooner it will recover. This is the law of the market and it cannot be bucked nor should it be artificially assisted/reflated.

I broker residential land deals and I can tell everyone that land values have now fallen between 30% and 50% in 12 months. As a a result I am now dealing with more OFFERS to buy then ever before ( I've been doing this for 12 years). So buyers have come flooding back to the market now that prices have corrected themselves so dramatically! In fact land values are now rising somewhat as developers are now competing to buy land and are actually now starting to gazump each other! Such a drastic drop in land values will now allow developers to build and sell at prices 20% below todays prices (in 12 months time) and still make a profit!

Affordability will be restored very quickly which in itself will restore the fortunes of the housing market. Think about it. If in 12 months time house prices are 30% down from their peak and interest rates end up being 30% less that their peak (i.e. 3.5%) the monthly mortgage cost of having the average house over your head will be 30-50% less than it was in 2007. Buyers will pile into the market and thus the bottom will be reached and prices will start recover as demand increase against a backdrop or poor supply ( national housebuilders have stopped building!).

So bring on the crash (which only affects those who NEED to sell and have negative equity) because as I am experiencing in the land market right now once the bottom is reached we'll get a strong recovery.

Beale should have said it will drop 30-40% to frighten the public in a self-fulfilling prophecy and thus get us to the bottom quicker.

Please no Government bailouts here as this will just delay the proper market correction and thus the recovery!

However, socialists believe in state intervention so we'll probably see a botched attempt to artificially reflate the housing market to disguise the real objective of reflating Crash Gordon's political skin.

Believe it or not, House Prices still going up in places and still higher than a year ago almost everywhere.

It was roundly ignored last week in favour of more gloomy surveys but ;

according to the house price index compiled by the Department of Communities and Local Government, using data on all completed sales (and so more comprehensive than the partial surveys by the Halifax and Nationwide), in most areas house prices are still up on a year ago.

Only in Northern Ireland do they show a fall.

Post 29.

Rubbish!

Remembering the early 90s - things were way worse than they are now.

I also believe that promoting doom and gloom should be stopped now, far too much scaremongering in the media which only serve to compound the problems further.

There are trends you can look at. My preference is to look at real house prices (net of inflation) and assume that the bottom of each cycle represents the true value of housing. Following that trend, prices will fall by around 50% from the peak. (And a good thing too! - I'd like my kids to be able to afford somewhere to live)

The regular bubbles in house prices in between are a result of decades of brainwashing (by industry insiders, the media, etc) that house process only ever go up, that you must get on the property ladder before it's too late, and so on . What we've seen over the last decade is really the result of "panic buying" by people desperately trying to climb onto the ladder.

If it wasn't for the dampening effect of the planning system, then the price of a house should not be much more than the cost of (agricultural) land plus the cost of building the house. And in the long term, planning for sufficient hosuing will be granted - it's just a matter of time.

The only question is whether there will be another bubble after this one, or whether people will be so badly burned that prices will stay at a true "value" level for a generation.

Rip you off, cause negative equity, forcing you to sell to the predatory bankers at repossess prices and then introduce a rent-back scheme.

Britain has always been a homeowner-based economy - not like the economies of France and Germany, where the majority of people live in rented accommodation. Homeownership made Britain one of the wealthiest and stable economies in the world.

Scarcity of building land, difficulty in getting planning permission and the time it takes to build substantial property using bricks and mortar and with every increasing costs, it all adds up to a very valuable asset that increases in value. These assets are the foundation of the British economy and credit ratings upon which stability depends. Because of this, the majority of people want to get on the property ladder.

The bankers’ also knew the enormous value of these secure assets, and that they would be the driving force behind a powerful booming economy. These assets were so valuable, that other loan sharks wanted to get in on the act - adverts started to appeared on national television encouraging homeowners’ to free up equity from their home and to - Spend! Spend! Spend! The banks’ were promoting credit cards – shopping on the high street was a wash with cash.

Margaret Thatcher allowed rented houses to be bought by those living in them. Her policy gave to people the opportunity to get on the property ladder, it was the foundation of the booming economy.

The bankers knew they would make a fortune if they could trade them on the US financial markets in the same way as US government-sponsored enterprises, or GSEs, and incidentally (in 1968 the US Government under the Johnston administration used these GSEs to finance the Vietnam War. Governments do not create a war tax, otherwise they would have to account for the expenditure – but if it is financed from other taxes, the accountability and transparency for the costs of war simply does not arise). However, the bankers’ knew mortgages were sacrosanct and couldn't be traded unless they were taken out of their protective regulation. So how did they get their hands on them?

Well, first, you must know what you are doing, and know how to have them deregulated “to get round existing strict regulation and the law”.

Gordon Brown to cover his tail is now saying it all started in USA, blaming Americans’ for causing the credit crunch crisis.

Don’t let Mr Brown spin you the yarn that it all started in America with the subprime market. The bubble ended in America, when it finally burst. The credit crunch that we are now experiencing in Britain started with deregulation of our own banking system. When Mr Brown changed the banking system in 1997, this allowed unscrupulous bankers’ to take mortgage-backed-securities out of the protection and control of British regulation and jurisdiction and to gamble with them through “institutions, which are not banks”, selling them on in the form of Collateral Loan Obligations (CLO’s) and similar products, using them as collateral in unregulated volatile markets and they lost them causing the credit crunch crisis. The Bankers’ made 26% on these transactions and were awarded over £1million bonuses, with no risk to themselves but at the risk of homeowners’ losing their homes and the taxpayer having to pick up the tab for bank loses.

And guess what! – when the banks’ started to fail, government bonds, which are taxpayers money with a triple ‘AAA’ rating, were given in exchange for collateral that were beaten dockets. In other words, homeowners and the taxpayer pick up the tab, inter alia. Cunning and Clever isn’t it? – It didn’t have to happen – it was all avoidable.

The question one should keep in mind is, was it Mr Brown's idea, or the Bankers' idea, or both? Who persuaded who?

Mr Brown is to borrow 40billion pounds ( from the same bankers’ who caused and benefited from the credit crunch ) supposedly to kick-start the housing market by re-packaging it as a mortgage-loan to those facing repossession of their homes – but isn’t this another form of a sale-and-rent-back scheme, or should I say rip-you-off-repossess-and-rent-back scam scheme? Is the strategy behind the credit crunch, to rip you off, cause negative equity, forcing you to sell to the predatory bankers, who ripped you off in the first place, at repossess prices and then introduce a rent-back scheme.

It would seem that the result of the induced credit crunch is to bringing us in line with the rest of Europe where the majority of people live in rented accommodation. Is it Mr Brown’s communist policy to undo Margaret Thatchers policy of home ownership. Is having to pay your mortgage to the Government another one of Mr Brown’s stealth taxes?

Today 7 September 2008, Fannie Mae and Freddie Mac were bailed out by the American Taxpayer to the tune of Three Trillion Dollars.

So what kind of Taxes will the American Government use to replenish Fannie and Freddie’s beaten dockets?

Well, you guys in America are also experiencing the rip-you-off-repossess-and-rent-back scam scheme – and if you go by what is happening in Britain it won’t belong until you guys experience Green Taxes in every conceivable form. But similarly, isn’t the war in Iraq estimated to cost Three Trillion Dollars? The Johnston administration used GSEs, mortgage-backed securities from Fannie and Freddie similar to the method known as - Federal Reserve Banking - to finance the Vietnam War.

We are told that the credit crunch started in America with the failing subprime property market. But some how I keep asking the question – Has history repeated its self? - Did Freddie and Fannie’s problems start because of failing Subprime property or has the US Government been financing the Iraq war in a similar way as the Johnston Administration did back in 1968? Which one of these drained the US economy first – was it the war or the subprime property?

Den.
Belfast.

29, kubikubi.

You make an interesting and important point which I am surprised gets little attention, particularly from the FT who publish their own index based on all property transactions. (From the Land Registry). This is as opposed to the Halifax index which is based on its own mortgage offers (not completed purchases) and probably represents no more than 10% of the market (if that, at the moment).

Given that HBoS doesn't actually want to lend at the moment it is hardly surprising that this shows up in its current valuations for mortgage offer purposes.

Although the Halifax index is a leading indicator (based on offers rather than completed transactions), I suspect that it may overstate the overall falls. Given that HBoS's appetite to lend diminished significantly this time last year it will be interesting to see if year-on-year falls in Halifax mortgage valuations start to moderate somewhat from now on.

We will be able to tell if this is the case or not as the "real" figures based on actual completed transactions feed through into the DCLG and FT indices.

#32, random, it's apparently the same over there
as it is here in the states. Too bad, I guess human
nature is the same everywhere.

statistics are based on Nationwide's actual completed sales are misleading.

This negativity and doom and gloom knock on effect on the economy as a whole.

Graham Beale and Nationwide would do best to keep their mouthes shut.

BBC should ignore gloomy surveys, reports and so called experts should NOT talking us into recession

1. To No.15: If you read RP's article rather than the blog, he makes the following comment on Nationwide's market share "its recent share of new home loans has been a bit less." If you look at the data, Nationwide's market share has dropped from ~13% in 2004 to ~7% in 2008.
This indicates to me that Nationwide chose not to compete with lenders aggressively grabbing market share (NR et al.) and stick with a "right sized" mortgage business. When any big business does this it has usually done some careful analysis and come up with interesting answers on which customers it wants and the associated risk in the future. By its actions Nationwide was implicitly stating that something was wrong with the housing market. It could have raised more money in the same way as NR to stay competitive but it chose not and could only therefore lend to fewer people as prices rockets and its available cash didn't.

2. I assume Graham Beale means 25% in absolute terms which with CPI/RPI running at 4-5% (if you believe those as inflation measures) which could mean that in real terms a 35-40% drop.

3. This is the first time someone with a direct involvement in the housing industry has been realistic and matched the predictions of those not involved in the housing industry (e.g. IMF, Capital Economics...), which I think requires some guts.

I suppose it's too much to ask the BBC to accurately report what Graham Beale ACTUALLY said!

He did say that peak to trough the fall in house prices,

"could be as high as 25%" but that is NOT the same as the headline the BBC gives to the story:

'House prices to fall a quarter'.

Why didn't Robert Peston ask what the lower figure 'could be'?? Robert, 'could be' is not the same as 'will' - like every other expert, however well qualified, Graham Beale is GUESSING, even if it is an intelligent guess.

Once again it seems that the media wish to talk up this crisis and further reduce confidence.

#5 Looking at a graph for historical levels of house price growth over the 80 years since the last 're-start' (The Great Depression), house prices have over 60% to fall from their peak last year to the price that would have been achieved with price rises equal to inflation over the same period.

The graph also shows that after every property boom the market only picks up at the place where it left off, more or less, all those years ago. So a 200% price increase will lead to a drop of...

But that is in a recession, not an extraordinary credit crunch situation that we are living in just now.

Re: 15 Gary Mellon

You raise an interesting point.

With present housing crises only part way through do people such building society managers, solicitors and mortgage brokers, have a duty of care to warn or advise new investors that the property they are about to buy will probably be worth 30% less in two years time.

Couple of Points

1 Supply will be a fraction in 2009, than it has been normally.

2 The letting market and the increasing proportion of distress sales will take out the spare stock in 6- 8 months

3 Land values for Brownfield sites in the north are negative and will stay that way for at last three years - so why sell to a housebuilder?

4 Household budgets are nowhere near as in trouble as they were in the 90's.

All this means that the South and other wealthy areas will recover alot quicker than poorer locations . We are in for a rollercoaster of low demand low supply then rising prices again.

Time for an institutional rental market for homes like Europe perhaps ?

39.

So prices will settle at 2-2.5x average earnings.

Good joke Groucho, but not nearly one of your best.

It appears that there is a popular cult of Brain Dead Gloom Merchants that appear to be unable to think their way out of a tissue paper bag. The latest from the head of the Nationwide is typical i.e. who is going to sell their house at 25% below a sensible value unless they see that 99% of those for sale are equally degraded.

The answer is balatantly obvious i.e. only those unfortunate enough to have lost their job or be in arrears etc. will be driven to sell at any cost (rather loss). The vast majority will not move or reduce their price to that extent and therefore the forecast is a complete fallacy i.e. the minute number of homes available at such reduced prices will be those of the desperate for the gain of the opportunist or greedy speculator.

Human nature will ensure these cases will remain a very small minority so forecasts of egotists and idiots who haven't stopped to consider the realities of the situation just deserve all the grief they attempt to create with their ill-considered divise comments.

After reading #16 about Marx I have to say I have been astounded tonight to see the breaking News that the US Government suddenly announced earlier they are changing the name of the country to the USSA ----inserting Socialist into the old name----

AND, happily, have simultaneously restored complete stability to the world financial markets by revealing details of what they are calling a "Five year plan" to ensure productivity growth in not only tractor production but also the production of credit to households, industry and above all Financial sector businesses..

The statement from the Fed ends: ".....Credit will not only return to pre August 2007 levels but, by the end of the five year period, greatly exceed it."

That's it sorted , then....don't know why it took so long?

The most prosperous areas with the most financially astute buyers led the downturn. It would be grossly unfair to make any suggestion that the August and September, to date, large increase in viewings offers and sales in these areas are more than a temporary blip, and could not possibly have influenced anyone central to buying struggling building societies to substantially downgrade their market predictions of the last couple of years.........

It is facinating to hear all the different views on what, how, did this happen: it is the result of living way beyond our means. The present government showed us how it was done and are only worried how to get themselves out of trouble. G Brown inherited a surplus, an economy that was doing well and plateaued on his arrival on the scene. He has spent all of it and a lot more. Our problem is we are ill equiped to remedy our present prediciment, we are broke and need to economise on every level. That is how we will get through it. It is not a total disaster, it is a fact and the government should be truthful about it and not talk as if the situation had nothing to do with how we have lived over the past 10yrs. This is not a problem that has been visited upon us form another place, we wanted a global market, well we have got it.

Dear Mr Peston,

again the BBC seem intent on not report the facts, and scareing an already jittery public's confidence and further slow the economy.

"Up to 25%" is what Mr Beale said this is not a factual "quarter", this is an estimation based on no facts. Why not quote the FT Housing index numbers which also include cash purchasers rather than a Nationwide executive that only quotes Mortgaged buyers, which distorts the true picture.

But perhaps that would not Make such a good headline, "Prices fall to Sept 2006 values"
A maximum fall of 10% dependent on area by the FT data, but still up a from 1995 prices.

Perhaps we should call you "Mr Robert Pessimist" The Head Line Grabber!!!

Robert I really think the standard of BBC reporting has gone down.

RP: So when do you think the world will end?

GB: Well it could end tomorrow.

BBC HEADLINE: GB forecasts World will end.

Maybe another hurricane is on the way? But manufactured by whom?

#16, #44, who was it who said "Socialism is
only fashionable if practiced for the benefit
of the wealthy?"

It had to be Keynes or Galbraith, but I
can't find the quote.

Does Nationwide's chief executive Graham Beale realize that Gloomy comments like this will further reduce public confidence !

bank chiefs should discuss ways to boost consumer confidence in the housing market not promote destruction by saying to people "Don't buy, Don't spend, Don't invest" !

BBC and media also to blame.....

Oh for goodness sake who in their right mind is going to believe anything the man from Nationwide says.
If he predicted Two years ago that this size of a bust was going to happen I would be a bit more impressed.
The future is very hard to predict why insist on making it sound as bad as possible.
Most of us are in the same house that we were in before this all started.
I'm sure the Nationwide did business with people that ended up not being able to afford the overpriced flat/house.
Or were they pointing out the fact that prices woul drop in the near future and unemployment would rise?

Graham Beale is too optometristic about the propity market and is intent on making a spectacle of himself

Neverthe less in the land of the blind the one eyed man is King for a a day and should throw off his monacles saying "your house is at risk even if you keep up your RIPailments "

cellars should avoid digging in, hoping for houses to go up arround them ,remembering what goes through the roof ,will come down particularly gravityrain economics

We have entered a new world today, almost unimaginable, in which the US government nationalized two major banks, and placed itself in the position of guarantor of most of the residential mortgages in the United States.

If it works, the mess gets cleaned up, all the high-risk exposure gets unwound, and someone can figure out just how to slice these firms into saleable pieces, then the Treasury and taxpayers could make out like gangbusters.

But if it doesn't work...hoo boy!...as they say in my part of the world.

In any case, no matter who is elected the next President or Prime Minister, we are in for rough sledding for a while.

House values will fall, because we have been operating for decades in a highly inflated marketplace, driven by the practices fostered by Fannie and Freddy. It will take time for them to fall to a realistic level--to the point where we buy houses to live in, raise our children in, instead of viewing them as 'investment vehicles', or personal credit cards, or trophies to impress our friends from school days. I've lost count of the number of ridiculous, pretentious houses I've seen go up in the past decade. I'm beginning to see them head to the auction block!

Hunker down, everyone, and remain calm. There will be no quick fix.

There are only two kinds of comment listed so far. Those who love the doom and gloom and make a range of negative assertions with little or nothing additional to support them and those that ask fo more analysis and penetrating questions. Surely the BBC should be asking the difficult questions and doing some rsearch on which to base them.

Is demand projected to continue to outstrip supply?

What proportion of people's income do they spend on housing. What is the long term norm and how high is it now?

Aassuming it is high how much do prices need to fall and wages to rise to correct this?

How long will this take at the current rate of change?

I am sure there are more questions it would be inteesting to hear addressed.

Could we see a crusade by the BBC against assertion and in favour of reasoned and justified analysis?

Of course one way to inject demand back into the economy is to pay the Public Sector a fair wage.

Average wages are up 4 percent.

Inflation at eight percent (or more)

Senior Managers getting 10 percent or more including bonuses.

Bearing in mind how many Billions have been spent on Banks and Wars, a 100 million to give the Public Sector a fair pay rise say equal to that which MPs voted for themselves would be a drop in the ocean.

Come on don't be a pinch penny minister !

It's interesting to note the Private Rented Sector is booming.

Growing rents and growing demand !

The Journalists for Months have been claiming the Landlords would all go bust.

Well, they are still here and coining it.

If anyone benefits from low house prices it will be the private landlords (who pay cash to buy their Houses).

Hopefully, the Mortgage rate will be reduced to give the economy a chance to get going again.

Or are the Conspirators waiting until after they have lost (and won) the next Election?

The Nationwide has always been a cautious forecaster of house prices. Being a Building Society it does not have shareholders interests to consider when attempting to hype up the market for better returns, a claim that could easily be levelled at some of its' market owned competitors.

However, to now be calling the bottom some 25% below the top from peak to trough is staggering.

What I find truly amazing is that when the credit crisis hit late last year, many people recognised that a decline in the availability of financing for the continued turnover of housing, would force the average wage to value ratio back towards the 3-4 times average earnings for the average house.
Consequentially many were quoting 30-35% declines in values to re-align to this norm.
At that time they were de-cryed by many as panic mongers and alarmists.
All those economists that quoted a minor correction, that made predictions of continued but modest house price increases year on year have been shown to be worthless and as such should now be shown the employment door. It is as fundamental an inability to spot the blooming well obvious, just as investing into a bundled mass of home loans where all over-sight had been removed from the money supply chain. It was always going to end with a loss to the owners of the supply chain, and was always going to impact massively on a fluid market, which has now set solid.

The housing market is a cyclical thing, as many of us old enough will remember.
I think that prices will drop 25% or more from and, put bluntly, quite rightly so. This market is way overpriced and the youngsters cannot get a sensible foot into the market.
Affordable housing, less stamp duty, cheap loans - all government gimmicks that will not, and more to the point, should not save the market.
Let nature take its course and allow another generation to join the housing market at a sensible price.
Landlord's super tax should also help - tax rentals and gains at the immediate higher rate, as the greddy property portfolio owners are making life very difficult for the good hard working youngsters.
Life will go on and the market will recover - these quick fix efforts by Brown and his ill-informed associates will, if anything, weaken the market further. Let it take its course!
Grey hairs tells me that it will right itself and by the way, this will happen again in about 20 years!

I do fear Robert that far from being a mere commentator, you are becoming part of the problem.

The anger with forecasts such as the one from your guest is that they become self fullfilling.
Every week or so recently people who should know better have been spreading gloom and doom about future house prices. Is it not surprising that buyers are holding back in the expectation (fed by the above) that prices will fall.

That they do hold back makes it a racing certainty that prices do indeed fall! Why oh why do not these pundits simply shut up and perhaps in time people who wish to buy a house will actually go out and do so; thus helping the market to pick itself up.

For those borrowers who now realise that they both overpaid and over-borrowed to buy their house (or houses), I suppose that it's a pity that Graham Beale and the rest of the sinecure-holders didn't show this remarkable insight years ago. As he got it so wrong then, why is he any more believable now? He (and his ilk) authorised huge over-lending over many years, so no doubt he will now accept the blame and take the honourable course. (Not)

I firmly believe that there is much, much pain still to come and current predictions by the army of experts now jamming our screens will be seen to be pure guess work, and woefully understated.

One might ask why negative equity is a problem if you don't have to move house? Unless of course the house was bought for investment and not simply as a humble place to live. In which case, tough luck, your investment just went down, these things happen, shut up and accept it. If you do have to move house, why cannot the lender just transfer the debt, if there is negative equity on the current property, just shove it onto the new property. They used to happily lend 110 percent. And if you were happy to pay X pounds a month mortgage for your home in good times, what's so wrong about paying X pounds a month now.

Not that many years ago, Banks, Building Societies and consumer-credit/finance companies devolved responsibility both for lending and attracting retail deposits to mangagers at branch level, who also managed the balance of the two at that local level. If they got it wrong they got the proverbial rocket from on high, but they usually got it right because they knew their market and their customers. Also, there were geovernment-imposed mimum lending criteria for all types of lending: deposit levels, repayment periods, income multiples and so on. These worked pretty well, and to an extent meant that people did not overstretch themselves financially. In those days, people wern't permitted to borrow money over years and years just to pay for meals, shopping, petrol etc, as is now the case with credit card debt and second/third/fourth mortgage debt. Ah, but then things changed, and the marketing and cuddly-toy merchants took over from people at the sharp-end. Now look where we are.

People are banging on about help from the government being needed to rescue all these unfortunates who realise that they have borrowed too much: please mister, it's not my fault, they shouldn't have lent me the money, it's all their fault.

Bring on the pain now, the more the better, and let's see some responsibilty being shown on both sides, buy houses to live in not as get-rich-quick schemes, and restrict lending to sensible and affordable levels.

Aaahhh, in my day young feller-me-lad, the sun always shone, a pound was worth a pound, M and S pants fitted, gabble gabble ga ga...

I agree with #47.
What Beale actually said was that from peak to trough, house price falls "could be as much as 25%", i.e. "could" not "will" and "as much as ", i.e. at a maximum for certain parts of the country and not overall.
I thought journalists existed to interpret and make sense of such comments rather than take them at face value?
The US and UK house markets are totally different because of the nature of the mortgage market in the US and the huge supply of land. Don't link the two, although the credit tightening is clearly global.

It really concerns me when I hear people like Graham Beale crystal ball gaze and come up with some random figure of 25% reduction in house prices. Why not 10% or 50%? If the financial markets are now so clever at predicting the market to 2010 why were they not able to predict the slow down in 2007 and stop people taking on mortgages that are going to cause untold misery for some. His comments are extremely unhelpful and will cause misery for many people, some will loose their jobs, it will cause breakdowns in families, some people will become ill through worry and there will be some who commit suicide. I just don't think people realise how powerful TV is and make these comments without any thought to the wider consequences. You are speaking directly to people in the comfort of their own homes and they believe everyword. Why can we not have someone with a counter arguement, so we get balanced reporting. Its not so long ago that John Prescott was jumping up and down demanding more houses, as we had an under supply, now we have 15 houses to each potential buyer. Market forces really does not make any sense at all, how can we lurch from feast or famine. The financial markets have behaved appallingly and really need taking to task. Water Companies get fined huge penalities for underperforming, so why do the banks etc come out of this with their reputations in tact. They were the ones who pestered people to borrow more and more credit without any thought to the future. I got fed up with the almost daily phone calls, junk mail, being stopped in the street with offers of credit cards, mortgages etc.
So please Mr, Beales and anyone else who is thinking of crystal ball gazing think about what impact your words could have on hardworking families, watching you in their home.
I wold love to see house prices drop, so my children could buy houses but not at the expense of someone else already committed to a mortgage

> Graham Beale crystal ball gaze and come
> up with some random figure of 25%
> reduction in house prices. Why not 10%
> or 50%?

I know. From 2005 onwards, when it was plain that a crash must come, these chaps just sang "Rocking, Rolling, Riding" by The Seekers.

Now we're in the midst of it, they're singing "Let Me Die In My Footsteps" by Bob Dylan.

Of course, all sensible people know that the answer is blowing in the wind!

Sorry to spoil the fun of all those clearly enjoying the "house price crash".

But... the reason the government wants to build 3.5 million new homes is that there aren't enough to meet existing or projected demand.

So after a short correction, the underlyng issue - not enough homes will reassert itself. And then prices will start to rise.

There is nothing like the over-supply issue that exists in parts of the US, land here is at a premium. I'm afraid those of you prediciting the end of the housing market's role in the UK economy will be dissappointed.

In the Southampton suburbs I have allready seen prices dropped by 20% and still no takers for the properties.
I believe we are looking at real drops of 40-50% to come back into line.

Here's a guy who called it on the nose.

We call him Dr. Doom over here. We would call
him Dr. Evil except that he's only calling for an
18 month-long recession.

#64, Barry, you're probably quite right. You don't
have the supply-demand problems there in housing
that we do. But, the UK economy is far less diversified
than the US, relying on global financial services for
a larger part of its GDP.

You may not get hit by the eye of the storm, but
I would take cover nonetheless.

When a market dries up to the extent of UK housing, talk of price rises or falls becomes largely meaningless. So too is the notion that house values are descending steadily along a curve that will inevitably flatten out at some point in the future. House values probably declined already to their full extent but no one will know how much that is until the market re-opens for business, if it ever does.

#9 "What are the Government/FSA doing, if anything, to make sure that the bankers who created this enormous mess are being trained in managing risk."

One might ask what the big institutional shareholders were doing. Through the charges on my personal pension fund I am paying some very expensive person to maximise that value of my fund when I retire in 10+ years. If he hasn't got it into his head that this is what I care about, not dizzy numbers at the end of the quarter that are a house of cards would he please resign now.

Complaining about these forecasts us absurd.

People have been warning that housing was over-priced by up to a third for several years now due to the average house price being so much higher than 3-times the average salary. This meant that investment prospectors and the easy availability of credit were underpinning house prices.

In other words, there have been such predictions (although admittedly not from the Nationwide) for a very long time. They do not really affect the housing market that much; except that, as with any market, rumour and speculation are important in determining price.

It seems to me that the 25% headline figure isn't in itself going to affect people's buying habits. It's more that house prices are dropping - and nobody wants to buy something which is immediately going to reduce in value (unless they can afford that luxury).

At the end of the day, as we have a capitalist economy and housing is bought and sold as a commodity, some people buying or selling houses are going to get stung at some point. Most people who complain about negative equity are quite happy to spend the positive equity accrued on their house on luxuries in the good times. But both positive and negative equity are a function of our capitalist economy. To complain about it is to suggest that we don't want capitalism any more.

The interesting thing is that mortgage rates aren't that high, so the price of a mortgage is not at an historically high level - it just seems high compared to the last 5 years or so.

Maybe people just need to WAKE UP to capitalism so that they are more likely to hedge against the bad times when times are good.

I don't know what all the fuss is about. I watched a makeover programme on daytime TV last week, and as a result of repainting one wall in a contrasting colour and putting a nice throw over my sofa I confidently expect to have doubled my own house price at a stroke....

If the government intervenes then, as many others have said, it is meddling in the free market. It has no place to do such a thing, not with MY taxes. It mis-handles them quite enough as it is, without using it to try and create a safety net for investors losing out. I lived through 1989 - 15.4% interest rates - I spent 2 years stuck in negative equity, barely left my flat as I couldn't afford to go out. When I sold I was thankful to have only lost £3,500. There was no bale-out then, nor did I think there should be, nor did I ask or expect for one. I invested and I lost out that time. If I'm not mistaken that is capitalism.

This government can't mix capitalism with socialism. It tried that before, and it took 17 years of the Conservatives to sort out the mess. Methinks we have history repeating itself .. again.

Why should significant credence be given to the Nationwide's predictions when only last Autumn its crystal ball suggested that house prices in London would grow by 1% and the UK as a whole would be flat for 2008?

However, its own index suggests prices have come off 11.5% since.

Factoring in a similar rate of statistical error forward until 2010 could see prices fall in total by nearly 40%, or indeed, return to pre-crunch levels.

Where's Evan or Stephanie when you need them?

Everyone seems to be treating this 25% drop as a given. I would suggest they look the word could up in the dictionary.

I'm also disappointed that in the article RP states that prices could fall as much as 25% yet the post has this as a certainty.

Surely when a business person, or heaven forfend an economist, says something like this then the 25% figure is at the upper end of their expectations.

The laws of probability and statistics should tell us, assuming that Graham Beale knows his figures and as a Chief Exec of a financial organisation he should, that the likely price drop is probably to be within a band of 10% and 20% with 25% hopefully being at or around the 95% statistically significant level.

Hence the chances of the prices falling by 25% or more should be 5% or 1 in 20.

Having said that bankers and financial commentators haven't been particularly sharp in the credit crunch when it comes to figures and stats.

#42 I didn't want to say, but average earnings in REAL terms isn't going to go up. We'll be lucky if it stays the same, which at present, it isn't.

IF the market decreased as it historically has done then the house price average would be about £70 000 which mean that the average wage in Britain (£25 000) would be multiplied by about slightly less than 3 to get a mortgage (including other cost which people usually add onto their mortgages).

If we remove London from the average then wages p.a. are £21 000 which is required to be multiplied by about 3 to reach £61 000. This being the average house price in the UK excluding London and the South East.

Now the days of lending a multiple of more than 3, in a Credit Crunch, to insecure earners are going and will be gone as more people struggle. You've got to remember just how much house prices were ballooned by 1) incredibly loose lending 2) foreign investors buying in to make 10% returns pa! Crazy! Also banks can lend any multiple they think they'll make a return on. There's no reason why they won't lend just 1.5 of a salary. Facts change.

History teaches (if you're willing to learn) a) this is not a run-of-the-mill recession b) it is going to be bad.

#64 This myth of Britain constantly needing housing is still being perpetrated and fails to recognise - like all myths - the elasticity of reality. Over a million immigrants from Eastern Europe alone need a place to stay: this has supported buy to let to a large extent. The easy access of mortgages for people who even self-declared their income meant that even insecure workers and young people could buy flats leading to a house price boom and a larger market as 15 years ago people who wouldn't have been considered for a mortgage were given one. Even now there is an over-supply of housing (200 000 flats and houses are empty all over Britain, maybe not the best but still there).

Now you tell me, if we go into a recession and consumer spending falls and people are made unemployed, do you think that those unemployed immigrants with families in homes a plane journey away will stay here? When there is less demand for rent will buy-to-let landlords hold onto empty flats? Do you think insecure workers will still pay their mortgage? The facts have and will change and general assumptions will leave people stranded.

Graham Beale did the decent thing by warn ing of the drop in house prices over the next two years.
This is in contrast to the disgraceful attempt by this government in trying to encourage young first time buyers into a falling housing market.
I agree there will always be a higher demand for houses than availability so in the long term they will always be a good investment
What will have to change is the way property is funded. No longer the crazy lending practices we have seen over the past few years which have seen the banks nearly bankrupted.
Back to the sensible lending still practiced in the main by the traditional building societies on properties with sensible valuations.
Everyone has to accept that their property will be worth what someone is prepared to lend against it and for most of us it will be a lot less than we imagine in the coming years.

The Nationwide boss is probably right if you allow for the froth on the market in July/August last year, the issue of reviving the market is crushingly simple...interest rates....when consumers see price falls and markedly lower interest rates then they will step back into the market. In simple terms property has to be perceived as cheap and easy to buy, that is not the case yet, but I think the bottom of the correction is only a few months away.

How strange that on the same day of this doom and gloom from Mr Beale we hear that the Nationwide "rescues two smaller lenders" . This same person was quoted by the BBC as saying "We regard it as both responsible and commercially beneficial to undertake these mergers".
A cynical person may view this as an opportunity to cash in, and increase market share. But as we know it was as stated a responsible act.
You have to question the motives of people in banking and finance who feel they have to talk down the situation.
Make up your own mind and don't buy into everything you hear.

74.
I don't think history will tell us anything about how bad this recession could be, but as a 1988 first time buyer I am not a complete novice in these things. We are all guessing at what conditions might be like in 12-18 months' time. The fact is it could go either way, particularly if the FMac/FMae bailout has the desired effect. I don't know, you don't know and Graham Beale doesn't know. Robert Peston certainly doesn't know.

Suffice to say, though, if house prices do go down 60% I will eat Kirsty's hat for her, before piling in big time.

Furthermore, although it is certainly true to say that you can self evidently squeeze our population plus immigrants into our current housing stock, there is indisputably a shortage in many areas of good quality family homes. The sort that those currently in shoeboxes aspire to. The credit crunch and the paralysis in housebuilding (which was bad even before the crunch because of plannning) will only make this shortage worse. Expect the bounce to be big, when it happens.

History has certainly taught me that will happen.

How can those negative equity numbers possibly be right?

The level of slump being discussed takes us down to Feb 2004 prices according to the Halifax. Everyone before that date would be safe from negative equity. Since then there have been say 3.5m house sales (~70,000/month), of which fewer than a third involved FTBs, say 1m. The rest will have included a fair amount of equity, which would cushion against negative equity. Not to mention the fact that all of these people have been making mortgage payments ever since, again increasing equity.

To be honest, 500,000 in negative equity is a worst-case scenario, and this would have major repercussions in the UK economy.

2.5m? How can you expect to be taken seriously when bandying about such silly numbers?

Even with the 25% fall property is overpriced. At the peak prices were 34% up over the last 5 years. Let's be realistic there are thousands of families out there who can't afford to get onto the ladder until prices drop to a sensible figure. Houses should be predominantly homes not investments.

My shop was really busy (15 viewings per day or more, ie normal historical trade level) while the Olympics were on TV. Clearly the BBC economics hacks and Robert Pessimist in particular were temporarily knocked off the agenda. Since their depressing return to our screens to pedal the familiar doom and gloom, the shop has emptied!

Perhaps the Chinese could be asked to re-run the Olympics until Chirstmas and thereby cure the world economy - then they could sell us more stuff. Doh!

Also, when are the Govt. going to stop peddling this socialist nonsense about "Affordable Housing" - there is no such thing, and never will be.

Two points.... one is that Graham Beale and Nationwide are provding a haven for the two Building socities therby preventing the chance of any Northern Rock style fiasco....

Doing deals in private and then announcing the fait accompli.....was what many people (though not me) said was the way NR should have been handled

Which leads on to the people who keep banging on that somehow Robert Peston is to blame and we are all talking up a recession that wouldn't otherwise happen....

So Merril Lynch, Citibank, UBS and God knows how many more have sacked their bosses because of what people were saying ?, Northern Rock, Bear Sterns and possibly Lehman Brothers have toppled because of reporters chit chat??

Trillions of dollars of mortgaes have been nationalised by the US Government because of carefully worded articles???

Talk about confusing cause and effect.... I blame the weather forecasters for all this rain and a riubbish summer...every night there they are rabbitting on about rain and next day...sure enough....its pouring down..... we talked ourselves into a miserable summer and now we are talking ourselves into a miserable autumn as well...

Mr Preston always picks on the gloomiest prediction in the housing market and fails to differentiate between the different regions, and the type of property . Whilst clearly flats have fallen the most because of funding issues, the fundamentals of a housing shortage have not changed. The increasing population and moreover ageing population not releasing housing back into stock together with the large rate doubling the amount of homes needed for families will without doubt mean that the economics of supply and demand will see prices returning to normaility .
I am a developer and at the sharp end of trying to get schemes in Surrey through the planning process. New applications for flats have all but disappeared and other housing at a diminished rate. The number of new housing starts will fall by over 50% and the huge number of redundacies and lack of detailed planning permission will mean that there will a significant shortage of new homes to satify demand .
We are in an entirely different supply/demand equation compared to the US and Europe who all have built more than they need . This is so obviously not the case in England, yet few political commentators make any comment other than negative sentiment .

78

I hope I'm not coming across as over-confident in my predictions. I definitely don't know. There are so many variables going on that I find it impossible to judge accurately.

I thought a house price crash would have occured sooner. I thought that we'd be facing a much more serious drop by now in both house prices, consumer spending and unemployment, and I thought that the monolines would have sunk too taking banks with them.

And the only pleasure I'll take in any of this is that it's turned me into a saver. I wouldn't ask you to eat Kirsty's hat if it turns out I'm right - unless you have a taste for them - but, if you're prepared to put any faith in history, give it three more years before piling in.

Houseflogger, that's the best post of the thread! I love the thought that potential house-buyers hang on every one of Robert's utterances, and sneak out to view houses while he's away! But of course, on his return they wouldn't dare.

The alternative view is that some people hate sport to such a degree that they will even go to an estate agent just to fill in time...

So the Nationwide is starting to admit to reality. House prices will continue to fall for more than a year and the fall may reach 25% from their peak.

I admire their optimism. According to their own figures (the ones adjusted for inflation) the market peak was about 33% above the long term trend. A fall of 25% would only return prices to that trend.

A less optimistic interpretation says that the last peak in 1989 was 35% above the trend. The following trough was not reached until 1996, and represented a fall of over 37%. Will history repeat itself? What about the trend itself? Can a real growth rate of 2.8%pa be sustained against a background of rising inflation?

How can we stand idly by while the poor housing bubble deflates are we humourphobic or what

We should scour the parks, the highways and byways searching for those layabouts living at non taxpayer expence out of public dustbins and compell them, by threatening to wash behind their ears ,to undertake 150% JIHADI Rolled interest payment mortges on park benches

Jobless
Inkomeless
Homeless
Accountless
Depositless
Illegal

They must put their shoulder to the wheel fare state and participate in the creation of national debt on which the farewell state depends and keep the pyramid selling scheme on the roller coasters by blowing up the housing bubble to infinity and beyond

Meanwhile the bank CEO's suffering the long night of the soul on some tropical low lieing land in the paciffic can figure out how to give 200% RIP mortgages to the occupants of graveyards pretending to be dead, just to avoid a mortgage and council tax before the JIHADI'mortgage failure brings down the perfect system

Rumour that Osama bin Laden is running the western banking system from a mortgage brokers in Southhall are a complete lie .....its Finsbury Park

Hi Robert, Here's hoping you have the time to skim comments.

When I hear Graham Beale suggest a 25% drop over a period of time I want to know whether that's in real or nominal terms. It can make quite a difference given inflation and the length of the period being considered.

Could you try and get that stated more often in your articles, and perhaps BBC News in general, or if there are conventions about which is used when, get them stated somewhere. The man in the street thinks nominal house prices but finance often think real. Thanks.