House prices drop most on record, down 3.6% in a month

Is this really News ????

Up and Down up and down my feeling are the prices have a long way to go down before they recover but ive been saying this for ages

The impact of rent reductions when housing benefit is significantly cut next year will result in many landlords finding that is no longer viable to let property. Consequently many houses and flats will be placed on the market to sell and asset prices will fall.

Yes things look good. Compared to Ireland, the USA and Spain which experienced similar booms in house prices up to 2007 to the UK (but lower)but then followed by a sharp decline, house prices in the UK are far too high. Just wait for the impact of public spending cuts on jobs, HB changes on landlord sales and 'the big whammy', a step change in the base rate.

Suddenly 2% interest in the bank looks quite attractive! Think I'll leave property 'investment' to the mugs...

Beautiful.

We need lower house prices in the UK, as when interest rates return to the normal c.4-6% range, millions of households will seriously suffer as people have become accustomed to artificially low mortgage payments in the past 2 years.

I worry about all the people buying property now, blissfully unaware of what their repayments will rise to when interest rates do normalise. Lambs to the slaughter.

Also, we have a national obsession with house prices, which is most unhealthy. Just look at what a large proportion of our incomes we use to service insanely high mortgage loans, and how that actually lowers our standard of living, whilst creating the illusion of wealth from rising asset prices.

On the upside, the prolonged housing boom since the mid-late 1990s has led to the renovation of virtually the entire UK housing stock by private owners and landlords.

Let's just hope the inevitable & desirable downward correction in UK house prices happens on an orderly basis over a number of years, rather than a crash. Although previous crashes have been due to excessively high interest rates required to defend the pound, which shouldn't happen now since the pound freely floats. Hopefully.

Keith Simmonds---what lanlord in their right mind is going to let to people on housing benefit?

If a tenant loses their job you just terminate the tenancy at the next renewal--renting is a business not a charity

@John Lacy

I think you'll find that many BTL investors are RELYING on housing benefit renters to fill their properties. I know people whose entire business model depends on it. Although I use the term "business model" VERY generously... these landlords find it difficult to sleep at night and don't even have proper contracts. These guys have around 20 properties in the south west. All very dodgy, fake references, liar loans, highly leveraged and so on, and all big contributory factors to the house price bubble. They asked if I'd like to join in (this was early 2007) and I did a bit of research and figured best to avoid with a barge pole as I can understand why BTL investors are unpopular with the youngsters. Anyway, today was a nice chunk of vindication for my views :-)

Anonymous 1: I'm from the southwest too and can certainly back that up. I've seen houses advertised for sale down here as going concerns because they had asylum seekers in them and therefor had a guaranteed income from the government for th forseeable future.

At least unemployed people can't lose their jobs I guess.

Housing benefit would appear to be a fairly safe bet ...but only if the rent is paid directly to the landlord as opposed to the tenant! Of course the big problems will start as soon as the 'cap' comes in, especially in the more expensive areas. Only one way for house pices to go from my perspective and that is down!

Its difficult to see how a housing crash actually benefits anyone - except the cash rich.

Home owners will have their deposit equity reduced. Banks will lose as the asset they have lent against no longer covers the loan - and will no longer lend as a result.

Anyone who does not own a home will be permently locked out of the property market - totally reliant on the rented sector.

The cash rich will then continue to aquire property at the bottom of the property cycle.

The same old story - the rich get richer and the rest of us have to get by somehow.

Kathleen Wood---Just a word of caution on your comment. If the housing benefit claim is overturned at any point in the future the person responsible for repayment is the person who received the rent. If that person is the landlord OR the landlords agent they will have to repay the money NOT the person who made the incorrect claim. For all the other risks involved for God's sake don't take the money direct!!!!!

The real fun starts when retail customers on high income multiple mortgages facing repossession counter claim against the bank for mis-selling the mortgage.

Its difficult to see how a housing crash actually benefits anyone - except the cash rich, says phil101.

How about most first time buyers who either cannot raise the deposit and/or can't get a large enough mortgage?

A fall in house prices has to be a good thing in the long term, but maybe the fall should be "managed" over a period of a few years. Those who bought sensibly or who did not rush in to BTL, will gradually be relieved of having to support those who stupidly overstretched themselves.

The true facts of the great housing swindle are only just emerging.

The ramifications are extremely disturbing shall I say (not wishing to be alarmist)

The most blatant cases of mis-sold mortgages are just coming to the surface.

What I mean is those who were able to obtain interest only loans are now finding themselves in a predicament because the mortgage terms were only fixed for five or seven years.

You will appreciate these people never had a viable equity stake in their properties from the outset and yet they are responsible for paying back the capital at mortgage closure. The problem is that when they come to renew their mortgage the terms they are likely to be offered will be way beyond their means because the new mortgagor has to take into account that the underlying asset is now worth less than it was when the first mortgage was negotiated and none of the loan capital has been repaid.

Before the banks were deregulated this type of loan would have been illegal because the capital would have had to have been covered by insurance. (An endowment mortgage)

I am beginning to see the outcomes of occupiers finding themselves in an impossible situation. The only solution open to them is to surrender possession and walk away.

There have been three instances in my locality. In the first case the house was vacated and the property sold privately immediately for far less than asking prices nearby. The occupiers of the second property were given a council house to move into and remains empty but on the market at a reduced price. The third property is being offered for sale but remains occupied.

I have noted that their have been no evictions and no properties have as yet been sent to auction. The powers to be wish to avoid panic.

Well "anonymous 2" where do I start?

It was never a "legal" requirement to have an endowment policy to cover an interest only mortgage. The lenders stopped taking a legal charge (assignment) on the policies and this made it much more difficult to police.

The interest rates are much lower now than 5 or 7 years ago so reverting to the lenders standard variable rate normally leads to a fall in mortgage payments and no extra administration fees.

If these people have purchased houses as homes not investments unless unemployment or long-term illness have intervened they should still be in a situation to continue to live in their current homes. If they've bought the homes as investments there is a fundamentally different mindset---"if its not making m e money I'm going to walk away from my responsibilities" seems to be a fair summation.

In 38 years working in the housing market I've seen less than 20 genuine no other alternative repossessions.

up down, up down, up down couldn't agree more

go to sleep for 4 years and prices will be back up there

thanks to a good bit of inflation too

I see we are knocking landlords once again

I can tell you as fact from the coal face prices are down 35% of the to of the market let me show you in clear facts a deal done today

Property price £87500 in 2007

Property Price £ 51000 today

25% Deposit 12750

BTL Mortgage £38250

Monthly Costs Intrest 5.79% fixed 5 years £184.55

Building Insurance Per Month £10.00

Gas Service Boiler Per Month £5.00

Total Cost £ 204.55

Rent £450.00 NOT LHA

Profit Per Month £ 245.45

Profit Per Year £2945.40

I know there are voids and repairs and non payers but the bigger the Landlord the better you are protected and its all tax deductable

Intrest rates will rise so commonsence says dont put all yoiur eggs in one basket fix 5 years at least

The Figs above are fact not fiction Proffesional Landlords know this and most Citywire Readers just have to open the eyes to see sence

I have a very large Property Bussiness and at present im Buying a property a month basied on the above figs

Prices are dropping more and more and I for one love it and I hasve very little LHA

Good properties attract good Tenants so why bother with Housing Benifit thats a total red herring intodays market

just look for the silverlinning there is always one if you look hard enough

Can anyone confirm this: you can get many benifits if you own your own house but not if you have £15000 or more in savings. If so I would say that is an incentive to buy property rather than save.

As a landlord on the South Coast I would welcome house prices falling - as I would be able to buy more cheaply and get even better yields, cashflow, profits. Yet many amateur landlords are selling up in a hurry which is causing an acute shortage of rented accommodation. I do not touch LHA with a barge-pole due to the many risks of this tenant market - but in the South East there is massive demand for property rental from good private sector tenants so am happy to steer clear of LHA. I think LHA will get pushed out of the private rented sector in the South East altogether except in the very cheapest areas. I see also today that house prices may be falling - but suspect that this is more the case outside the South East - ie in those Socialist parts of the Midlands and North where the Govt has run out of other people's money....shame...NOT

Housing prices have a long way to fall. Since we are following Japans economic policies which have left them in a slump for 20 years. This has resulted in some properties losing a staggering 96% of their peak value. Hard to believe and what is more of a concern is that we don't have a car industry anymore (thanks again to our government). We also have little in the way of electronic goods manufacture (by comparison). So if they have been in such a mess for so long, it doesn't paint a pretty picture for the UK does it?

majic

Its difficult to see how a housing crash actually benefits anyone - except the cash rich, says phil101.

How about most first time buyers who either cannot raise the deposit and/or can't get a large enough mortgage?

This is the whole point - a fall in prices wont make it easier for first time buyers as credit will dry up. Its not price which determines affordabilty - its access to credit.

We are allready seeing this as deposits increase.

@phil101 - "We are allready seeing this as deposits increase."

Deposit requirements have been 20%-ish for decent interest rates since 2007-2008 as banks have been accounting for this risk, i.e. they KNOW that crash pt 2 was gonna happen one day.

Can anyone remember what happened during the last crash (1989)? Did credit dry up?

@LANDLORD X - "I would be able to buy more cheaply and get even better yields, cashflow, profits".

Wouldn't rents actually reduce as priced out folk gradually buy and move into more reasonably-priced homes, thus reducing rental demand?

@Dislexic Landlord

"I see we are knocking landlords once again"

Occupational hazard mate.

There will always a part of the population who will despise landlords almost, but not quite, as much as a banker... and just about the same as an estate agent.

Amusingly enough, it is also bankers and estate agents who are most likely to be making a mint through multiple property ownership.

For the kids, like my own, who are just trying to make their way in life, I can see why they are so angry at being priced out.

My kids tell me they only hope the house price correction is sufficiently thorough to ensure those who have gambled on property and inflated the bubble in the first place - bankers and landlords alike - get taught a lesson that will be remembered for generations.

The lesson? Don't steal your own kids' future away from them, only to indebt them to a slavery they had not a single aspect of choice in.

It's all a question of sustainability Vs greed. And there is nothing sustainable about the current bubble, hence the pleasure at seeing this massive drop today. :)

@Dislexic Landlord

"I see we are knocking landlords once again"

...just to add to my above comments, landlords remain free to change jobs/profession if they don't like being knocked... just as are bankers, estate agents, etc... :)

Anonymous 1...just to add to my above comments, landlords remain free to change jobs/profession if they don't like being knocked... just as are bankers, estate agents, etc... :)

Or better still.... retire on the profits and get away from all the misery of the UK Financial (and weather) climate

Chris B (Slough UK) So if they have been in such a mess for so long, it doesn't paint a pretty picture for the UK does it?

Come to think of it Chris, I cannot think of Slough ever being a pretty picture when I served my sentence there as a first-time buyer.

Commiserations old chap, lol

John Lacy Oct 07, 2010 at 12:10

.Kathleen Wood---Just a word of caution on your comment. If the housing benefit claim is overturned at any point in the future the person responsible for repayment is the person who received the rent. If that person is the landlord OR the landlords agent they will have to repay the money NOT the person who made the incorrect claim. For all the other risks involved for God's sake don't take the money direct!!!!!

That's the rules John but when I was receiving Housing benefit direct as a Landlord, one tenant omitted to tell HB and myself that she had found a job paying cash in hand. Result - Council sent me one letter teling me I was responsible for repaying the 4 months HB and I wrote back and offered to attend court either to defend myself or give evidence against the tenant. My defence being that I had a full-time job myself and did not have time to check out what any particular tenant does with their life. Result - Council wrote back saying No Further Action and they will arrange a deduction from her future benefits (as she gave up her job)

@ Anonymous 3 (or is that Dislexic Landlord??)

Oct 07, 2010 at 23:46

"Or better still.... retire on the profits and get away from all the misery of the UK Financial (and weather) climate"

-- Yeah, contribute to the misery, cream off the profits, and leave the minions to pore over the charred husk of a nation left behind.

Oh, and then moving to another place to do it all over again, but in a sunnier cheerier climate and more people/resources to exploit. Yay capitalism. :)

Anon 1

I banks knew that there was going to be a crash - they didnt prepare very well. Hence the public bail out subsequently required.

Credit is drying up - I dont think that there is any doubt about this and first time buyers will be the hardest hit. I suspect that in 5 years time more people will be renting than ever.

Currently though, renting is quite a good option.. Its flexible, has known costs and liabilities and doesnt tie you into financing a depreciating asset in troubled times (like now).

Anon 1,

I think you missed the 4th word in my post - "Retire". It means give up work...

Also I experienced enough misery working for below average wages, getting made redundant 4 times. Investing and gambling was the only way out, and don't worry the UK will come back again like it and other countries have done before.

You just have to lay your money on flavour of the month. or carry on as before. Your choice at the end of the day. I didn't particularly like being a Landlord for those few good years but now have stored the proceeds of my "ill-gotten gains" in to cash and precious metals and it's easier to sleep at night.

If you really want to know what could happen to the housing market in the next few years, here in the UK, take time to consider the ongoing saga which is unfolding America.

There are now three areas of malpractice which have been uncovered, which when added together summon a nightmare scenario.

They are: (1) Mis-sold mortgages where the true credit rating and the borrower's ability to repay was deliberately hidden by falsifying documents. (2) Records of property transfers may be incomplete because documents relating to mortgages held on those properties have been lost or are incorrectly filed due to the highly complex securitisation process. i.e. The issue of CDOs--- (bundling) (3) The bank's exuberance in using legal process to recover mortgage debt. (foreclosure and repossession) where true ownership and title to a property cannot be established due to incomplete or false documentation.

To learn more go to Barry Ritholtz blog The Big Picture. There have been numerous contributors who have discussed the subject in detail plus Barry's professional overview.