Good article David. I have first hand experience of valuation issues, and not on a new flat but on my own home. I wanted to release some equity but the surveyor valued it lower than the last valuation I had 2 and a half years ago! It was laughable and not even worth arguing about.

The Halifax figures just out are worse than the Nationwide's with a 2.5% fall in the last month, an annualised 1.1% increase. Of course the press doom-mongers will jump on this straight away.

I'd be surprised if there wasn't a 0.5% reduction in rates next time. It's needed bearing in mind how real rates have increased even as rates have come down.
Huw

Hi Huw

Given that the next BoE meeting is Wednesday some are suspecting that the Halifax may have got its bad news out early!

Thereby increasing the liklihood of a 0.5% reduction.

Cheers
Neil

The fall in real rates of 0.5% should have happened in January. Why they have left it this long is beyond me. I know they are fearful on inflation but if we have a very significant fall in house prices, this country will slip into a recession. Interest rate changes take time to work into the market.

Liquidity is key now. The Govt needs to meet urgently with the Council of Mortgage Lenders/banks to come up with options to try and stabilise the market. The BOE needs to release further funds to the market.

I do believe that prices will fall but we limit the damage and the threat of recession by acting now. 10-15% off prices I'll live with; a 30/40% drop as a result of lack of Govt/BOE action + an over zealous media talking things down will leave me heading to the bar (not in Europe, too expense with the value of the Pound against the Euro.....)

Yes John - strong drinks all round - but I'll be buying my whiskey from Tennessee!

The view out there is that the BoE didn't cut rates earlier because of high inflation - but that inflation will now be sacrificed to the more desperate need to save the UK economy.

Cheers
Neil

The big problem that the BOE faces is that the level of average debt per person is massively higher than during the previous house price crashes. Im not just talking mortgage mutiples here - credit cards, personal loans and home owner loans.

If the BoE reduces interest rates and inflation takes off at some point the interest rates will have to go back up - much higher than they currently are to counteract inflation.

My point is that interest rates dont have to go up to 15% - 20% to have a devestating effect on this country. Interest rate rise to 8% will be sufficient to kick the legs out from our economy.

A recession is coming full stop ...... since that is always how it works ...... housing price crash followed by a recession. This time the recession will be far worse because of the size of the speculative bubble and the amount of debt owed by nearly everyone. The retail sector will be hit first and everything else will follow that down for the next 2 yrs.

It will be at least 6 years before UK prices recover to 2006 levels - we are not talking about a fast recovery here folks. It is certainly too soon to be looking for investment deals in the UK. Prices will need to fall another 25% before I bother looking.

Richard,

You reckon cash is king in this situation?? Have you properties in the UK and what are you doing - Getting out or hanging in there??

I switched all my money into Euros and gold prior to the day before Northern Rock situation went mass media.

I have several apartments in Eastern Europe and I have a few 100's oz of gold bullion - which will go above $1500 by the end of the year after the current dip due to the IMF deciding to sell all its gold (I just wish they would hurry up about it so the rest of us can buy at the resultant lows and watch the price swing upwards afterwards).

It's clear the UK market probably has among the worst fundamentals of all the european markets.
PS educates us all really well about what moves real estate prices and banks and lenders increasing finance to borrowers almost always moves prices upwards. We have not really yet seen any of the lack of liquidity caused by the credit crunch feed through yet to UK valuations as there is always a lag period. But when it does, I would predict we will see a huge drop in UK values, even to the extent that some properties will halve in value.
Also rental increases will soon fizzle out because in recession, many of the migrant workers who have supported values will move on, and the government will be wanting to cut back on housing benefit for low paid families because tax receipts will dive.
I can see the UK becoming similar to Germany where assett values have not moved hugely even in 20 years. Of course it is possible to invest in better areas such as Cambridge etc, but that will only be relative to a crashing market.
Ii essence the UK is best avoided.

If you had read my forum posts entitled "Debt Bomb" written in 2006 you would know that I saw this "credit crunch" coming. I was a little aghast at the pro UK stance that Property secrets had at the time so I felt I had to say something on the matter.

I practice what I preach ...... I sold my house in the UK at the peak of the property bubble for 20% more than the average evaluation, I just feel sorry for the mug who purchased it - and for ANYONE who purchase in 2007.

I hope you're wrong here, although I do know times are getting much worse.

However, one thing I have noted is that those without property here, tend to be talking the market down more. All the pundits that are predicting a 40% decrease in property prices are living in rental property.

I can't see such a decrease here. I think 10-20% is more realistic. However, I do agree on the debt position.

I'm just hoping that my CEE investments help to soften the blow.

Richard - Where do you think we will end up against the Euro this year. €1.25 to the pound already seems to have factored in the certain short-term interest rate falls.....