2.5% Drop

We've now had 2 2.5% drops in a month. The first was by the Halifax reporting March figures. The latest is from the Nationwide. The property correction or crash call it what you want but its well under way.

Even the lenders are now talking of a fall. The telegraph is predicting a 20% fall.

For those of us out of the property market times are good (and Im not just talking my book)

Rightmove

I forgot to mention the rightmove survey. This showed an average price fall of 3.2% in December alone. While this was distorted by Hips pushing more smaller properties on the market it shows a sharp move in the market.

January should be better as fewer small properties will be on the market but the trend is turning. Price falls are being widely expected in the market. The question is how far and how fast. At one extreme it is possible the falls will be small.

We currently have an over inflated market. If there is no price correction the overhang could last years. In the 1950s house prices fell for 10 consecutive years.

If the price correction is quick we have a chance to get it over with and come out the other side

Bye Bye Sub Prime Buy to Let

It is a very small part of the market BUT it shows a trend. The number of subprime buy to let mortgages has fallen from 1383 in July to 149 with only 4 lenders in the market.

This shows a trend as the credit crunch extends. Lenders will move away from anything seen as risky. Loan to Values will fall. Criteria will tighten. Rates will increase. Income multiples will fall.

Demand will fall as people cannot get mortgages they could in the past.

Demand will fall as others are concerned they will not be able to remortgage.

As mentioned before many will not be able to remortgage and will have to stay at high rates.

Buy to Let collapses

The proportion of properties purchased on buy to let fell from 44% last year to 18% this year.

Ouch.

Buy to Let Quitters

RICS have released that landlords are selling up at the highest rate for 3 years (6.5% sell at the end of a tenancy rather than 6.1%) This will have an effect on the housing market as more properties become available.

The suprise is though they are doing it now. In April they can expect that the capital gains rate will fall from 40% to 18% so why sell now?

Perhaps they don't expect the property to sell before April?

FSA

The FSA today warning about over 1.4 million people having fixed rates that expire this year and being unable to remortgage to cheaper rates

"which will leave them facing a significantly higher rate on their borrowings, which may prove too much for them to afford."

Looks like the 50% increase in repossessions is an underestimate

House Builders share price collapse

The price of house builders shares have fallen by 50% in the last six months. According to Roger Bootle this has happened three times before and each preceded a major fall in house prices.

The derivitives market is also predicting a 7% fall in the Halifax house price index for next year.

The "smart money" seems to be on a fall.