Too many people still believe that the property market will always see a rise in valuations. All assets including property will have periods of both positive and negative returns.
The market has changed and a huge part of this change is the mortgage market and the ability to raise a mortgage and the amount of the loan.
Britain is in the grip of a full-blown house price crash. In fact this is already the worst house price crash on record, far bigger than the slump in the 1990s, with house prices back to 2004 levels.
Unfortunately I believe the answer is a resounding NO.
Many property experts, who seem to be saying the same thing….Watch out! House prices have further to fall
David Miles, former advisor to Gordon Brown, says a UK housing bust is “likely in the next few years” because house price growth has been grounded in unrealistic expectations of double-digit annual increases. I believe once house price rises fall below expectations and reality of the situation is accepted, significant falls are likely.
Factors affecting House Prices
Most house moves are voluntary. If homeowners are faced with selling at a price they consider to be too low, they are more than likely to withdraw the property from the market. This is why when the property market is overvalued the correction tends to take place by means of price stagnation rather than a crash.
For five years or more, the expert consensus is UK property prices are overvalued. This has rested on one central observation that the ratio of house prices to incomes is historically high and the mortgage loan amount achievable has dropped as a multiple of income.
For example someone on £40,000 five years ago, most likely could raise a mortgage of £380,000 to £450,000. Currently, this same person would be expected to raise a mortgage loan of £120,000 to £150,000.
This factor coupled, with the fear about incomes, job security in the current economic environment, and property being an illiquid asset and so difficult to sell quickly.
These have had an effect on the valuation of properties in recent times and this is expected to continue for many years. Most opinions seem to suggest the property market valuations will stagnate over the next decade or two with the likelihood of short-term declines in valuations possibly over the next 5 to 10 years.
Any questions my email address is welshmoneywiz@virginmedia.com
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