Morning:
8°c
London house prices crash
Jonathan Prynn, Consumer Affairs Editor06.01.09
LONDON'S property market crashed by an average of 15 per cent in the last 12 months - the fall accelerated through "a year of turmoil" with a drop of 2.5 per cent last month alone.
The worst hit areas were Westminster which plunged 22 per cent, Waltham Forest 19 per cent, Newham down 18 per cent and Haringey 17 per cent. Other boroughs saw falls of 16 per cent.
The value of the average London home is down to £257,963, latest figures from the Nationwide reveal today.
But most of the capital's homeowners are still sitting on huge profits, according to new research.
A borough by borough breakdown reveals how even the current depressed values are far higher than levels at the start of the boom a decade ago.
Every borough in the capital has seen at least a doubling of prices since then with three - Newham, Hackney and Southwark - still averaging values triple the levels of 1997.
Most economists and property experts are agreed that prices have further to fall this year but some now believe that the decline is slowing and the bottom could be reached by the summer.
The Bank of England is expected to cut its base rate again on Thursday, lowering it to 1.5 or even one per cent, levels not seen since the Bank's formation in 1694. Nationwide chief economist Fionnula Earley said cheaper mortgages and further falls in values could soon start to entice back first-time buyers who have been effectively "locked out" of the surging market since 2003.
She estimates that nationally there are now as many as 750,000 first-time buyers who want to buy, a huge pool of pent-up demand that could put a floor under any further falls. She said: "Clearly this estimation is fraught with uncertainty and sensitive to assumptions, but it does appear likely that a substantial pool of pent-up demand has been building up which could make its way back into the market when affordability improves and economic conditions and house price growth expectations stabilise."
The collapse in housebuilding could also contribute to a shortage of housing that could further help prices recover quickly, she added.
Leading London estate agents also said they believed the worst of the housing storm may now be over.
Ivor Dickinson, managing director of Douglas&Gordon, said: "The London market was hit first, therefore prices have already fallen around 25 per cent. We are nearly there in terms of the bottom of the market with a further five per cent drop still to come. We are already seeing an increase in buyer confidence with an increase in activity in the lead up to Christmas and a good start to the year."
However, some more pessimistic experts warned against any hopes of an early recovery.
Ruth Stroppiana, chief international economist at financial analysts Moody's Economy.com, said: "The UK remains firmly in the grip of the worst housing slump since the Nineties. Rising unemployment through 2009 is expected to fan further house price falls and more forced sales. House prices in the UK are expected to continue to decline through most of 2009, with the average house price likely to shed over 25 per cent peak to trough."
Howard Archer, chief UK and European Economist at forecaster IHS Global Insight, said: "We expect house prices are likely to fall by a further 15 per cent in 2009. This would take them down to £130,091 at the end of 2009 on the Nationwide measure.
"Another five per cent drop in house prices is expected in the first half of 2010, taking them down to a low of £123,586, which would be 34 per cent below their October 2007 peak level of £186,044. House prices are then seen flattening out in the latter months of 2010." Seema Shah, property economist at Capital Economics said: "This year, house price falls are set to be at least as large as in 2008...we expect house prices to fall by 20 per cent in 2009."
The latest Land Registry figures show estate agents in London are struggling to sell even one property a month. Only 4,651 homes and flats were sold in the capital in October, the month after Lehman Brothers bank collapsed and the availability of credit imploded.
Reader views (22)
Too many moralists here! P assumes he knows all about the housing market and everybody who's got burned. One assumes P has opted to remain within the public sector which is his business but he shouldn't take pleasure in seeing people who wanted a better quality of life facing the problems of negative equity. Just get on with your life P and stop judging others. And the buy to letters, stop whining! You made your choices in a free market without anybody forcing your hand. If it went wrong, sorry, better luck nect time.
- David, London
The end of 2009 and you will see the speculaters moving in and buying up all that cheap property,just like the early 90,s all over again Boom and Bust..
- Michael Francis, Fethiye
Patrick, Singapore property price went up 30-50% in the last 3 years and rents doubled due to a major shortage in property. That boom is about to collapse. Do you really live there ? A shoebox in Singapore is no cheaper than a shoebox in London unless you are talking about HDB in which case rent a counhcil flat in London .
I'm moving back because my Singapore dollars mean i can buy 30% more pounds this year and with the house price drops I can have a better quality of life and afford a car. Also jobs still pay better in London unless you are an expat finance person and they will all lose their packages this year.
- Michael, London
James, I completely agree with you.Andrew, I take it you are one of the BTL'ers?
And whats more, why should those who didn't get themselves into complete and utter debt have to bail out those 'greedy' so and so's who did?
- S-M Hearmon, London, UK
Well said Jonnie of Brixton. Property prices one of the many reasons i quit uk 3 years ago. Maybe when I return i may be able to afford an overpriced cupboard in the vicinty of a crack den or a Lidl. The middle class property specualtors and wannabe landlords brought the whole pain on themseoves. property can go up or down. Like gravity
- Patrick, Singapore
James from London: thank you for your comments. I would suggest that your comments demonstrate a closet socialism that is anathema to the eventual prosperity of any capitalist democracy. The individuals who risked their capital to purchase properties also generated associated employment for a host of trades and business's. They also provided homes for others to live in. Are you suggesting that a 'government agency' limit who can buy and how many units they could own? Logically that cannot be allowed in a free society. Markets go up, and markets go down. If landlords are now losing money, they will take it on the chin. That is the definition of risk. To call them greedy says more about the person making the accusation than it does about the landlords themselves...
- Andrew, London, UK
Please let this finally end of two of the most grating, irritating clichés ever:
"get on the ladder"
"renting is dead money"
- Ivor B Gun, London, England
Andrew from London. Your presumably a BTLer and TBH your attitude is exactly what I would expect. You truly do not have a clue if you believe that BTLers were doing something noble like generating wealth for others in the form of jobs. Its incredible that people like you are trying to justify their naked greed. Perhaps you are one of them & rightly got your propery fingers burnt.
- P, London, England
As someone who is a Buy to Let landlord I often get sick of the bad press associated with it. It seems to be okay for multinationals to make billions, footballers to make over one hundred thousand pounds per week but God help the ordinary man who chooses to buy a property to ease the oncoming cash famine of the pension years. BTL landlords do serve a purpose, don't forget that not everyone wants to buy a property or may want to enjoy life before they make any financial committments. I have let my properties primarily to foreigners who are here for a few years and want to return to their country of origin. Stop cursing the landlord and address the real problems behind the meltdown
- Marie, London
Andrew from London, allow me to point out some mistakes you have made.
BTLers are greedy, because they bought properties that in the past would have gone to first time buyers, pricing them out of the market. They then rented the same properties back to them! Sounds greedy to me!
The "life" they brought to the market was not welcome, as anyone buying a new property or trading up (i.e. most people) ended up paying more.
As far as employment goes, no nation ever became rich for long just by retraining as estate agents and selling each other houses for more than last month.
Finally as far as being unaccomplished goes, it seems very unfair to call the priced out twenty somethings that because they didn't buy a house (or two) when they were teenagers!
- James, London
There is a degree of schadenfreude concerning the meltdown of the housing market.How interesting that so many people are wailing about the money they lost and giving the impression it was their divine right to see the property go up in value.Some of us have lived in the real world and it was obvious the housing crash was on the cards regardless of the banks going to the wall. I get the impression because its the 'true middle class' who have aspired to be 'filthy rich come what may' are now eating humble pie,they bore anyone listening and because they cant afford a third holiday, make sure the lazy journalists write another sob story. Maybe in the future the smug level will return to an acceptable level and ' wannabe property speculators' realise its a minority of people who play the property game for the long haul and 'flipping' investments is not for everyone who wanted a 'portfolio' to impress their friends or bang on about 'its my pension'..Welcome back..It only took the last ten years for some of us to await with arms wide open...similar to your mouth as another 30 grand comes off the top of your 'cherished home'.Next week,another journey with the outcasts of private schools who are now in the dreaded state sector.
- Jonnie Of Brixton, brixton.london,england,
Scott, thats the attitude that got us into this problem, must by a house.. must by a house, doesn't matter what it costs or whether you can afford it exactly as Toby says...
- Mike, London
Toby,
as a "millionaire" living in london, who has also spent a deal of time in germany - I am confused about what germany you are referring to.
Its a free common market, but I can't see lots of affluent londoners flocking to be unemployed in the fatherland. I do however deal with a number of german expats every day. make of that what you will
- Scott, London
Crash ? A mere 15% decline is hardly a crash. What if one had invested in RBS or HBOS - one would be 80-90% down - or Madoff for a 100% loss.
And how many bought at the peak? Our house was bought in 1976 - it had a 25 fold increase, so that has fall to perhaps a 20 fold one!
These are largely paper losses: most people do not buy at the peak and then sell in a year or two. Can we all just relax a bit on property prices then.
We have been through these property declines before,and will again: the long term trend is upwards.
- Michael Corby, London UK
Every week there is news of yet another price 'crash' - a grabbing headline that rings hollow. This small percentage is nothing compared to the near 300% that house prices in London have risen by since 1997. Even if prices fall by 50%, those who bought early would still be sitting on a tidy profit.
Can anyone afford the current prices that are presumably reduced by 15 to 19%?
- Hin Tan, London
From what i can see mortgages are no cheaper for first time buyers than when the market was at its peak as only those with 25%+ (i.e 62.5k for the average london home) deposits have access to the low interest rates - these people tend to be those who've already profitted from the boom in prices. Presumably this is a result of more cautious lending and a significant reduction in the competition in the lending market.
- Bobby Gillespie, SE1, London
There is no point in buying a house or flat now when it will certainly be cheaper in 12 months time. We are quite content to rent a flat and pay no more now for it than we did in 2004. The only concern is that our landlord has not kept up with his repayments and the property may be repossessed in which case we will find somewhere cheaper elsewhere.
- Simon Ellis, London
just pay your rent on time P, and your bitter relationship with your "greedy BTL" landlord might improve. no?
anyway, given the buying/selling fees involved, low deposits etc nearly every first time buyer starts in negative equity. a property is a 25 year asset class, makes no odds if the initial net realisable position starts in the red, as that is not the relevant time period to assess such things.
- Scott, London
Carry on like this and they will soon be worth what they should be worth!!
Looks like the dream of boasting how much your house has increased in value has had a rude awakening.
Luckily lots of council tenents bought their properties at big discounts and then were able to sell and move to somewhere better.
Problem is for those who bought their homes at full price and may now face eviction will have nowhere to go as Thatcher would not allow councils to spend the money raised on council house sales to build new replacement properties.
Wonder if a bendy-bus can be converted to a carvan?
- Melvyn Windebank, Canvey Island, Essex
'P' of London. Those 'greedy' BTl'ers were the people who provided life to the housing market, and by association the economy in general. When those type's of entrepenuers are shut out of the market, it isn't only them that are hurt, but obviously unacommplished and bitter people like yourself that suffer. If the economy worsens, then you won't have a job, never mind a BTL'ers rental to live in.
- Andrew, London, UK
This is no surprise. It is a fact that the majority of people who buy property in London do not have to think about whether their property is worth the money. A lot of millionaires just buy it because they want to have it without thinking "If I rented the property for a fraction of the interests I would get on a savings account, this would be a better deal". Another reason is that the majority of people who live in London forever have never lived abroad and do not notice that they could have a better living standard abroad...and live like Millionaires. As a millionaire in London you have a lower living standard then someone who is unemployed an lives in Germany.
- Toby, Munich, Germany
Vast majority of these were greedy BTLers anyway so who cares they get the natural justice they deserve.
- P, London, England
