As stated before, the unwinding of the US housing situation has some way to go before the system rids itself fully of all the excesses accumulated during the multi-year upswing. But what about the UK residential property market? The graph below shows a clearly unsustainable trend of the UK House Price Index calculated by Nationwide.
The RICS house price index plunged further into negative territory (to -14.6%) for September, indicating that the majority of real-estate agents surveyed now see prices dropping.
Source: BCA Research
In a rather sobering article released this morning, Rachael Bonfield of The Home.co.uk wrote: “The UK housing market’s troubles have worsened this month. The Home.co.uk Asking Price Index, a key indicator of market sentiment, released data showing that prices have fallen by a further 0.6% in the last month (England and Wales). Growing fears amongst sellers and dwindling numbers of buyers have driven asking prices down in 6 out of the 9 regions in England and Wales since September. The average lost value for homeowners in England and Wales equates to £1 511 in a single month.
“’Discounting of properties on the market is becoming more widespread,’ commented Doug Shephard from Home.co.uk. ‘Confidence amongst sellers has plummeted as genuine buyer enquiries have tapered off in the wake of the spectacular debacle over Northern Rock.’
“Many serious buyers, mindful not to chase the market down, are now playing ‘wait and see’ whilst sellers are growing increasingly desperate. Greater London, the UK’s leading market and trend indicator, also fell further this month by 0.5% as sellers were forced to price more realistically in the current market conditions.
“The sub-prime fall-out for UK house prices is proving increasingly serious. According to the latest figures released by the Council of Mortgage Lenders for August, mortgage interest payments were already at their highest level since 1992, relative to income, before the credit-crisis struck in September. Even higher post-credit-crisis mortgage rates will undoubtedly lead to greater numbers of distressed sales entering the market in the coming months.”
The following video, narrated by a person only known to me as Gordon, casts further doom and gloom on the UK housing situation.