UK House Prices 2008
2008 has seen a turnaround for the UK Housing Market. Since the turn of the year, prices have been falling. The main reasons for the falling house prices are.
- UK House prices overvalued compared to long term trends. See: Overvalued housing markets at Economics Blog. The main indicator to look out for is the ratio of house prices to earnings; for first time buyers this has more than doubled in recent years
- Shortage of funds for mortgage lending. The Council of Mortgage lenders have reported a 40% fall in mortgage approvals since the start of the year. This has reduced demand and also made it difficult for people to refinance. In particular people who used to be on fixed rate deals as low as 3.99% are now facing significant increases in the cost of their mortgages. This will get worse throughout 2008. The shortage of credit is also increasing the interbank lending rate. This increase in bank costs is nullifying the small cuts in the Bank of England base rates.
- Buy to Let investors starting to sell. Buy to let investors who hoped to cash in on rising property values are now starting to sell to try and avoid any potential housing crash.
