The Halifax have announced that UK house prices fell by 1.3% in April, and 4.2% in the first 4 months of the year. If that rate of decline continues for the rest of 2008 then the annual fall in prices will be nearly 13% by the end of the year. The Halifax expect there to be a mid single-digit fall in UK house prices this year. Prices are supported by low interest rates, a strong labour market and a shortage of new houses.
Undoubtedly the credit crunch is hitting the housing market hard. The drop in the supply of money worldwide means the UK banks are less willing to lend money. In recent weeks, lenders have been scrapping mortgage products, raising interest rates on others and are now asking for larger deposits. This is putting increased pressure on first time buyers, as they now need to come up with even bigger deposits than before.
The thing that will scare people most is, that if the trend continues, prices will have dropped by almost 13% in 2008, but you have to remember that UK prices have increased by 171% over the past ten years and by 51% over the last five years. The Council of Mortgage Lenders have forecast that free equity held by home-owners would account for 68% of total housing wealth at the end of 2008, and 45% for mortgage customers. Overall this should mean that most homeowners will be able to cope no matter how the market develops in the short term. For those who overstretched themselves during the boom years, it could be painful.
International Real Estate Investment 