The housing slump appears to be getting rapidly worse as ministers prepare to
give councils extra money to intervene in the market.
House prices fell at the fastest rate in 18 years this month and a leading
estate agent said that multimillion-pound homeowners were feeling the pain
of the downturn for the first time.
The value of an average home fell by £5,000 this month to £164,654, according
to figures from the Nationwide building society - nearly £22,000 less than
in October last year. Prices have fallen by more than 10 per cent since last
August, the largest drop since the worst point of the housing market crash
in 1990.
The deepening malaise in the market has also wiped tens of thousands off the
value of country piles and luxury London homes, according to a leading
estate agent.
Multimillion-pound properties were relatively unaffected by the housing
downturn that followed the credit crunch as well-heeled buyers were
unaffected by the clampdown in mortgage lending. But prices for properties
worth between £1million and £4 million have fallen sharply in recent months,
according to Savills.
Country homes worth between £1 million and £2 million fell in value by 5.2 per
cent, or £72,000, in the three months to June. Houses worth between £2
million and £4 million slipped by 3.2 per cent, wiping nearly £100,000 off
the price of a £3 million home. Prices of London homes worth between £1
million and £2 million dropped by more than 8 per cent. Savills said that
only prices of properties worth £4 million or more were holding up in the
downturn.
More worringly for ministers, the Council of Mortgage Lenders predicts that
45,000 people will be repossessed in Britain by the end of the year, an
increase of 50 per cent from last year, as rising food and fuel prices and a
slowing economy leave families unable to pay their mortgages.
In an attempt to stem the tide, Alistair Darling, the Chancellor, and Caroline
Flint, the Housing Minister, are planning to announce an emergency “mortgage
rescue” package next week.
Under the plans councils will be encouraged to offer low-income families at
risk of repossession the chance to sell a stake of their houses in return
for financial help. First-time buyers will also be given more council-backed
assistance with deposits and town halls will be given extra money to buy up
empty, unsold new property.
A more radical proposal under which councils would have been freed to compete
as mortgage lenders with access to a pot of £2 billion in government
borrowing has been vetoed by Mr Darling. Instead he is likely to extend a
Bank of England guarantee designed to boost confidence among existing
lenders.
It is understood that other options to kick-start the housing market,
including a stamp duty holiday, are being held back for further
consideration.
Measures to increase significantly the ability of councils to buy property
have won support in many Labour-led councils. They reverse a trend begun
almost 30 years ago by Margaret Thatcher, whose policies were designed to
reduce the amount of council-owned or council-controlled housing stock.
Analysts said that prices would continue to fall in the coming months.
First-time buyers, struggling to get mortgages as lenders demand hefty
deposits, show little sign of returning to the market, forcing sellers to
cut their prices even more. Alliance & Leicester said this week it would
not lend to borrowers who had less than a 15 per cent deposit. Many
potential buyers are also waiting until they feel prices have hit rock
bottom.
Recent figures showed that mortgage approvals for house purchases by big banks
fell by two thirds in July compared with a year earlier. Seema Shah, of
Capital Economics, said: “The slump in mortgage approvals is consistent with
further sharp falls in house prices in the months ahead.”
Jonathan Hewlett, director of Savills in London, said: “Reality has hit home
in the prime market, with sellers happier to adjust their prices in order to
clinch a sale.”
The steep decline in prices has already pushed thousands of homeowners into
negative equity, and further falls could leave more than a million people
owing more on their property than it is worth. Vince Cable, of the Liberal
Democrats, said: “House prices are no longer simply falling, they are
crashing. All the signs are that we are at the beginning, and not the end,
of a very painful process.”
Some analysts forecast that prices could fall by as much as 35 per cent from
their peak last year and may not start to rise again until 2010.
The grim conditions in the housing market are taking a heavy toll on estate
agents. Fears are growing that as many as 10,000 estate agents could lose
their jobs by the end of the year.
The bleak prediction, after an estimated 4,000 redundancies in the industry so
far this year, would mean that about 15 per cent of the industry's workforce
will have been handed their cards since the end of the house price boom.
Last week, Halifax Estate Agents, owned by the banking group HBOS, said that
it would shut 53 branches and cut 100 jobs because of housing market
difficulties. Savills also said yesterday that it would cut jobs. Ben
Yearsley, an investment manager at Hargreaves Lansdown, the stockbroker and
asset manager, said: “If the housing slump continues much longer than this,
we are likely to see 10,000-plus jobs going.”
Money
Central: London house price data, borough by borough
Cut-price piles
Shrubland Hall, Ipswich, Suffolk
Described as the most important sale in East Anglia for a generation, lots 1
and 2 (the main house, built in 1770, the gardens and gatehouse) have been
on the market since April 2006, although smaller parts of the estate have
been sold separately. The guide price is down from £8 million to £6.5
million
Machan, Cornwall
On the market since September; guide price down from £4.5 million to £3.5
million. Stephen Perks, of Hampton International, said: “Potential buyers
may under more normal circumstances have sold up and purchased Machan as a
fabulous hillside retreat. These potential buyers are holding on to see what
will happen to the property market.”
why should my hard earned property now be subject to asbo drunk & drug abusing neighbours who ultimatley is paid for by me the tax payer? having local authorities buying up unsold new build properties to rehouse DSS claiments really concerns me!
Liam, Aberdeen, Scotland
Massive increase in community charges predicted. Isn't Labour satisfied with the 110% increase in council charges I have had to bear over the last 11 years. Reduce council tax, so people can afford to pay their mortgages.
Why should the council tax payers be made liable?
steve tea, manchester, cheshire
Why dont they leave the law of supply and demand to do its work. When prices were going up nobody bothered about it.Now that the prices are coming down because of the law of supply and demand and the correction because of the false growth. The economy was build on the sand by Blair and Brown.
Nicholas, LARNACA, CYPRUS
this government gives the impression of a blind boxer trying to box in the dark
peter c, Devizes, Wessex
We may be certain that local councils will apply the same purely financial, non PC criteria to all who apply. Or will some applicants be more worthy of help from my taxes than others? Will there be a bleeding heart amnesty, for some, on paying back the help when things improve? Couldn't happen!! .
D.L. Stephens, York, England
Where was the help for all of the people who have lost their jobs and been victims of age discrimination when looking for work? Lots of these people have lost their homes and not a word has been said. How utterly devious of this government to try to manipulate the statistics now.
judy, Liverpool, England
These lunatics must be stopped.
There is never enough money in the public purse but when the housing industry is in peril (of their own making) the billions start flowing.
The developers should go bankrupt and their land sold at a discount to allow the building of affordable housing.
A Harris, Kettering, UK
What a sad indictment of our caring society. The real enemy is not those who try to better themselves, many working
long hours without perks or holidays. Place the blame were it truly belongs, those who engineer recession as a means of controlling inflation, none of whom will loose their house's
Black, Newbury, Berks
Why shoud tax payer pay (rescue) gready home buyers, who over paid for their houses in the first place.
If they(shelfish)house buyers did not pay over the oads house prices woud not have been so high,and no one wod have to borrow more than what they can afford.
rohit, Leicester,
I haveworked and saved I feel badly let down. They are going to borrow money, which I, a taxpayer, will have to repay, the effect of which will prop prices up and keep me off the ladder.
I want to vote Tory, but they don't inspire either. Will a Churchill or Thatcher please stand up??
Simon, Barnsley, England
Same panic as Fmay & Fmac.
+ interest rates to be lowered also - so becoming even more negative to inflation.
but all is collapsing so fast it probably is in the wider interest - but dont expect those that have funds to be benevolent to those that do not.
next debacle endowments - any calculations ?
graham topp, toulouse, france
Between bailing out Northern Rock - with our money - and now bailing out thousands of people in debt - presumably with our money - I am baffled. I thought no one could 'buck the market'? The Rent Act should be reformed though, and security of tenure restored to tenants; then they can create homes
Alice J McCabe, Doncaster, UK
As soon as the 1st September ticks over I'm creating an e-petition on No 10 against any government action in the housing market, only by direct action by the public will this government listen, they are not acting on your behalf, merely trying to save their own jobs and they know it.
Jon, Coventry, UK
The fasten seat belt lights are on, the oxygen masks are appearing - Labour are giving us a white-knuckle ride, the pilot's lost his marbles. Put your head between your knees and kiss ...... your taxes goodbye.
Eddie Reader, birmingham, england
Immoral, idiotic disgrace.
What next? A rescue fund for casino gamblers?
If you took out a mortgage, you took a risk. You knew that. Why should any other individual, via our taxes, take away the downside of the risk YOU CHOSE, when we don't benefit from any possible upside.
RENT for god's sake.
Laura Roberts, London, UK
"I will not allow house prices to get out of control and put at risk the sustainability of the future." - Gordon Brown, 1997
Now get the taxpayer to pay the overinflated prices...
Steve, Wimbledon,
Why are people finding it hard to pay there mortgages on low intrest rates as they are now.
When i was buying my house we were always paying around 7%-10% intrest rates we got through it with no help from anyone. And inflation at the same rates
David, Bristol,
Let's just tax people at 100% and be done with it.
Roger, Oxford,
I'm a first time buyer and the best thing the government could do for me is nothing it all. Having been priced out of the market for years I'll soon be able to buy my first flat, as long as the government don't sabotage this by trying to prop up the market.
Gary Delaney, Birmingham, England
The easiest way to help the housing market? Let prices fall to the level required to stimulate demand - probably another 30% should do it. And i'm all for Councils buying up property - so long as it's for social housing purposes and they have the good sense to wait 2 years for the market to bottom.
Markov, belfast, Co. Antrim
The slump will so impact banking finance, especially through rising rising unemployment that house prices will need to traditional multiples of earnings, of 3 times the main earners income not up to 6 times both incomes.
That would put average prices at around £66k, a drop of about 65%.
David Martin, Bristol, UK
How is it helpful to first time buyers to encourage them to buy an overpriced asset in a falling market? Unless the idea is to simply give them a hefty deposit for free, which would I suppose give some protection from falling prices.
But can such a giveaway be justified?
Paul, uxbridge, uk
Any use of taxpayers money to mitigate the effects of the current correction in the property market simply passes the liability for debt from irresponsible borrowers to taxpayers who have chosen to live within their means.
Let it fall, either the market corrects now or it crashes later.
Edward Chalmers, Dundee, UK
Politicians and vested interests have benefitted from an unsustainable, debt based, economic boom that is now in a much needed correction.
We will all pay for this through the erosion of the value of savings and assets caused by inflation; bad enough without our taxes being squandered as well.
Edward Chalmers, Dundee, UK
Labour = privatise profits, socialise losses.
Another disgraceful act by this government.
Jamie, Cardiff,
I'm sure there are plenty of speculators who have lost out in recent falls in values of shares and commodities, maybe the government should step in to help them also!
Rick, Manchester,
What do they mean by low income? The current situation is a threat to all house owners. As a middle income earner does this mean I have to effectively subsidise lower income wage earners, whilst I might not be eligible and lose my home? Another ill-thought and muddled policy from NuLabour?
Dean, Manea, Cambs, England
I see the price of used cars is falling because people aren't buying them and cant afford the payments. That means car owners are worse off. I think that local authorities should step in to buy parts of cars, the spare wheel maybe.
... stupidity, and we dont need cars as much as houses
Phil, Welwyn, UK
When will that fool Alistair Darling sort out his department and put to bed the Stamp Duty Fiasco?
He is the main contributor to the stalling of the housing market in the last few weeks. People are waiting and waiting for something concrete to go forward with.
Come on Darling, SPEAK NOW !!!
Marco Alzapiedi, New Barnet, UK
More renters long priced out of the market can watch more of their tax propping up the market, joining tax breaks already enjoyed by buy-to-letters. Let's be clear that intervention in the market will primarily benefit the banks, whose culpability in the housing bubble is only matched by Brown's.
Ian, Forres, UK
There has been a problem for long enough with housing but whilst the middle aged, middle classes were coining it in, it was fine to leave first time buyers and working classes to get on with it. Now they are being hit - suddenly a whole raft of housing initiatives are being found - some labour govt!
Victoria, London, UK
Old school Socialism, intervening to prop up a collapsing market, failed in grand style the 70's. But now Blair is out of the way, Brown is showing his true Socialist colours. Woe betide him, as intervening in failing industries enshrined a misallocation of resources as "dumb money of last resort"
Matt, London,
So its free market rules when housing prices rocket up making the rich richer but panic-stricken government intervention when house prices begin to fall to levels accessible for the less well off/prudent.
Charlie F, London, UK
This will not prop up prices as rescued block of flats will probably cause prices to fall as there is a perception that council tenatns bring an area down.
Rob, London,
What can I say? This is throwing good money after bad.
Please can the government explain the rationale for trying to keep house prices inflated above an historical equilibrium?
The government is basically giving our taxes away to the reckless and greedy.
A Nelson, Newcastle, UK
This could work if Councils were able to buy up Housing Stock at say 85% of an independant market valuation from struggling families and rent the homes back to them ,paying under market value would ensure people would not use the scheme to make money?
J GARY STEIN, inverurie, scotland
Great, so my tax money, money I've worked hard for, is to be used to prop up a grossly unfair and unsustainable system. This is robbery of the young to keep the house price party going for the soon-to-retire. Criminal, simply criminal.
Bob Jones, London, London
Disgusting.
The taxpayer is being asked to foot the bill for the folly of foolish buyers who have paid far too much for their houses. More fool them - why should I, as a prudent non-debtor, prop up their excesses and the crazy prices they have paid?
peter kiddle , st neots, uk
Great. Labour will waste more taxpayers money on depriciating assets.
Anyway, i think it's all BS. They don't have the money to do any of this.
Np, England, UK
The decision on stamp duty is being postponed? is this a sick joke? and why exactly are the English nation still whingeing about the government and not yet launching a full scale mutiny yet anyway? In a democracy you get the government you deserve...stand up, shout louder and kick these theives out!
Ann, Sydney,
Will the council help me out if I fall behind on payments for my new plasma TV and lexus? No, why should housing be any different?
Lets also factor in the fact that half of them can't even afford weekly bin collections, now they're selling mortgages.
Sometime i wonder why i work and save!
Paul, Camberley,
This is an absolute disgrace.
Why should the taxpayer be asked to bolster a grossly overinflated property market? Local authorities will be taken for a ride when buying unsold property from developers at inflated prices.
I was under the impression that we were living in free economy.
Allan, Inverness,