Five experts predict how much further house prices will fall

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UK house prices are now nearly 15 per cent lower than 12 months ago, according to the Nationwide, with the price of an average house dropping by £30,000 to £158,872.

But when will the house price crash end and how far will prices fall? Should buyers grab a bargain now, or wait another year, or even longer. Times Money asked five experts for their predictions on when the market will hit rock bottom. Here are their answers. And have your say in our poll below.

Martin Ellis – chief economist, Halifax

Prediction: Another 8% fall

“We are predicting a 20 per cent fall over 2008 and 2009 – so as we calculate that prices have already fallen by 12.4 per cent, we would expect roughly another 8 per cent fall before prices start to bottom out at the end of 2009.

“There’s a lot of uncertainty surrounding the economy and unemployment figures in particular at the moment, so it’s very hard to say when prices will start to recover. Prices certainly won’t bounce back quickly.”

Jonathan Davis – housepricecrash.co.uk

Prediction:  Another 35% fall

“The market will not bottom out until spring 2011, by which point there will be a 40 to 50 per cent drop from when house prices were at their peak in August last year.

“If you remember the last house price crash in 1988, it took until 1994 for the market to recover, so a good four or five years. There is no reason whatsoever to suppose the market will recover any quicker this time.

“It is far too early to bag a bargain – people should not be buying for at least another two years. We are only one year into the crash, and it has a long way to go yet.”

Yolande Barnes – Savills

Prediction: Another 10% fall

“We are forecasting a 25 per cent drop from when house prices were at their peak last year, so that means we’ve got about another 10 per cent to go. Whilst we expect prices to bottom out during 2010, the prospect of recession means we do not expect prices to start recovering anytime soon. Houses will not regain their 2007 value until about 2014, or possibly 2013 in the south-east.”

Nicholas Leeming – propertyfinder.com

Prediction: Another 10% fall

“There will be a further drop of about 10 per cent throughout 2009, before the market starts to level out at the end of the year. It will take a while for the effects of the Government bail-out to filter through – the capital markets will not be freed up until maybe the third quarter of 2009, when we can expect to see more mortgage transactions and a gradual recovery of the market.”

Nick Bate, UK economist, Merrill Lynch

Prediction: Another 10% fall

“There will be a 25 per cent drop from the market peak last summer – we have already seen about a 15 per cent drop, so we have about another 10 per cent to go.

“However, no one can say with any confidence exactly where prices will be in a year’s time – but it will certainly be a long time before prices recover to the levels we saw last year. With unemployment rising and people becoming less credit worthy, banks may continue to be reluctant to lend for some time, and this will lead to a very muted recovery.”

Online Surveys & Market Research

Compiled by Lauren Thompson

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Comments

[A A Miner]

Two debiliatating elements are at work at present.
The credit crunch which has been and still is responsible for reduced mortgage finance.
And a World recession which is now under way with a vengeance.
As far as morgage affordability is concerned you have to remember that House prices have increased 3 fold in 20 years, whilst wages have only increased 2 fold. This indicates an adjustment downwards of at least 33% on all properties, so far not reflected in most asking prices.
You can then add on the effect of increased job instability/unemployment and wage deflation. The effect of this is anyones guess, but is likely to be in the region of an additional 15-30% drop in actual price paid.
That, as I see it will be the bottom of the market, it could all happen within the next 12 months or it could take up to 3 years.
Unlike the last recession things nowadays are moving a lot faster and I would'nt be surprise at around 12 months.

[Ishai]

The house prices are determined by two factors, DEMAND and SUPPLY. Make no mistakes; Demand refers to the actual Demand and not potential demand, same goes for supply. As we get faster and deeper into recession, banks will continue to be very careful lending money driving to reduced Demand. A large number of houses bought for investment or renting will find their way to the house market in addition to some 75,000 houses repossessed during 2009 and a similar figure during 2010, increasing supply. High Supply and low Demand will drag the house prices down faster than 2008 with an estimated average of -2% per month, so expect 22-25% drop in house prices end year 2009. During 2010 the pace will decrease to an average of -1.1 % per month expect another 12-15% drop during 2010. House process will start to stabilize by Q1 2011. The most probable scenario shows an additional house drop of 35% (+/- 5%) before thing start to get better in around 30 months time.

[Christopher Wright]

This is such twaddle.

People are on about "peak to trough" falls.

But we never stay at either point. In other words,even if the peak-trough fall is say 30 percent we will come back most of the way in due course.

The fall in value is not a case of value but of a lack of loan availability (granted, houses HAVE been overvalued).

Also, the highly-hyped drops are based on today's much-reduced volume of sales. The typical logic is to say big house A lost 100,000 pounds and smaller house B lost 20,000 - equals an average loss of 60,000. This is true mathematically but clearly nonsensical to extrapolate across the whole market.

Also, nobody is asking the key question: Restricting ourselves strictly to houses which are actually selling now, that question is, not what was it worth a year ago according to an agent, but what did it last acually sell for.

Then we can compare hard facts, not media hype.

Unfortunately, the ill-educated public who don't understand statistics, coupled with sub-standard modern journalism, make poor bed fellows on such subjects.

[Andy, Oxfordshire]

What a load of twaddle calling these people experts. Why didn't they foresee the proportions of the housing crash 12 months ago? And now you're asking them for an opinion and calling them experts. You journalists certainly have a warped sense of humour.

[Ralph G.]

Judging from a lot of comments here, it appears that some people have forgotten the prime purpose of a house and think that it's an investment. When I purchased my first house some 22 years ago, I did so because I needed somewhere to live. That was my primary motivation. I considered the options, buying vs renting. The costs of renting were about the same as the cost of the interest on the mortgage (I viewed this as paying rent to the lender). Had I not purchased I would still be paying rent, whereas, the amount remaining on my mortgage now is probably less than 10 percent of the cost of renting an equivalent property. This begs the question, will people renting continue to do so if the level of house prices drops to a point where the cost of interest payments is less than the cost of the rent? Or will they accept that owning a property firstly provides them with a place to live which in the long term will be cheaper than renting? And if it proves to be an good investment too, fantastic! Do I care what my house is worth today? Not really, as it provides me with a cheap way of living.

Now, the point of all of this is that the media brainwashed a lot of the population into believing that property ownership was a fantastic investment and is now doing the exact opposite by harping on about falling prices. How about writing about houses as places to live in and the long term benefits of property ownership?

[john spindler]

These are the worst posts i have ever seen. Most of you must live in the happy valleys home for the disturbed. Crash Crash up to 90 percent. Anyone who thinks that isn't safe to take themselves for a walk.

It's not uncommon for middle class earners to earn 50/60k basic salaries these days. 3 times salary 150k mortgage. Oh and I 'll have a semi for 80k in the south east.

And what if the fact that the US and UK are deliberately stoking inflation turns around and creates rampant inflation ? Get a fixed rate for 10 years and watch inflation eat away your mortgage !

[Mike Shillito]

At last we will all learn the ultimate lesson on asset values.

House,s & property have become relied on as safe bets and sure returns! Not any longer , just like share and other instruments of investment they can and do go down.

Let this be a stark lesson for all and maybe, just maybe we will all become a little more spendthrift and rely less on those borrowed pounds to fund our exessive lifestyles.

One can only hope?

[victoria astor]

I am afraid that the lie,s being told by the so called housing expert,s is false as far as house price,s and the general economy are concerned,
I am a wall street investor of many year,s my family, {The Astor] at one point owned New York and help set up the wall street of today.
both the uk and us economy,s are still in serious free fall, and will not recover for at least six or more yea,s they cannot recover, as they are to badly damaged,
we have yet to see the other major banking institution,s fall and need bailing out
what do i mean
such high Bonuses were paid to fat cat,s from the public,s bail out money in both country,s that the banks are afraid to reveal what they did give as Bonuse,s there would be a public outcry.
as far as the housing market is concerned in the uk, you must expect a further 80 per cent fall at least, maybe even below that, as the economy is now so in debt because of borrowing.
do the public at large ,realise what this borrowing mean,s for us all. it all has to be paid for from out taxe,s, and taxe,s will rise to such an extent, that there will be no clearance of this national debt for at least fifteen year,s if we are lucky.
of course these people who claim to be expert,s try to bolster up the housing market, saying, oh it will soon bottom out and look out for bargain,s, you people are putting moey in their pocket,s by looking for that so called bargain.
buy to let. be careful thats a poverty trap.that will siral you into serious debt or bankruptsy, why, unemployment, which will rise, that mean,s people, the prospective tenant, will not have the rent money to pay you, ,they get housing benefit to top up their dole money that increase,s the councils outlay paying this benefit, and they in turn have to get government bail out and the government goe,s cap in hand to borrow even more and increasing the depth of the recession.
we are heading easily for a situation more serious than the great depression,and house price,s will not be even worth the price of the dirt on your boot,s
i am a professional investor, and i can tell you right now that we are in for a serious time ahead, these government bail out,s cannot work, as their is to much dirty debt yet to rise from our biggest bank,s yet both here in the uk and in the state,sbe warned, dont invest in property at least for another five to six year,s

[Michael]

I don’t think income multipliers are particularly relevant. The thing that makes the big difference to the cost of a house is the interest rate.

The average house buyer will work on how much comes out of his bank account each month. This figure is the real cost of the house.

A house costing £50,000 20 years ago when interest rates were around 15% would cost interest of £625 per month.

The same house costing £150,000 now with interest rates at around 5% would still cost £625 per month interest!

And so its easy to see how prices got inflated to the level they are at, especially as a lot of people started taking interest only mortgages.

[fraer]

everyone here is vested interest. Even davis has too much of an agenda with his website.

this could have been a good column with some independent economists but as it is it's of little real interest

[tom]

Nassim Nicholas Taleb is the only person i would listen to when it comes to predictions,as for all these other wonks who did not see the worst recession since the 70s
on the horizon,why should anyone listen to them now.

[nimrod]

Since the rate of inflation under Browns handling of the economy was always rising it follows that it can only FALL from its PEAK..this has been reached...... the only way is DOWN....since house prices ROSE by 300 Per Cent...WORK IT OUT FOR YOURSELF !

[Jim]

I am one of the lucky ones who still has a secure job, I bought my house 5 years ago and at last years peak my house had doubled in price. However my income over the 5 year period has only gone up by about 20%. That in my book is an 80% difference in affordability. Now if house prices continue to fall by 15% per year and income rises by 4% even a fool can see that we're not going to reach affordability for several years.
What bank is going to lend large amounts of money to someone who wants to buy something that is falling in price, especially when there is a high risk of default on the loan.
These experts are biased & motivated in talking the market up, conning us into buying because that's how they make their money.
I for one am sick and tired of being manipulated by big people who get rich off my back, It's time to fight back with the truth.
This government have presided over the biggest scam ever, it's their red tape, their regulation, their target driven policies, their stealth taxes, and their welfare state etc. etc..
We are at the edge of a cliff with no safety rope and drunk on years of Labour's cheap debt. HELP!

[Sceptical]

What do these "experts" really know ?

[Gordon M]

House prices will stabilise when 3 times average wages = Average House price (the old building society lending limits) because that is affordable and therfore sustainable. So house prices have another 50% to fall, i.e. 65% off their peak. The figures for wages & house prices will go up when Fed/BOE/ECB 'Quantative Easing' (i.e. printing vast amounts of more money) causes raging inflation, but the 3:1 wages/house price ratio will remain true - because lenders and borrowers now both know that any higher ratio is a bubble that will lead to a bust and consequent defaults, repossessions & loss write-offs.

[David Downes]

Four of your panel, all with a direct interest in seeing the housing market stabalise, report that we're two thirds through the problem. One, with no real interest, writes that we're one quarter of the way through the problem. And this pretty much sums up the housing market, a speculative investment.

Personally I agree that the price of a tent is about to fall on the high street, as with all forms of housing, although nowhere near by as much in thousands, as the price of property held by four of your panel.

What's needed is for Government to tax all profits made on the sale of housing, and by large sums. This way, people might learn to accept that their house is a home and not a gamble.

[Frederick]

Just like me these experts must have seen it all coming. Or, am I just a silly old man who alone knew it could not go on? It's not Homes Under the Hammer - it's home prices through the floor. Why does the BBC still keep on transmitting the repeats of this and other stupid property shows.

[Kevin Beach]

There is nothing to sustain prices at any level above the bricks and mortar value. Properties will fall to the their rebuilding cost, which in turn will fall because of lack of demand for builders. Expect a 50% to 90% drop from peak values.

[Nigel Grimshaw]

Wayne very correctly asks "Are these some of the same experts that kept telling homeowners and potential buyers that the housing market would not go down but would slowdown to a peak, flatten for a while and then rise again?"

JK Gabraith's analysis of the 1929 Wall Street Crash revealed that industry experts and knowlegeable insiders rarely, if ever, see an obvious specualative bubble. In part, they have too much of a vested interest to think the unthinkable.

[gary]

just want to refer to david in london who says "houses double in value every 10 years. Fact."

Fiction actually lol. In the last decade they have tripled and if you consider a 3% inflation rate then 10 years should see just over 30% growth, not 200%. Its called a bubble.

If you study historic price charts, you can place the true average house price at around 120-130k. This would mean that they still have a further 20% to fall, but it will overshoot briefly before changing trajectory so I predict that prices will fall a further 25%-30%, I think 20% as a bare minimum, but given the historic precedence of recent events in the financial markets, unemployment rising fast, repossesions rising, increased living costs, who knows what the maximum could be, but I wouldnt rule out a situation similar to Japan, where in a similar example of disproportionate growth saw prices in some areas plummetting 80% from peak to trough

[gary]

just want to refer to david in london who says "houses double in value every 10 years. Fact."

Fiction actually lol. In the last decade they have tripled and if you consider a 3% inflation rate then 10 years should see just over 30% growth, not 200%. Its called a bubble.

If you study historic price charts, you can place the true average house price at around 120-130k. This would mean that they still have a further 20% to fall, but it will overshoot briefly before changing trajectory so I predict that prices will fall a further 25%-30%, I think 20% as a bare minimum, but given the historic precedence of recent events in the financial markets, unemployment rising fast, repossesions rising, increased living costs, who knows what the maximum could be, but I wouldnt rule out a situation similar to Japan, where in a similar example of disproportionate growth saw prices in some areas plummetting 80% from peak to trough

[TEEPEE]

IAN (The Plasterer) Give up your day job - become an economist !

You may earn less???

Your sums (comment 27 Nov 20:19:45) make sense though - Guess that is because you actually earn your money and know just how hard it is.
Cheers
TeePee

[iogeeinonowt]

An average 3 bed semi will have to be £85.ooo A 3 bed datached will have to be £120.000-£150.000
The mortgage rate will have to be 4.5% and the average deposit will have to be 5% of the askingt price.
This will not come into being untilmid 2012 sorry

[Np]

They're not experts until they predict at least a 50% fall.
The way the economy is collapsing, with massive unemployment due next year (I predict 5 to 6 million) prices could easily fall more, even back to 1996 prices.
This would be good as young couples could afford to buy and start a family, instead of putting it off for a while or for ever. This would redress the unhealthy ratio of old to young in the UK.

"Martin Ellis – chief economist, Halifax"
How much does this guy get paid?
We will have nearly 20% in 2008 alone. There's room in 2009 for another 20%. So he'll be out by a factor of 2. He's in the industry, he should know better.

[Chris yapp]

I think that house prices will fall to 3 X earnings so that it will be a combination of loss, wage rise/fall an dinflation.

I sold in September 2007 and rented, expecting 2 years. I now think 2012 will bottom out as unemployment will be higher than I expected. House prices won't get back to peak till 2020

[Lizzybe]

before the credit crunch I was having an informal chat with some bank workers- I asked if they'd read a tiny tiny article in a newspaper I recently read that said the BOE had sent letters around to the banks asking if they could handle a 30-40% drop in prices. It seemed ludricious at the time. So, I think this has all been engineerd by the govt- who had to find a way to ensure the public sector could get on the housing market.Since they can't afford to build social/council houses for first time buyers and low paid workers so surprise surprise, this govt now has a fund of hundreds of millions to buy unsold property from builders for ..social housing. This whole real estate bust is I think a deliberate destructive act by the government. So wake up folks, this is social engineering at its worst, and the destruction of the housing boom will not stop until you get this government out. They actually hate the idea of ordinary people being able to create wealth out of property especially for pensions and becoming independent of government subsidy. If you're wealthy and independent they can't control you or your vote.
The government would own all and we become a nation of renters not property owners. Freedom or being tied to the government for life. Its your choice.

[Stan]

In September there was a report that prices at auction had fallen by 55% over the year, since then I've seen no reports on auction prices. Were there special factors then or have the prices fallen so badly since that they are not being publicised?

With deposit requirements tightening, earnings multiples falling and recognised earnings rules being tightened we are near the beginning, not the end, of this bear market in housing.

When money is a bit easier the lenders may be able to cause price boomlet on the basis that the low interest rates mean that new mortgage payments are low as a percentage of earnings but when those rates rise the collapse will begin anew.

Another 50% before the market turns?

[Economic Realist]

For all the still deluded house price bubbleblowers out there, here are the basics to remember:

1. Supply & Demand
2. Cost of Borrowing
3. Availability of Credit

Most people buy with borrowed money. The banks have none to lend. So with limited 3. you will see an increased 2. (for those with no money of their own to put in) and a reduction in the Demand part of 1. (and don't confuse desire with demand) as the Supply part of 1. increases as a result of company bankruptcies, job losses etc. to come - pushing prices down further.

Prices have a long way to fall.

[Dave Barnes]

@Peter Rogers

"fact remains that if the average house price is 158k and the average wage is slightly under 25k then current prices are 6.37 times average wages... i would predict the average price to drop closer to 3 times, this would imply an average price of 75k or around a 50% drop from here"

Exactly.
In the USA, house prices were -- for decades -- traditionally at 2.5 to 3x gross income. In my opinion, that is the stable price point.

What is most likely to happen is that inflation will invisibly reduce prices to this long-term stable level.

[Christopher Wright]

Hey guys and gals - I foresee a good time to buy.

[Justin]

The house price(s) that we(3) were looking at was £239,995 on
dec 07/jan 08
Now it's down to £199,995 how much will it drop from here if any do you recon???
Will it drop another 10 / 20 / 30%???

Your comments required!!??

[Justin]

So could anyone tell me when should I "try" to buy my first home???

As a "wana be" first time buyer on an "average wage", should I be buying now or should i be waiting 1,2 or even 3 years to buy my first home???

Very unsure what to do or where to go from here???

Help/comments PLEASE???

[anthony]

Jonathan Davis – housepricecrash.co.uk

I remember reading this guys doom and gloom about 5 years ago when yeilds were over 10% on BTL and at a point where prices were much lower than they are today, it's the equivalent of me saying gold will go up to $2500 in the next 5 years, it will but it's hardly rocket science.

Greenspan ignites a huge debt bubble about ten years ago with changes to the fed's fractional reserve requirements so of course that money goes into mortgages. You should replace him with eric janszen of itulip.com, how this guy doesnt get a mention i'll never know.

He's predicted every major bubble since the tech boom.

btw i'm still buying property ar good yields and also buying gold.

[Bob the Banker]

A prediction from housepricecrash.co.uk
That will demonstrate total objectivity then ?

[Phil Bailey]

I think the 40% to 50% fall prediction is closest.
The driving force behind property chains is the first time buyer. Until first time buyer-type properties are withing their grasp, most property prices will continue to fall
They rose above this becuase of the buy-to-let investors. Now they have significanlty less involvment in purchasing, their effect on the market has all but disappeared.

[Roberto]

Here in Ipswich prices have generally already fallen by fifty percent from the peak. Also to sell you have to lop a further third off the asking price. If prices drop a further fifty percent during 2009 this will be what we may reasonably expect.The quality of the Ipswich housing stock is very poor in general terms.

[james colwill]

The falls will not be even. There will be a bigger drop in buy to let investment and property will become more owner/occupier biassed again.
Location will be key and good areas with low crime, good schools etc will recover swiftly, while bad areas will go through the floor becoming virtually valueless.

[nathan]

Yeah like the economists even predicted that they would fall in the first place, they should keep their opinions to themselves as their credibility has gone out the window, figures and textbooks isn't always how the real world works, times most of their predictions by 3 and you have a more realistic figure, I think Jonathan Davis' figure is more realistic. And how many of you people arguing against falling prices predicted that they would fall in the first place ay?? I was one of the few that saw it coming 3 years ago before you give me stick.

[Philip Taylor]

I live in Grimsby, house prices never grew any thing like those let's say in London, a nice 3 bed semi in a nice area is £135,000 here, how much in say outer London or the South East of England ?
The point is there is no percentage fall for our Country overall,the south had the massive rises, and the north had big rises,once London prices come back to a sensible buying price it will be a normal market again, so i will guess, another 25% off London and the south east of England and 10 to 15% off the north and mortgages become available again, then that will be it.

[chris nz]

House prices will crash 1/2 to 1/5 current value.

Why?

Total destruction in the availability of cash.
What 20 per cent deposits required, 25 (really 50)
unemployment. There will be Massive bankrupsies

Basically the bubble is going to way past the start
of the bubble in 1995.

Don't ever believe in the types of people who are
connected to financials, real estates, they lie
for the market.

[Guy]

What are you talking about? GB has abolished boom and bust.

[harry]

Trying to predict the value of house prices Really!The weather tomorrow will be fine, if it dos,nt rain, such confident guess work..If no one is able to sell there properties e.g (shortage of cash flow)how can we have a true reflection of the value of a property anyway..but for sure prices will rise again over the long term.maybe on the 23rd of may 20012 hahahah.HARRY

[David Elliott]

I am glad that Pedro is not building my house!

[Rich]

Before we put anyone on a pedastall let's remember that Jonathon Davis spent a long time being wrong about house prices... Even a stopped clock and all that.

[Adie Lee]

Pedro is onto something here, even if some might consider it simplistic. Insurance companies never insure for the "market value" of a house, rather by how much it would cost to build an equivalent house to replace it. A friend recently insured his house, valued at "£220k", and in discussions with the insurance company it was revealed that in reality they will insure for £60k, the amount it would cost for them to rebuild his house. And conservatory.

From first comments - land registry figures are incredibly inaccurate, due to the number of new-builds sold at ever-inflating prices. One way this was achieved is when developers gave "loans" for the deposit, to make it easier for the buyers to get their mortgage. However, the loan gets added to the value of the property, making it appear more expensive than it really sold for - the result, an upward price bubble.

When we stop referring to houses as investments and regard them as homes, we might see a return to sanity. Why do we want the market to "recover" when they are still grossly over-valued?

[Dean Fox]

The last housing market collapse tells us prices will fall roughly 25% overall, but then level off for a few years whilst earnings catch up.

Prices may not rise as fast as previous booms again, because tight government controls on lending will probably set in. The Conservatives should have done that when they legalised sub-prime mortgage backed securities for their right-to-buy scheme in the 80s, and Labour's FSA should have done it this time around. Neither party will surely make that mistake again, will they?

[martin Cooke]

Where will everyone live then? Is demand going to go through the floor? Prices and rent will not both fall. £200,000 house at current Mortgage rates or £700 pm rent. I know where my money is! Approximately the same cost but you own outright, keep dreaming!!

[Colin Holland]

I am shocked at how naive most "experts" are - pure propaganda.
At auction, house prices have fallen 30 to 45% - this is where the main market is, and it is expected to hit 50-60% early to mid 2009.
So whoever bought their house some 10 years ago may go back to 0 growth.
3 years ago I told a foreign finance minister that whatever UK government is in charge of a major housing disaster will be kicked out for destroying people's only true pension.
Get rid of Brown.
His new initiative called a rabbit out of the hat (for 9000 people in new difficulties) is a bureaucratic DEAD rabbit.

[dean]

Pm your boom as bust ha ha ha house prices to fall by 50%

[tbird]

house prices will never rise over the rate of inflation again as no-one has the money needed to break into the housing market. STOP THE PYRAMID SELLING that's what I say