Chief Executive of the nationwide Building Society Graham Beale admitted to the BBC that he felt house prices would drop by 25% by 2010. This at least goes some way to make my own crude prediction of 50% by 2015 look a bit more realistic. I still think that the market could overshoot that 25% mark and bottom out at 50% of the peak of two years ago.If Beale's predictions are correct, then more than two million homeowners may find themselves in negative equity along with anyone who buys a house within the nest two years... If I am anywhere near the mark, it will be a heck of a lot more than two million who may suffer. Negative equity will only have an impact on those that experience an inability to pay their mortgage or would normally liquidate some of their property equity, so it is not always a disaster, and if they can carry on paying the mortgage ultimately the equity will stabilise and regain it's previous level.
What can we do about it?
Firstly do not try to liquidise any of the capital in your house, do not borrow against your property and make sure you do your budgeting so that you can always pay your mortgage. Do not assume that the housing market will recover any time soon. If you are looking for your first house wait for maybe two years if you can. If you are thinking of buying a bigger house, probably best to wait for two years if you can. Re-asses the market in two years and be prepared to hold out even longer.
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2 comments:
Hi Credit Cruncher,
I feel that we are likely to see a bottoming out of sold prices in 2009 (asking prices may well fall for longer) but I am beginning to feel that a 25%+ fall in prices is likely - I've already seen it on a couple of occasions.
Can I ask you a question? Under what circumstances would you buy at the moment?
I would only buy if it was a long-term investment and I had a lot of capital (which I don't...)
I am still gonna stick my neck out for 50% by 2015 just bear in mind how much prices have risen over the last 12 years... it very nearly reached 400% at the peak.
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