Sky News business editor Michael Wilson

If you’d been through the property pain of the eighties, your unease may be surfacing again today – if it hasn’t already. The latest misery message from the Nationwide shows house prices recording the largest  monthly fall since their index began in 1991. Prices have fallen by over 4% since this time last year – that’s the biggest monthly fall since the last recession of the early nineties.

Not that this comes as a surprise, given the other elements of economic gloom – and unless the more dove-ish members of the Monetary Policy Committee can sway its present cautious mood - an early cut in the base rate next week looks very unlikely.

Estate agents lay off staff and home-owners hunker down.

But there are some reasons to be cheerful. Even though prices are falling, they are 5% higher than a year ago. Fewer people bought at the top of the market  - in the 1980’s a much higher proportion did. And according to the Nationwide, today’s borrowers have more equity in their houses since they put down a bigger deposit than their counterparts did twenty years ago.

Also, recent mortgagors opted in the main for loans which repaid capital rather than interest - only borrowing , which means , again, that more of their equity is protected.

However, these are slender straws in the flood of other fundamentally bad economic news. Such is the importance of the whole process of house buying, decorating, DIY, furniture and so on, any slow down adds to the whole depressing picture.

Comments

[Bubba Smith London UK 2 Jun 2008 13:04:48]

Mr Wilson;
Is it not about time that you took the gloves off and went after the lying politicians and financial(sic) men who cry "credit crunch" "profit warning"?
Are you unaware that the recent £50 Billion bail out by the government of big banks was merely an exercise to move BAD lending "below the line" and therefore, the way in which bank's will be able to avoid proper scrutiny when filing their Basel Regulations returns?
B&B is yet another example of the poorest standard of lending now coming home to roost.
10 years ago whilst working on retail lending audits (in respect of which I was never able to report properly) I predicted that "todays profits shall be tomorrow's losses"!

[Dom in Harrogate 2 Jun 2008 11:46:32]

As the media has done such a fantastic job of talking down property, it means those that don't need to sell won't so, the expected plethora of unsold property on estate agents books just isn't happening. Take a look for yourselves. Agents have no more unsold property on their books than last year, and in harrogate, it appears agents still have about 10% or more of property on their books under offer. The land registry also confirms that completed sale prices are nowhere near as depressed as some building society and bank surveys would have us believe. Their figures are of course limited to their own lending and if they aren't offering competitive mortgage rates, those lenders surveys aren't worth the paper they're written on. The facts of the matter are that demand is there, it is readily available finance that isn't. Sooner or later, with the well publicised help from central banks, the inter bank lending rate will come down and banks will get back in the business of lending money. That is, after all, the way they make their staggering profits. We are a small island with a huge population and an ever-increasing demand on the existing housing stock. It does not take a genius to know that the media are wrong and in the medium to longer term, the market for property will always be strong. No one surely forgets that property prices have historically doubled every ten years since the war! I feel sorry for those who cannot afford their first home but, owning property is not a birth right.

[Rob 29 May 2008 17:59:49]

There will be much suffering over the next 2/3 years. The government will be honest about the true levels of inflation once there are sure signs that the Credit Crunch is more or less over. So interest rates and therefore mortgage rates will, for a period of time increase causing further pain to the man on the street. These problems have been caused by greed. The greed of the people who trade oil, the greed of people including myself who have lived life beyond their means and borrowed too much and, of course, the lies of the politicians. For this reason we are all in for a massive correction the likes of which have not been seen for many years which will be compounded by the problems related to Inflation. Batten down the hatches - the bad times have only just begun and they're going to get alot worse.

Finally, to H jones -The pain and suffering of anybody is not to be taken lightly - even estate agents have families to support and the fact that they are who they are have kept house prices high and helped the vast majority of us feeling much wealthier than most people have ever felt. I was lucky enough to buy my house 4 years ago for about 60% of todays values - not a feet of finacial brilliance just bought at the right time. Estate agents are amongst several groups of people to be thanked for the good years that we have all had. Now we will go through some hard times its up to all of us to make sure that we can see ourselves through it. One things for sure, it WILL be difficult for the forseeable future but the good times will be back.

[Stew Eastbourne 29 May 2008 16:24:35]

I would like to comment on the possible effect todays announcement will have on the buy to let sector. With mortgages harder to come by and lower overall confidence in the housing market the rental sector should see a boom. However, landlords who own multiple properties will surely be balancing any increase in rental income with the potential reduction in the value of their property portfolio. Those whose confidence is waining and who have benefited from the increases in property value over the last five years must surely be considering quitting whilst they are ahead. A sudden rush of property onto the market would provide a 'tipping point' purely by the economics of supply and demand. I am also eager to await the impact of those mortgage holders who are coming to end of their fixed terms and who may find that the lenders are unwilling to offer such competetive terms. You cannot blame the lenders for exercising more caution, especially with the level of redundancies and business failures expected to rise. I for one will be waiting till the new year at least before rejoining the housing market.

[William Hicks 29 May 2008 15:28:26]

I'm not really sure why the editor thinks falling house prices are a bad thing. Shouldn't it mean people have more monet to buy actual real goods to enable the economy to grow, as opposed to selling the paper wealth of increasig house valuations ? One can only assume the editor favours most pyramid scams ?

[Khalid 29 May 2008 12:51:28]

Sir
Whilst living in an area [Where The Streets Have No Name], naturally, the lowering of prices will bring a smile to those who are buyers, whilst a tear or two for current occupents/sellers.
Nonetheless, the misery bestowed by virtue of many a council' tax is not as flexible as the market itself, albeit re-mortgage and other secured loans are removed from the equation when determining the true value of property based upon current market trends.
However, who would argue that having a roof over your head provides added security for those much sought after of life' luxuries and whether or not one houselhold disagrees with the MPC' stance to sustained inflation, unless the lowering of interest rates is in the interest of all, a level of inner discipline will further eradicate such perceived distress. Still leaving all mums and dads the time to tell their kids that the outside world will not tolerate knives on the streets or you will not live to see the day your room is fully decorated. Have a good day [U2].

[H Jones 29 May 2008 11:43:20]

In these hard times we must pause and spare our thoughts to all of the estate agents who are losing thier jobs right now. The pain and suffering of those poor innocent people must be awfull.

[Michael Cornwall 29 May 2008 11:34:03]

I am an add on so I am worried. I have just been over to my warehouse and driven back through the beautiful Bissoe Valley a wonderful way to drive to work. I called in for some petrol at Richard Brothers Garage,only to be told they dont sell it any more. They said they do not have storage for buying bigger quantities,and the expense is not worth it ,taking into account the cost of card payment. The trouble with statistics and progress is that people, their names, and who they are, is never available.Here in Cornwall we are little people ,I go and buy petrol and it is hello Michael, My friend Jerry has stopped selling petrol as there is nothing in it just sells cars and maintainance.I will make an effort Michael to always put a name to some information that I write to you about.As I said we are little people here but very very important too.