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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (14805)	11/4/2004 10:47:45 AM
From: marginnayan	Read Replies (4) \| Respond to of 116555

Head to head: UK housing market Story from BBC NEWS: news.bbc.co.uk Published: 2004/11/04 13:03:29 GMT The UK's biggest mortgage lender, the Halifax, has said that house prices fell by 1.1% in October. It is the latest in a growing line of surveys that show demand is weakening and sales are falling. Is this it for the UK housing market? Two experts give their different views on whether the UK housing market is finally coming off the boil. Martin Ellis, chief economist at the Halifax I think that it is becoming increasingly clear that the market is slowing down. There is growing evidence that house prices are rising at a much slower pace than at the beginning of the year and activity levels have weakened. House price growth is simply returning to more normal sustainable levels. We have been expecting this to happen for some time and have been surprised it hasn't happened earlier. This is because prices have risen much more quickly than earnings over the past few years, a development that is causing increasing problems for potential first-time buyers who would like to buy their own homes. We are not looking towards a long period of house price falls or a sharp correction in the market The lack of first-time buyers is acting as a constraint on housing demand and is combining with higher interest rates rises to cause a slowdown in the market. However, we have been here before. The market cooled in 1999/2000 when the last series of interest rate rises took effect. There were also occasional monthly falls in house prices during this period, but the overall trend was a slowdown in the rate at which house prices were rising. I think we are now in a period where the market is softening and gradually slowing down. We expect a soft landing over the rest of this year and into 2005 as the market returns to more normal sustainable levels. We could see further monthly house price falls over the coming months as the market settles, but this is part of the normal pattern in the market. Occasional monthly falls have occurred over the past few years even though prices have been on a strong upward trend. No market moves smoothly in a given direction. However, we are not looking towards a long period of house price falls or a sharp correction in the market. Housing market fundamentals remain sound. Interest rates seem likely to peak near current levels. Employment and household incomes, two very important drivers of the housing market, continue to grow. Supply constraints, especially in the south of England, will also underpin the market. These factors point to a steady slowdown. Ed Stansfield, property economist at Capital Economics After last month's surprising rise, this morning's data, showing that average house prices fell by a seasonally adjusted 1.1% in October, is much more in line with other housing market reports which suggest that the boom may be turning into a bust. What we are witnessing is the start of prolonged period of falling house prices October's fall knocked around £1,800 off the average house price. The latest fall, which was the largest since October 2000, if we exclude the technical adjustment to the Halifax index in December 2002, needs to be seen against last month's (downwardly revised) 1.3% rise. But, once we abstract from the volatility of the recent monthly data, the underlying trends are clear. Price pressures are easing, and easing rapidly. With housing market valuations now so stretched, we believe that recent falls in house prices are likely to develop their own momentum in the months ahead and that what we are witnessing is the start of a prolonged period of falling house prices. Although the traditionally busy New Year period could yet bring some relief to the market, any upturn is likely to prove both modest and temporary. Today's figures suggest that our forecast of a 20% peak-to-trough drop in average house prices, which will put the market onto a more sustainable footing, remains on track. Story from BBC NEWS: news.bbc.co.uk Published: 2004/11/04 13:03:29 GMT © BBC MMIV