UK House Prices: Support Growing for Second Crash Scenario

Well, you would have to be buried under a stone not to have seen at least one story this week predicting that the second correction in UK house prices is either about to begin, or has already begun. I have read two excellent pieces, one in this is Money, and the other in Moneyweek.

The biggest reality to support the impending doom according to the consensus, is -- something we have written about on this site many times in a similar context -- the lack of affordability in the UK housing market.

This has of course been made worse by the rises in prices since last April. According to the piece in thisismoney.co.uk, house prices rose an average of £1000 last month, just £500 less than someone on the national average salary of £25000 per year would take home.

Then you have the fact that mortgage availability is scarce, with talk of mortgage rationing for the first time since the 80's. Because of the lending situation a hefty deposit is required to secure a decent mortgage.

Unfortunately house prices have been rising faster than most first time buyers can save up that deposit. Not to mention the fact that buyers with low deposits are expected to pay £300 per month more than those with a substantial deposit.

The final nail in the coffin comes from house price analysis website Hometrack, which says that house prices, which rose just 0.1% in January, rose in only 7% of postcodes. More worryingly they said that sales volume (-4.2%) and buyer registrations (-2.7%) both fell faster than the number of property listings (supply -1.3%).

As time goes by there seems to be less and less support for the camp that says the recent rebound was the start of the housing market recovery, and more and more support for the fact that it was a bounce.

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