Property pundits are dusting off the crystal balls. Most couldn’t do worse than last year: many said then that prices would “at worst, fall by only 5%”, says Edmund Conway in The Daily Telegraph. Take our largest building society, the Nationwide: it predicted a “significant slowdown” in annual house price growth in 2008, but to 0% at worst. Yet its December index showed that prices dived 15.9% in the past 12 months. Hardly surprising that Nationwide, Halifax and the Council of Mortgage Lenders (CML) aren’t making price predictions for 2009. “Whether this is because of their lack of confidence about their forecasts or their embarrassment about the state of the market is another question.”
Among forecasters who are giving their views, there’s a new unanimity, says the Daily Mail’s Graham Norwood: “prices will fall further across Britain”. Yet even “pessimists” such as Legal & General Investment Management (LGIM) may not be pessimistic enough.
LGIM expects prices to fall another 10%-15% in 2009 and says “it will be at least ten years before we see prices return to their 2007 peak levels”. But as Reuters reports, the property swaps market (where individuals basically bet on the direction of house prices) suggests we have another 30% to go before December 2010. It could take far longer than ten years for prices to return to their 2007 peak in real terms – if they ever do. The credit boom that fed them was unprecedented and won’t return soon.
Even a slowdown in price falls could be a long way off. Daft income multiple and 100%+ mortgages are history, and deposits now need to be 25% or more. Monthly house-price falls accelerated in December to 2.5% (Halifax) driven by mortgage approvals falling – November’s 27,000 was the lowest since the Bank of England started compiling data in 1999.
“Whatever the further government intervention, arrears will be as bad or even worse than in the early 1990s,” Ed Stansfield of Capital Economics tells the BBC. That’s largely because the jobs outlook is so dire – the British Chamber of Commerce expects unemployment to rise to one in ten within two years. That, says the CML, means we may see 75,000 repossessions this year, a rise of 67% on last year. Or more – 75,000 was the peak reached during the last recession. This one already looks worse: 2009 is set to be a truly awful year for the property market.