How far will the housing market fall

We’ve been harping on about the housing bubble for some time here at The Business News Source. As we pointed out it wasn’t ‘if’ – but ‘when’ the collapse would happen. OK, so the ‘when’ is now here and the focus has shifted to ‘how much’. We’ve seen figures for the UK’s housing stock ranging from 30 percent to 50 percent over valued. Interesting to see what the guys over at Defaqto make of this….

“According to a report from Morgan Stanley, co-authored by a former adviser to the government on the housing market, David Miles, house prices will fall by 15 per cent in the next two years, leaving one in ten homeowners with negative equity. Yet, during a speech last night, Bank of England Monetary Policy Committee member, not to mention chief economist at the Bank, Charlie Bean, said that only 5 per cent “of mortgages have less than 20 per cent equity in their home.”
This is what Morgan Stanley says. It thinks prices will fall 10 per cent this year, and 5 per cent next. (By the way, that is almost the opposite of what Capital Economics says, it predicts a 5 per cent fall this year and an 8 per cent next.) As a result of its expected falls, the Morgan Stanley report says 13 per cent of all mortgage loans that were outstanding at the end of 2007 will move to negative equity. Furthermore, Mr Miles says, the final figure will be worse than that, as the figures take no account of those who took out mortgages in 2008.
But it gets worse. For Morgan Stanley also believes that prices could fall by 25 per cent, leaving one in four with negative equity.”

We’ve got some strong advice to anyone considering buying a house in the UK at the moment – in order to build in some buffer for that dream house we suggest that you seriously offer at least 25 percent less than the current realtors valuation – chances are that if it get sold to someone else, you’ll be able to knock on the door end of this year and they’ll be happy to sell at any price.