View more on these topics

Property Price Party Poopers

Property advisers Jones Lang LaSalle has warned that the recent reports of UK house price increases is merely a rally that will lead to further falls.

This week Halifax reported that house prices have increased by 0.8 per cent in August and Nationwide reported that last month was the fourth month in a row where UK house prices had increased – but the property experts expect much more pain into 2010.

Jones Lang LaSalle head of residential housing James Thomas says the pick-up is “irrational” and without improved lending, a slowdown of unemployment or an increase in new properties, the market will struggle going into 2012.

He says: “The economic fundamentals that have supported the upturn, most notably the constrained supply of housing for sale, will be eroded as unemployment hits a peak and mortgage lending remains weak. It is impossible to ignore the short-term risks posed to the UK residential sector by rising unemployment and poor credit availability.” managing director Kevesh Thukaram agrees. He says: “Property prices are definitely recovering but only in the short-term – the economy isn’t out of the woods yet. We are in the middle of a recession not a sustained recovery – this is a false dawn in a mini-bubble.”

Most advisers I talk to are pinning their hopes on house prices continuing to grow into the new year – if equity grows, risk shrinks and lenders are more likely to offer mortgages, which will kick-start the market and hopefully the real economy at large. But Thomas goes as far to say that house prices will fall by 7 per cent in 2010 – if that is the case the UK can expect the mortgage drought to run in the next few years.

This means people will not want to move, first-time buyers will be unable to take their first steps and the buy-to-let market will continue to be plagued by ‘accidental landlords’. Lenders will retreat into their shell even further and loan-to-value ratios will become ever smaller.

Also, if the dearth is to continue for years rather than months, what does that mean to the continuing repossession and arrears forbearance being shown by the mortgage lenders?

If unemployment increases and mortgage activity remains stayed, then how long can a lender keep offsetting owed debt while assets decrease in value? GE recently revealed it was losing more than £1m in the UK every day thanks to rising arrears – if house prices keep falling can the Government-backed forbearance measures still continue?

What do you think? Are we out of the woods or is this just a false dawn? Tell us your thoughts below.


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Clear bull trap
    I have to agree. Unemployment obviously hasn’t peaked, and there’s little repossession media hype yet, so this must be a housing bear-rally/ bull-trap/ DCB/ whatever term one prefers. Winter will be tough, and the thought of a V-shaped housing recovery starting from where the mean property price intersects the long-term trend line i.e. where it currently is, is clearly a ludicrous thought in anyone’s universe … unless of course you operate within the noble faculties of real estate, politics or banking.

  2. house prices
    house prices went into free fall for a while in some areas in Decenber- February. Recent rises are a correction of that undershoot. Mortgage repayment as a % of net income are quite low. Most people are in work. Limitied new house building. As banks recover hey will lend more. I suggest house prices have stabilised and may go up a little more. Property rarely drops sharply In 1989 a surge happened as income tax relief was removed so this exaggerated the fall. Banks are recovering and UK property is a sound investment in my view

  3. Property Price Party Poopers
    House prices are still crazily high and the only thing preventing a total meltdown is the currently very low rates of interest on mortgage borrowings. If interest rates rise just a few points, then a lot of mortgage borrowers are going to be in dire straits. I bought my first house for 4 x my then salary (and the multiple would have been less had I not been in the fortunate position of being able to put down a substantial deposit). First time buyers now are having to buy at a minimum of 6 x salary and often more. This is not a sustainable state of affairs. There are certain immutable laws of gravity in matters of finance as in anything else and pretending that those laws have somehow been conquered and banished is simply living in cloud cuckoo land.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm