Negative equity fears soar after record slump in house prices

Thousands of homeowners were plunged into negative equity this month as house prices slumped by £5,000.

The cost of an average home fell by 2.5 per cent during May, the biggest monthly decline since records began in 1991, figures from the Nationwide Building Society show. House prices have fallen by nearly £12,500 since the market turned in October.

Gráinne Gilmore, Economics Correspondent and Rebecca O’Connor, The Times - 30 May 08

This month’s slide in prices prompted economists to forecast that house prices would fall by more than 20 per cent in two years. This would plunge two million homeowners, or one in six mortgage borrowers, into negative equity, according to Morgan Stanley, the investment bank.

Howard Archer, of Global Insight, an economics consultancy, said: “The 2.5 per cent plunge in house prices is a real shock and will fuel concern that we are now headed for a sharp correction in house prices. Our latest forecast is for prices to fall by 7 per cent in 2008 and 9 per cent in 2009. However, it now looks more likely than not that house prices will fall by 10 per cent this year and 12 per cent in 2009.”

Capital Economics, another consultancy, says that its prediction of a 20 per cent fall in house prices is “firmly on track”. Nearly 370,000 borrowers will be in negative equity if prices fall by a total of 5 per cent this year and next, Morgan Stanley said. Prices have already slipped by 4.7 per cent since the beginning of the year - full article

See also: http://www.youtube.com/watch?v=W-jH_xcaZng

House prices fall for eighth month in a row

Annual house prices in England and Wales decreased from 3.6 per cent in March to 2.7 per cent in April, taking the average to £183,626, according to the latest figures from Land Registry. This is the eighth consecutive fall in the annual rate of growth.

Land Registry - NDS - 30 May 2008

The monthly change for April is -0.2 per cent. The volume of transactions was also down from the same period last year, with an average of 72,479 per month between November 2007 to February 2008, compared with 103,141 per month from October 2006 to January 2007 - full article

UK house prices have their Wile E Coyote moment

Those who remember the Road Runner cartoon will know there was always a moment, just after Wile E. Coyote was tricked for the umpteenth time into running off the edge of a tall cliff, when he appeared to be momentarily suspended in mid-air before plummeting towards the ground.

Tim Bennett, Money Week - 29 May 08

Well, UK house prices have just had their Wile E. Coyote moment. They rose, they stalled, and now they are unquestionably in freefall. According to the Nationwide, prices fell 2.5% in May, significantly more than they did in April (0.9%) and the most since Nationwide’s records began back in 1991. The average house price in the UK, on Nationwide’s numbers, is now £173,583. That’s 4.4% - or £8000 – less than this time last year. Worse, prices have now been falling for seven months in a row, the longest stretch of its kind since 1992 - full article

See also: http://www.youtube.com/watch?v=W-jH_xcaZng

UK banks ‘could cope with 20% drop in prices’

Britain’s banks and building societies could absorb a 20 per cent fall in UK house prices in a year without further denting their capital reserves, according to research by Moody’s, the credit ratings agency.

Peter Thal Larsen, Banking Editor, FT.com - 30 May 08

The study, to be published on Friday, comes as shares in the UK’s largest lenders continued to slide on Thursday, raising fresh concerns that the investment banks that have underwritten the rights issues for Royal Bank of Scotland and Bradford & Bingley would be left holding a substantial proportion of the new shares - full article

Sale and rent-back set to soar

Sale and rent-back set to soar

Landlords who get into the sale and rent-back (Sarb) market can offer a service which is both ethical and profitable, says Emma Tyrrell

Telegraph.co.uk - 30 May 08

Thousands of landlords are attempting to break into the sale-and-rent-back (Sarb) market, drawn by below-market-value prices, and the growing number of people facing repossession.

Despite a new investigation into the market by the Office of Fair Trading, and bad publicity over the actions of rogue operators, sale and-rent-back is on the increase - full article

Can holiday lets beat the property crunch?

What’s really going on with buy-to-let? Another day, brings another theory. We are told it’s a bad time to enter this tricky market, then we learn that this is a good moment to join the buy-to-let gravy train.

Liz Rowlinson, Daily Mail - 30 May 2008

What’s certain is that with self-catering holidays now accounting for 60% of all trips taken abroad, it shouldn’t be difficult to let out your property in the sun.
The market-research company Mintel predicts that foreign self-catering breaks will exceed 34 million by 2011, so it’s a growth area worth tapping into - full article

Insurance confusion puts Landlords and Tenants at risk

According to Leaders, one of the UK’s largest indpendent letting specialists, many tenants who do not have contents insurance believe that their landlord’s insurance policy will cover their contents; however this is rarely the case.

At the same time, many landlords make the mistake of thinking that they are covered by standard buildings insurance for letting their property to tenants. However, a standard home insurance policy will often exclude cover for any property from which income is earned; and any claims made on such a policy could be rejected by the insurer.

This means that many landlords and tenants are risking thousands of pounds of their personal possessions by not insuring themselves against accidents, bad weather or crime.

A recent survey estimated that almost a million private tenants have no home contents insurance, despite the fact that a third of private renters surveyed said that they estimate their possessions to be worth more than £10,000 in value, with some individual items worth over £1,500.

Continue reading Insurance confusion puts Landlords and Tenants at risk…

Rental Headaches Revealed in New Survey

PEOPLE in Britain panic most about whether they have remembered to change their billing address when they rent a new home, a survey has revealed.

A survey of tenants by The Deposit Protection Service (DPS) revealed more than a third - 36% - of movers get flustered over changing the address on their phone, gas and electricity bills.

A further 29% said that they lost sleep worrying about packing and unpacking - while one in five revealed that the prospect of moving furniture gave them a headache.

Just 5% believed that they should worry about their new landlord.

However Kevin Firth, client services director at The DPS, warned that tenants must make time to talk to their landlord or agent.

Continue reading Rental Headaches Revealed in New Survey…

Tens of thousands could face negative equity by end of year

Up to 100,000 homes could be pushed into negative equity by the end of this year because of the credit crunch, the Council of Mortgage Lenders (CML) stated last week

William Kay, The Times - 25 May 08

While this was far more optimistic than a recent Morgan Stanley prediction that as many as 2m households could face negative equity by the end of 2009, it is still a significant admission from the lenders’ trade body.

The council, which represents most large UK home lenders, including the leading banks and building societies, issued its estimate alongside a forecast that house prices will be around 7% lower at the end of this year than at the end of last year - full  Article

Good life turns sour for expat Britons as housing slump spreads to Costas

Britons living in Spain have been hit by a housing crash that has led to the value of houses and apartments on the Costas falling by 20 per cent and estate agents predicting worse to come. A glut of new property, built during a decade of booming prices, has left thousands of homes unsold, increasing the risk that prices will not recover for many years

Thomas Catán in Madrid, The Times - 26 May 08

The Spanish property market has all but ground to a halt, and Spanish and British buyers alike have been hit by the effects of the global credit crunch, rising interest rates and an economy slowing sharply - full article