Property Crash Could Be Coming
Property industry watchers are warning that a property crash could be on the way, the like of which we haven’t seen since the 1990s.
Consumer confidence has been badly hit by the Northern Rock crisis – a very obvious manifestation of the global credit crunch that has come to Britain’s high streets. This has increased the possibility of a housing market downturn – especially in London.
Chief economist at the Royal Institution of Chartered Surveyors, Simon Rubinsohn, thought there was now a one in ten chance of a crash on the scale of 1990 to 1993 when negative equity hit so many families in the UK. He rated an even higher chance – 20% – of a 10% fall in property prices in London in the next 12 months with mortgages taking the biggest hit. The capital has been the strongest market performer over the last year, but the best hope it has got for the next year is to flatten out to no change.
The images on our TV screens and on the front of our newspapers of savers queuing round the block to withdraw funds from Northern Rock is bound to have an effect on consumers, and could result in slowdown in consumer spending, a fall in economic growth and a halt in the property market.
Already it has been reported that London estate agents have seen a drop in the number of enquiries, the quietest weekend of the year coming straight after the Northern Rock loan crisis. The market, some agents say, is taking a breather, with the buy-to-let market looking particularly vulnerable as lenders view it as riskier – despite an impressive payment track record by investors.
Major property developments in London could also be hit. The £1bn Shard of Glass tower is at some risk after the firm behind it complained of problems in the financial market hampering its attempts to secure further backing.
Better news all round was that the inflation rate dipped to 1.8% in August – from 1.9% in July – though food increases are expected to take it back up again soon.