How To Become A Millionaire

UK Housing - Could You Cope With a 20% Drop In House Prices?

Posted on March 29th, 2008 by James Alliss.
Categories: Uncategorized.

Hello and welcome to my Blog. I keep meaning to update the Blog more frequently but with a full time job and trading the Forex markets I find it very difficult to do so. However, I’ve got some spare time and wanted to point out something that you may find interesting.

Back near the end of 2006 I wrote two articles. One was titled “Are We Heading For A Recession” and can be found here. The other was “The UK Housing Market Is About To Crash” and can that article can be found here.

Now, at the time almost every person I spoke to said that there was no way the UK property market was about to crash as there were too many people for the number of houses available. I continually disagreed and stuck to my guns by saying there was no way I’d buy a house in the UK because it was like an overpriced stock waiting to collapse.

Now let me ask you a question. It’s now the end of March 2008. What do you think is going to happen to UK Housing?

The mess in America over the sub prime mortgages will, and has already had an impact on our housing market. Anyone remortgaging in the near future is likely to see a sharp rise in repayments. If you haven’t already sold your investment property then you should consider how bad your position would be if house prices fell substantially by 20% or more.

I don’t have a crystal ball and I can’t predict the future but perhaps some more of my friends and family may start listening to what I have to say because so far I’ve been completely right. There is no way I’d be interested in buying a house right now because we’re in for a very rocky ride.

If you bought a house say 10 years a go then I can’t see how a housing market crash would cause you too many problems since you’ve had such a substantial up move. But if you’ve released equity in your home based on recent prices, then you could feel some real pain over the coming year.

Another thing you may want to consider is that the UK is vulnerable to all the same problems that the US has because our banks have been exposed to the same sub prime mortgage debt. In fact, we are more so because our housing bubble is even worse and consumer debt is higher here too.

Here is a final though: Warren Buffet, who is now the richest man in the world said “the best investment anyone can ever make is to pay off their mortgage early”.

James Alliss.

0 comments.