Why House Prices
Will Now Crash
For some time now I
have believed that UK house prices would not crash.
Despite being vastly
over-inflated, I believed that house prices would merely stabilise - stop rising
as rapidly as before for a year or two, to allow wages to catch up with
It now seems to me that British lenders have
laid the foundations for a serious crash.
1. Banks are lending 120% of
the cost of a property.
2. Mortgages can be obtained for five times earnings
- instead of the traditional three times earnings.
3. Mortgages can now be
obtained for periods in excess of half a century.
The demand for property will continue. And with the
pressure maintained artificially house prices will continue to
Until they crash.
Bankers and mortgage companies have put in
place the requirements for a major house price crash.
When is it likely
I have no idea. It could be a year or two. But, looking at
today's prices - and the bizarre new lending rules which have been introduced to
keep the market rising - I don't think the coming crash can be too far away.
Copyright Vernon Coleman 14th November 2006