Why House Prices Will Now Crash

Vernon Coleman

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 mortgages.

No more.

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 consequences?

The demand for property will continue. And with the pressure maintained artificially house prices will continue to rise.

Until they crash.

Bankers and mortgage companies have put in place the requirements for a major house price crash.

When is it likely to happen?

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