Open any paper and it is all doom and gloom. The Sunday Independent ran an article this weekend quoting Peter Spencer from Ernst and Young who published their summer forecast yesterday. In a nutshell they predict the housing market will get worse before it gets better.
This is of course not rocket science as we head towards Christmas but what is a worry is the 'R' word being touted around. 6,000 job losses at Wolesly, a plumbing and building merchants and other job losses in the supporting industries means the effects of the slow down are being felt further down the line, mainly as orders dry up and invoices are not paid. The rest of the economy has to panic as well for a recession to really bite and the press are doing their best to ensure that happens. For example, the report says the UK is 'flirting with recession', the papers say the UK is 'heading for recession'.
Anyway, my very humble opinion is that with consumer confidence so low it will only be the brave who come out of the winter property market hibernation looking to sell/buy property the rest will sit on it for another year. People with money will look at picking up deals in the second quarter next year and house builders will be forced to spend on marketing and come up with novel ways to shift their stock.
Here is what the reports says about the housing market:
And the free fall in housing market will continue
Credit markets in the developed financial markets are still showing little sign of loosening and continue to impact on the increased cost and restricted availability of mortgage finance. In light of the deteriorating economic environment, ITEM expects that house prices have significantly further to fall.
Spencer says, "We expect prices to drop by about 10% through 2008 and a further 6% through 2009. At the same time, we expect housing turnover to fall by about 35% this year and a further 10% in 2010, with all the usual effects on the associated expenditures. It is worth emphasising, however, that the correction in house prices is likely to be far greater outside London."
I also read a piece in the FT this weekend that analysed the crashes since 1720 odd and one thing is for sure, it will get better and then we will have another crash in the not so far future as apparently we never learn the basic fundamentals of risk (well, the banks never learn) and we all get caught up in the roller coaster of the good times forgetting that they cannot last inevitably.