Well not according to Capital Economics latest housing report.

One of Trumpo’s good pals has kindly provided a copy of a recent report carried out by the highly regarded property analyst Capital Economics Ltd.

It makes for very interesting reading indeed, I have picked out a few of the juicy bits that will certainly make people think about their plans for the next 12 -24 months.

Property prices to fall a further 30% by the end of 2010.

When I first read the headline, I thought no chance, but when you read the reasoning behind it, the headline has some scary legs. We are in the heart of the largest house price correction and it is efficiently being fuelled by a dramatic and continuing rise in unemployment, lack of available mortgages and the inevitable rise in reposessions. One scary prospect is that the gurus predict that for any start of recovery, houses need to drop to an average value of 3 x income, at the moment house values are still at 5 x average income, so the falls required to get to the sustainable and affordable housing market are going to be very painfull for all, and the worst hit are going to be the young and financially vulnerable.

Limited scope for rental growth.

Whilst the letting market may be booming, it looks like its partly being sponsored by struggling building firms, i.e. they cant sell them so they rent them out. One point that will be good for renters is that rents are actually coming down in certain parts of the country, mainly fuelled by an excess supply from private landlords desperate for an income to support their buy to let mortgages. The flip side however for those drop in property prices is that the yields on rented properties will continue to rise, maybe even returning to a long run average of 9%. Thats providing you didnt buy at the peaks.

Land values collapse.

Knight Frank estimate that land values fell by 50% in the year to March 2009 and that the falls were spread evenly accross the country. They also predict a further decline of 35% in 2009.

The major catalyst for the crash in land values is that the large building firms, that had land banks and are in desperate need of cash and are dumping their land to the highest bidders. Capital Economics have put an overall forecast of a 70% drop in land value – WOW!

No Recovery in housing supply in 2010.

The pessimistic figure predicted last year by Capital Economics of 95,000 new dwellings (personal homes & flats) for 2009 has already worsened. The fall in starts of newbuilds is showing that no more than 80,000 new dwellings will be built this year. If this isnt bad enough they are predicting only 75,000 in 2010.

The biggest problem in this arena is credit, or the lack of it, builders cant access the capital to build and buyers cant get the mortgages, it’s a massive double whammy.

Whats bizarre is that the Govt have set a target of 260,000 new homes between 2011 and 2015 – I think we should get the housing minister a new calculator, or a spade to start digging.

What I cant work out is why these figures are being kept so quiet, whilst im all for positive talk, surely nobody in their right mind should be buying a house to see a 30% loss in the next 24 months, and yet the spin doctors keep saying; go on dive in, the property waters lovely – a new buyer should rent for the next 18 months and see what its like then, or else you will just be throwing money down the drain..

I am trying to be positive, but I just cant see anything in the property market to be cheery about, unless your cash rich enough to go fishing for bargains from distressed sellers, then we are all property doomed, for the next 18-24 months anyhow!

Yours and continually looking for a positive spin.

Trumpo.

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