Is the UK Housing Market set to Crash?

The Housing market is certainly a popular topic of conversation these days. There was a time when people felt that ‘house prices would always rise’ However, the sobering lesson of the US housing market is that house prices can fall, and when they do it can be very damaging for the economy.

In some respects the UK is different to the US. We don’t have the same oversupply. Our mortgage industry  wasn’t so poorly regulated, interest rates are likely to fall in the next 12 months.

However, there are several warning signs that prices could be set to fall.

1. Freezing of credit markets has led to a sharp fall in mortgage approvals.
2. Confidence and expectations have changed; future markets are predicting a 10-15% fall next year.
3. Banks are raising standard variable rates due to the credit crisis.
4. House prices to earnings ratios have increased significantly.

I wrote a detailed essay here on: Overvalued Housing Markets