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Record Fall in London House Prices

[ Posted October 20th, 2008 ]
 
 
 Londoners find it hard to digest the current real estate trend in their own backyard. As an aftermath of the credit crunch in the country, the house prices in London have plummeted drastically. We anticipated this to happen with the current financial climate but no one ever expected that the credit crunch will hit the UK real estate market this hard and in particular the London market. As we have already noted, August 2008 was a bad month for the UK mortgage industry, repercussions of this are hitting the UK real estate market hard. The house prices fell around 9% in London since last year. It is feared that this is just the beginning and the credit crunch will have further negative impact on nation’s economy and the housing market.
 
Last month the government unveiled a package of £1 billion to help home owners and home buyers by suspending the stamp duty on properties worth up to £175,000. However this move didn’t have the desired impact on the market. According to Miles Shipside the director of Rightmove.co.uk “The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets”.
 
Many People who have lost confidence in the housing market are no longer looking for best mortgage deals but instead are shopping around for rental properties. Many buyers have opted for wait and see approach as far as the housing market is concerned. This has major ramifications for the real estate business in UK which currently is suffering from serious liquidity problems. The rental market on the other had has really been booming and the rents have significantly gone up especially in London. Many first time buyers prefer to rent rather than buy in the present climate.
 
As highlighted above banks are in dire need of funds and Gordon Brown’s government has gone out of its way to help the banks through these rocky times. Many of the banks have already passed on the half a percent rate cut to its customers. This will help ease the mortgage burden on many hard working families who are struggling to make ends meet. The reduction in interest rates may also have some positive impact on the mortgage industry but this remains to be seen.
 
All the major European governments have pumped billions into the banking sector to bail out some of the biggest high street names, otherwise the banking sector would have definitely collapsed. As part of the government bailout plan many of the banks have partly been nationalized. Banks have also become far more cautious when lending and have put in place a much stricter criteria for mortgage approvals.
 
The banking and the finance industry was further rocked by the collapse of Lehman Brothers and AIG insurance had to be bailed out. These events do nothing to improve the confidence in the economy which is teetering on the edge of recession anyway. Since 1987 the London housing market has not seen such demeaning falls. Experts in the financial and real estate sectors believe that house price falls are likely to continue well into 2009.
 

 
 
 
 
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