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Crash? What crash?

20th May 2008 | back to article listings BACK    print this article PRINT

That Britain is in the process of a property downturn is not in doubt, even in the eyes of the most blinkered. But while the impact of the credit crunch is well known and recent house price figures are clear enough evidence of what is going on, the question remains just how far this will all go.

Optimists would like to think there will be no crash, just an adjustment as an inevitable market correction gradually dissipates and allows the market to return to a situation of growth if not of boom. In contrast pessimists have suggested a major downturn that could see double-figure falls in house prices, a fear now known to be taken seriously by housing minister Caroline Flint thanks to her erroneous exposure of notes in front of the cameras in Downing Street last week.

But while Ms Flint suggested it was impossible to know how bad things might get, others have answered that question by stating clearly that the answer is: not all that bad at all.

Speaking to the Daily Express, a number of experts in the industry made clear their view that a full-blown crash is simply not on the radar. Housing economist John Wriglesworth said: "There is no sign of a property crash and never has been. Predictions otherwise have been grossly exaggerated. What we have seen is a small correction from a massive peak and there is very little chance of falling into an abyss."

Similarly, Peter Bolton King, chief executive of the National Association of Estate Agents commented: "There is no housing crisis, we have no credit crisis. If anything, we have only a crisis of confidence in the market. We just need a couple of good deals offered by lenders and people will start to borrow and buy again."

Furthermore, there may be signs that the mortgage market - a key element in the recent downturn as home loans have become harder to get - is starting to respond to the improvement in Libor rates. In announcing it is lowering its fixed rate three and five-year mortgages with fees by 0.2 per cent and those without fees by 0.1 per cent, Halifax acknowledged this, a spokesman stating: "These price reductions reflect a recent, modest, reduction in the still very high cost of Libor related funding."

When it launched the special liquidity scheme on April 21st, the Bank of England stated that the aim of the £50 billion move was "to improve the liquidity position of the banking system and increase confidence in financial markets". It did not promise this would happen overnight. But if the confidence of market experts, or moves such as that by Halifax - coming on the back of mortgage rate cuts by Nationwide and Abbey last week - are any indication, those investing in property may be seeing the green shoots of recovery sooner than the pessimists would suggest.

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