the idea that US sub prime loans is mainly a US problem and what we will suffer is merely the contagion and will pass over quickly is a delusion. the US mortgage market has in fact far more stringent controls then this country , so there definition of subprime is mortgages over 90%,btl's,self certificated, and interest only, and this constitutes most of the uk market. the coming downturn will not be a correction a crash much worse then 1990 in my opinion. greenspan reducing interest rates to a ridiculous level and the labour party taking housing off the cpi not a smart move. mike

mr morgan , gold coast city, australia

If I own several properties outright, with no borrowing, and the properties are in good locations and produce approx 5% pa, why would I want to sell? The only reason I can think of is that the market is certain to fall materially and I could buy back the properties at a cheaper price (taking into account sale and purchase costs). What is the advice of those who purport to have a crystal ball?

Joanna, London,

"no crash", instead a "correction"? Surely if market 'corrected ' itself, then we will be talking about falls of 30-40% (HSBC and IMF assessments). Now 'correct' me if i'm wrong but if my £160'000 house became worth £112'000 (30% reduction) it would feel like a crash to me!

Stuart, sheffield, uk

As a BTL investor who is offloading his properties, I can safley say prices are heading downwards - I had a vested interest in them stagnating or increasing slightly but it isnt going to happen so i'm cashing in before the real falls start to happen - primary reason is that the cheap cash that flooded the lending markets and fuelled the price growth over the last 5 years is no longer available - average joe can no longer borrow 5 times his salary to buy a studio flat in dodge-city demand is reduced and therefore prices will drop

this is just a basic lesson in economics - the sooner that an average wage allows you to buy an average home, the better

Portfolio Pete, London,

I agree with Get Real. If I were to sell my house and 'get out' as has been suggested, where would I go? My mortgage is currently cheaper than a similar rental property monthly, also similar rental properties are pretty hard to find.

shaun, Devon, UK

I would like to make some hopefully not too emotive observations and comments on this subject.
If my memory serves me correctly the previous housing crash in the late 80s arrived due to considerably higher interest rates to cool considerably higher inflation, with the fall in prices only occuring when unemployment was much higher. We are in a much more stable environment currently.
Estate agents need turnover to survive, they will encourage people to accept reduced offers to keep the market turning over especially seen as people who do not have to move will stay put in the current climate thus reducing their business further.
I personally have a BTL portfolio and will not be rushing for the exit. The motgage costs are easily covered by rent, I have a significant equity buffer, it is a long term investment my decision to sell will be mostly driven by tax considerations.

Phil, London,

It is really annoying to here so many people bitter and jealous about their lack of success with property investment. Property is a leveraged investment like any other asset class, the majority of property 'owners' do not entirely own their properties they own a minority or majority share in the asset, fact. Nobody has a birthright to ownership of any asset, lets start a blog about how unfair it is that we can't all own a private jet. Another fact there are affordable homes in the UK for first time buyers, unfortunately they can't all be housed in Chelsea, lets start another blog. Property investors are not the cause of supposedly high property prices in some areas, divorce, spoilt single people, immigration, snobbery and increased life expectancy are. We should be celebrating the UKs wealth and prosperity and not be trying to bring about economic downturn. If property falls so will the economy and unemployment will rise particularily I expect for those first bleeting singletons!

Phil, London,

I agree with the article there will be no crash.............................................. just a correction of about 40-50%.

Al, Brighton, England

It is interesting to see the huge negative opinion of the market here. As a Central London agent it is true that I have seen a slow down in keen buyers, but there still is a shortage of stock.

People have been building up on the fence for years so any drop in prices will see an influx of buyers to bolster the prices back again. Basic market economics and the rest of the UK generally follows the trends here.

Nobody can tell what will happen to the World markets or whether or not a huge disaster could hit us too, but when you look at the basic economics it does sway more towards a stagnation rather than the huge polical and economic cock up of the 1990s crash. We have a strong economy, low unemployment, lots of property investors and lots more small households than a decade ago. Many investors can ride the storm of a downturn and thus restrict the panic selling that is required for a price crash. Thus there is a real shortage of stock for the average buyer which is unlikely to change.

Tom H-B, Belgravia, London

I think that Get Real should follow the advice of his name. He may well have 'scrimped, saved and borrowed' to buy his current house, but the fact of the matter is that it is the timing of when he did this that matters. This is a matter of luck in a high inflationary environment, not skill. Is it the fault of new graduates now entering the workforce that they weren't born in the year he was born? I suppose so following his logic.

The question you should ask yourself is would all of your scrimping and saving today allow you to borrow enough to buy your property at current market value? If not, then there is a problem with the level of prices relative to even your no doubt impressive income. Whether you like it or not asset bubbles, driven by cheap credit and speculative investors have always ended in tears. This is no different.

Weak foundations, Birmingham,

Yes, it really is time to get real. It's simply not possible to have ever-increasing house prices without increasing earnings. If someone is happy to pay over-inflated price for a shoe-box flat then be it, but please don't start crying when the prices fall. It's already started in the Northern cities like Leeds.

Peter, London,

Hey GetReal, no crash? I thought so too once, but increasingly I feel that one is coming.

You need to consider the buytoletters. There are thousands, and they are losing money every month. Clearly, crash or not, we are at the top here. As an investor, you would be crazy not to sell (or try to sell) now. This will lead to alot of property coming onto the market. Couple this with higher rates, tougher mortgages, and high construction levels, and you definitely have the elements in place for a crash.

And your comments re. whining non-home owners, consider nurses, policemen etc, that don't earn high salaries like you. They are doing great jobs serving YOU. Where are they supposed to live?

ab, quimper, france

The best qualified experts to judge the housing market are those who have owned property for a few decades and seen this sort of thing before. The housing market is not a pure market in that the commodity is not traded as a livelihood, but has an intrinsic value to the owner. He is not obliged to trade it regularly. What happens in the housing market is that when prices stagnate or fall the only properties available to buy become those arising from death, divorce or relocation (where the move is actually worthwhile upping sticks). This reduction in supply automatically underpins prices at around the levels when the downturn arrived. Housing requirement projections are a bit of a clue here don't you think?

MEJ, Uzes, France,

I find it slightly disturbing that so many frustrated would-be property owners, guys who feel they've been left behind because they didn't or couldn't get on the ladder, should open up such emotive zeal here.

However bad you feel about having stayed out of the market, remember those of us who worked hard, scrimped, saved, borrowed and rented out rooms to pals etc, have made our own luck.

And the market, no matter how much you'd like it, is not going to crash: there is no mystery, property is worth what people will pay. In good areas, there is excess demand. Without higher unemployment, drops in incomes and/or much higher interest rates, effective demand will not fall much. There is no reason why it should.

Sure my mortgage has risen from £2700 to £3500 per month, and I am not seeing 1-2% monthly rise, but there is no problem paying the mortgage and everyone wants a house like mine.

Understand that there is no market, only people like you and me. We want houses and we can pay.

Get Real, London, UK

Lower value properties are those under 350000 pounds!!
What a laugh. And cause for tears!
What about lower earnings.How many times lower earnings are needed to buy a lower value home.
Low interest rates and crazy borrowing have bankrupted the country.It's a housing based economy,and it is frightening.

nic, royan, france

All the indices and signs seem to be clearly indicating a fall and yet the author thinks that prices will simply go flat. I can only presume the author has a large buy to let portfolio and is living in denial.

terry, ruislip, middx

"Suddenly homes are for nesting not investing. Get ready for the trend to cocoon."

I'm sure there's only so much "cocooning" (sounds more like head-in-the-sand to me) many people will be able to do once their mortgage costs rise sharply and they're desperate to move (but unable to sell at their desired price).

Use whatever euphimisms you like -- the crash has started, and it has a long way to run yet.

Johan Prose, London, England

Anne – you say, "No respected commentator currently believes there will be a repeat of the crash of the late 1980s". Can I point out that no 'respected commentator' was predicting the run on Northern Rock - but the run on a bank was widely predicted by those of us who don't wear rose tinted spectacles and, having sold our houses, split the money between numerous banks to have no more than £35k in any one bank. We were written off as 'doom-mongers' before and, from your comment, clearly still not worthy of 'respect' (my comments on this site are normally not published). Hopefully when we all see prices falling dramatically, you will have the good grace to admit that, whilst you didn't see it coming, others did.

Tony Marshall, Fareham,

The writer makes the usual mistake of believing that there cannot be a crash unless the exact same conditions exist that caused the last one. High intererest rates and job losses.

It is like someone in 1913 saying that their ocean liner cannot sink because it does not sail anywhere near icebergs.

And to say that no respected commentator thinks there will be a crash is just factually wrong. Presumably she counts mortgage providers, estate agents and surveyors (who are all spouting this soft landing wishful thinking) as respected commentators when everybody knows that we should ignore their propoganda.

Tony, St Albans,

"Are we in for a crash?

Correction would probably be a more appropriate description. Stagnation-not slump - appears to lie ahead."

This is complete nonsense! Have the laws of economics suddenly changed?

"No respected commentator currently believes there will be a repeat of the crash of the late 1980s which was the result of a shock upward move in interest rates and higher unemployment."

Who are these 'commentators'.? Respected by who? The unemployment came after the crash!

"Lower City bonuses mean there could be fewer bidders for properties between £1 million and £2 million."

This one sentence explains why record numbers of ordinary Britons are leaving this country and will never look back!

Good riddance to an overpriced, rip-off, family-toxic and miserable place!

Colin Camper, Blackpool, France

It would seem that the word 'correction' has the connotation one desires. It might for example be a 10% fall in three years as in 1990 - 1993. It might be the 30% correction with no timescale that HSBC suggest.

Perhaps David Smith who denies that there is a sub prime problem in the uk would like to contribute?

Pete Balchin, Solicitor , Bristol, UK

House prices have been artificially boosted at the tail end of this downturn by the progressive extension of Hips. Early in the Summer this caused a glut of 4 bedroom properties to come on the market. Then 3 bedroom.

Well, lets see what happens in the January/February house price figures when things go back to normal and include a surge in 1-2 bedroom properties to come onto the market up to the introduction of Hips 18th Dec.

The 31% fall in transactions year on year is the real indicator of house price sentiment at the moment - don't be lulled into a false sense of security by Anne Ashworth's soothing words; it could prove expensive.

harry e, London,

should I sell my house now?

If it's a home, then only if you happen to want or need a smaller/cheaper one in the next 5 years or so( Ignoring factors that are not purely financial, of course). If that's the case get out now when the goings good.

If it's a "property" or "investment", then most definitely yes, and as fast as humanly possible, if not faster.

Dave D. Ubious, London,

This person must be being "economical with the truth".

The best way to avoid the housing and general crash is to sell all and let the rest suffer. It may be possible to move to another area of the market in order to to cover day-to-day costs.

If you are a humane person, stay in and take your share of losses with the rest of humanity.

Lets hope that capitalists sell out now so that someone has capital left to re-start things after the dust settles.

The reason financial institutions are saying that a 20% crash in house prices is unlikely is that many would be suffer difficult losses and some bankrupcy/liquidation if this was the case. Running a business as a Director would mean you were trading fraudulently today, a serious crime.

More heads will be rolling at UK and USA banks, if it is politic to do so when confidence is so critical.

I have lost all my assets. I see the crash as an opportunity to start again, earlier than most who are yet unaware of their future..

RichK, Southampton, UK

The writer sounds as if she lives in a prime residential London home and is married to a city banker. Careful, he may loose his job over the Credit Crunch along with the many thousands predicted by the City. Does she not realise the £350K is the average London house price. Has anybody asked who the Buy to Let investors are going to sell their portfolios to when they need their pensions, without the first time buyers to step in I expect the only people to sell to will be other BTL investors - problem is they won't be silly enough to pay the high prices. Interesting times.

William Rouse, Exeter, Devon

You need to substantiate your assertion that the market will merely stagnate. That's a big call reading future trends. If we're to take you seriously you'll have to do better that that.

To me it sounds like spin. Of course governments and some homeowners want a soft landing. But the trend line is the median line thgrough the highs and lows. Markets heading down tend to overshoot just as they tend to over shoot on the way up. There's no good reason why, if house prices are 30% too high (as the IMF suggested) why they shouldn't slump to a point where they're undervalued.

Indeed when sentiment is running against a market something often has to look cheap to tempt buyers back in. At a minimum rental incomes on properties will have to exceed other secured investment returns after expenses - getting 4.5% or less is simply not sustainable in a downswinging market - any property owner in their right mind will sell and bank the cash instead.

Give it up Anne the market's turned.

Jonathan, London,

Clearly the author of the article has far better experience and deeper knowledge of economics than the IMF (UK House prices 40% over inflated and due for 'correction') and the Chief Economist of the HSBC (UK House prices 30% over inflated)..... Phew!!! I for a moment I actually thought this was meant to be a serious article but now I realise I must have clicked into the joke section......Its also interesting how the English language adapts itself to the situation, 'Correction' does not have a specific percentage value associated with it does it?

Arthur, Penzance, UK

Erm,

All the indicators are downwards and even the estate agent are saying prices will fall. It is likely they wil fall very far indeed.

There is no thought process required, sell and sell quickly.

Robert, Oxford, UK

Despite the length of the article, the title question was not addressed.

Selling now and waiting for a prices to drop substantially would make economic sense if the turmoil of a move won't put you off, or if you are a BTL investor. There isn't much to lose by moving out of property for the next 3 years, and plenty to gain if the downturn is sharper than predicted.

Since even the recent HSBC property report indicates a 30% correction level, I'd disagree with the reporter that economists aren't sticking their necks out with such predictions.

Markets never stagnate, they either rise rapidly or fall sharply, that is the nature of a market and historically there is no such thing as a soft landing leading to an orderly correction. When the trend is certain to be a decline, people will move fast to stem their losses, which inevitably always leads to sharp corrections.

Take Northern Rock as a prime example, good business, but stampede and problems created by the general public.

Joanna, London,