Will there be a housing crash? Yes – and soon

Will there be a housing crash? Yes - and soon. At Moneyweek.co.uk - the best of the week's international financial media.

August is generally a quiet month in the housing market. Hordes of would-be house buyers are either away on holiday or too hot (or too wet this year) to be bothered with house-hunting. But this August, the 0.6% fall in the Halifax property-price index - the "sharpest fall since December 2000", noted David Budworth in The Sunday Times - seemed extreme even for the summer. Perhaps there is more than just seasonality at work this year? Not according to Lee Watts, managing director of Kinleigh Folkard and Hayward. He has circulated an article headed "Property bubble is not bursting", in which he argues that "the London market is the most balanced I have ever experienced" and claims "the market will pick up again during the autumn months". He's an estate agent, so he would say that, but is he right?

Probably not. A balanced market needs an equal number of buyers and sellers, and today, buyers are decidedly thin on the ground. Bank of England figures show mortgage approvals in July marked their steepest monthly drop since 1990 and are now down a whopping 37% since last year. First-time buyers, who normally account for half of all market activity, have been priced out for some time. But today, they're an endangered species. A recent survey by the Council of Mortgage Lenders revealed that only 37% of the under-25s even aspire to own a home in the next two years. In 1983, that number was 75%.

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