Emigration Blues – Houses Not Selling

In recent years, emigration has been easy – with little difficulty when it came to selling a house.

In Britain’s soaring property market, houses sold quickly, for a good price and provided a tidy sum to help buy a house overseas. Indeed, for the few years of the century, many people were fortunate enough to leave the UK with enough money to buy their next house outright.

In the last 12 months, however, house sales in the UK have collapsed as mortgage funding has disappeared. Many would-be migrants have been forced to consider letting their houses in order to make the move.

Now the chief executive of the Nationwide Building Society has delivered a further blow to the aspirations of people hoping to emigrate.

Speaking to BBC News, Graham Beale, said he thinks house prices could fall as much as 25 percent from their peak, forcing 2.5 million homeowners into negative equity.

Furthermore, Mr Beale also said he expects no signs of a property market recovery until 2010.

“I think that next year we will see a similar pattern to this year…we will see further falls in house prices. And I think before we really get to the new world, whatever that is, I think we will be into 2010.”

Mr Beale’s comments follow in the wake of other predictions of property market doom:

• From Jeremy Grantham of GMO, who wrote to his shareholders in July: “In the U.K., house prices could easily decline 50% from the peak, and at that lower level they would still be higher than they were in 1997 as a multiple of income! It is a truly ugly thought that mortgage lenders and the guardians of the financial system seem never to have considered, at least until recent weeks. If the price goes all the way back to trend, and history says that is extremely likely, then the U.K. financial system will definitely need some serious bailouts and the global ripples will be substantial. Of all the negative possibilities out there, and there are plenty, real pain in this area is the most likely; I would say, nearly certain.”
• From Roger Bootle of Deloitte, also in July: “Accordingly, the lower pound will not prevent the economy from slowing sharply over the coming quarters as steep falls in house prices, a squeeze on real incomes and the credit crunch hit domestic demand. We now expect UK house prices to fall by around a third by the end of 2010, with severe adverse effects on household spending and investment.”

On the other hand, some sellers are taking heart from July’s Land Registry Monthly Report, which indicates that prices are down by just 2 percent in the past year.

The Land Registry Report is based on all sales – including cash purchases. Bank and Building Society figures only reflect purchases made by their borrowers. Hence, in an environment where mortgages are much harder to obtain than in previous years, property sales that depend on mortgages will be hit hardest. So, while the Land Registry records a 2 percent annual fall in house prices, Nationwide finds that prices are down 10.8 percent while HBOS finds prices are down 10.9 percent.

So what should anyone wanting to emigrate do?

• If you believe the doomsayers, it makes sense to sell now – even for a bit less than you hoped for. You’re going to get more money doing this than if you wait while prices continue falling. You will be able to drive a hard bargain when you buy in weakening property markets overseas.
• If you believe people are talking down an essentially healthy property market in the UK, and a new bout of house price inflation is just around the corner, then you should rent out your property to enable you to complete your move overseas.