Watch for falling house prices
HOMEOWNERS in the UK s housing hot-air balloon have had it easy for a long time, safe in the knowledge that the value of where they lay their hat has been rising for a decade. Yet now it seems house prices have inflated so much, the first signs that the b
HOMEOWNERS in the UK's housing hot-air balloon have had it easy for a long time, safe in the knowledge that the value of where they lay their hat has been rising for a decade.
Yet now it seems house prices have inflated so much, the first signs that the bubble will burst are emerging.
Since the last UK housing bubble popped in the early 1990s, house prices have nearly tripled, with the average price currently at £184,924. And it seems people have forgotten that dark period because they're still buying.
However, recently a former adviser to Gordon Brown warned in a report that house price growth has been based on unrealistic expectations and 'significant' falls in value are likely.
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When his announcement was made, the shares of sub-prime house loan lender Kensington Group plummeted, making it the biggest loser in the FTSE350 that day.
The company warned that profits would be at the lower end of City forecasts, while profit growth in 2007 would fall, due to 'intense' competition.
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It seems lenders are finally starting to come to their senses. The Financial Services Authority recently warned banks should now be planning for house prices to fall 40 percent.
In fact, Kensington is one of the first companies to announce it may hold back on its lending, which may mean others will follow suit. And when that happens, a collapse in prices is likely.