The coming year will be a record-breaking one for the housing market. The only trouble is, the records being smashed are those charting the limits of poor performance. A cursory glance at the statistics points to fat chance of any recovery in 2009, with a worse year ahead than 2008.
For starters, RICS figures show that on average, chartered surveyors are now selling less than one property per week - a new record low - and the Halifax House Price Index has fallen15.7 per cent since last August's peak.
"In the early 90s, the peak-to-trough decline in house prices was 13.2 per cent, meaning this correction has already surpassed the 1990s crash," says Capital Economics property economist Seema Shah. Capital Economics now forecasts that house prices will fall a further 20 per cent in 2009, driven on by recession and unemployment.
Such a bleak outlook will knock the confidence of any would-be buyers. However, the biggest problem remains the snarled up mortgage market. Bank of England figures show mortgage approvals are down 75 per cent from their late-2006 peak - another all-time record low. Worse, the government's predicts that net levels of new mortgage lending in 2009 will fall below zero next year as the wholesale money markets remain firmly closed.
The report's author, Sir James Crosby, has called on the government to issue guarantees on £100m of mortgage-backed securities in a bid to support new mortgage lending. But the stigma surrounding residential mortgages demands a risk premium, which is why the recent interest rate cuts have done little to reduce levels available to those taking out a new loan.
The vicious circle of falling house prices will also ensure that lenders continue to insist on large deposits - the current average is 25 per cent according to Moneyfacts.co.uk, a huge barrier for would-be purchasers. In truth, house prices will only start to rise when first time buyers can afford to re-enter the market, and have the confidence to do so.
Of course, none of this bodes well for the fate of the housebuilders, whose balance sheets are already in an appalling state. predicts that the UK's six biggest quoted housebuilders may yet have to write down their assets by a further £11bn. Adding on writedowns they have already made, the total would be £13bn - more than the aggregate £11bn of pre-tax profits they have made in the past 10 years.
The most heavily indebted - , and - are arguably being run for the benefit of the banks, rather than the shareholders. Those with cashflow covenants in place are already discounting aggressively to win sales, but the collapse in volumes witnessed in 2008 is unlikely to improve in 2009.
The prospect of dilutive debt-for-equity swaps - as seen recently at private housebuilder - cannot be ruled out, and nor can rights issues. However, housebuilders will need to do more with any capital raise than simply pay off debt, which will do little for future earnings.
London-centric is the only listed housebuilder to have maintained a net cash position, with finance director Rob Perrins upgrading the investment maxim of "cash is king" to "cash is emperor" in a recent presentation to analysts. The group has hoarded £138m to take advantage of cheap land deals next year as private developers succumb to the scythe of the administrators.
And then there's the . Repossessions of buy-to-lets are now ahead of owner occupied property according to the Council of Mortgage Lenders, and this gap is expected to widen in 2009 as the government's bail-out measures only apply to owner-occupiers embroiled in possession proceedings. Buy-to-let mortgage approvals have fallen 58 per cent year-on-year according to CML data, and maximum loan-to-values have fallen from 85 to 75 per cent, depriving housebuilders of what used to be a captive audience for their ready-to-let product.
Indeed, the latest RICS housebuilder survey reports net reservations from investors have fallen more sharply than existing home owners or first time buyers. The RICS also says rents are set to fall sharply, as a glut of new letting instructions have been forthcoming from those who can't sell their homes, and are .
"We predict that house prices in the UK will fall by 1-3 per cent in 2010, with London house prices set to recover first," says Neil Chegwidden, head of residential research at Jones Lang LaSalle. "UK residential prices will then recover during 2011, with price growth accelerating to 9 per cent per annum during 2012-2013. A return to 20 per cent plus house price growth per annum is highly likely at some stage over the next ten years."
Looking further forward, Jones Lang LaSalle forecasts it will take around eight and a half years for house prices to recover to 2007 peak levels. So, an unhappy new year ahead - but roll on 2016.
