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Fitch Sees British House Prices Set to Plunge.
By The Anglo American | October 15, 2009
Fitch, the credit ratings agency sees the stabilization of British House prices as a false dawn. The Agency predicts house prices will drop at least 30 % from the 2007 highs. So far prices have dropped just 13%.
The Agency’s report focuses on the debts of British house builders’ debts of over $11 Billion that mature in 2011/2012.
Ewan Macaulay of Fitch’s corporate finance group said to Britain’s Daily Telegraph {October 15, 2009} that without a significant improvement in house sales he could not see the major house builders honoring their loan maturity dates. The resulting de-leveraging would swamp the fragile housing market with cheap properties.
“It is therefore possible that a number of indebted homebuilders could be seeking to refinance at the same time and, given the finite pool of finance available to the homebuilding sector, this could result in one or more homebuilders not being able to access sufficient new finance.” {Daily Telegraph UK}
But this is only one black cloud. On the near horizon lurks a British sub-prime crisis. Over 30% of Britain’s self-certified mortgages, are more than 90 days past due. The unfolding repossession process of these “buy to lie” mortgaged properties is only months away.
But there is a sobering fact of life that could easily kill off the British housing market completely. If house prices were to return to their historical average in relation to earnings then Fitch’s research looks extremely conservative. House prices would drop more than 30% from today’s prices not from their peaks in 2007.
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