Blanchard Consultancy – the independent construction consultant

A UK recession could leave up to 1.3 million households in negative equity, analysts predicted yesterday. House prices will fall by 25-35 per cent from peak to trough, compared with just 12 per cent from 1990 to 1995, the Bernstein analysts said. In the "recession case" of a 35 per cent drop, 1.3 million households, or nearly 20 per cent of mortgages, would be in negative equity and banks would lose £38bn over several years, they added.

A slowdown that sees growth of 0.5 per cent next year would result in 400,000 households suffering negative equity. The effect of the far bigger than expected fall in house prices would be offset by lower loan-to-value ratios, less activity near the peak of the market, and higher repayment rates than in the last crash.

On Thursday, Halifax's parent HBOS reported property prices down 12.7 per cent in August from a year earlier. Bernstein said the UK housing market now had strong downward momentum, with mortgage approvals collapsing, estate agents unable to shift stock and industry sentiment gloomy. "With house prices down 12 per cent so far this year on the HBOS index, and significant further falls expected, the fear of negative equity is again stalking the land," the analysts wrote.

Read the full article at The Independent Online

Labels: global recession, Halifax, Housing market, HSBOS, property analysis, property prices, uk housing

Investment guru Warren Buffett says the worst of the global credit crunch is over for Wall Street, but not for the man or woman on the street.

The chief executive of Berkshire Hathaway said there would be "a lot of pain to come" for mortgage holders.

He made the comments as Berkshire Hathaway's annual meeting got under way in Omaha, Nebraska, attended by a record 31,000 people.

The meeting has become known as "Woodstock for Capitalists".

Mr Buffet's investment decisions often go against the market and are followed religiously by many.

However, Berkshire Hathaway, the company Mr Buffet took over in 1965, has not escaped the credit crisis.

It saw its first quarter profit tumble 64%, hurt by losses tied to derivatives contracts and a steep slide in insurance premiums.

"The worst of the crisis in Wall Street is over," Mr Buffett told Bloomberg Television shortly before the weekend meeting began.

"In terms of people with individual mortgages, there's still a lot of pain left to come," he added.

Succession fears:

Mr Buffett, ranked the world's richest man by Forbes magazine, praised the Federal Reserve's rescue of Bear Stearns.

He said the move avoided financial market chaos.

"I think the Fed did the right thing in stepping in on Bear Stearns," Mr Buffett said.

"Just imagine the thousands of counterparties around the world having to undo contracts."

The central bank helped broker the buyout by JP Morgan, after financial institutions became reluctant to lend to Wall Street's fifth-largest investment bank.

At the meeting, Mr Buffett also tried to reassure shareholders that Berkshire Hathaway would be fine once he had gone, but the 77-year-old billionaire offered few new details of the company's succession plan.

Berkshire Hathaway has stakes in American Express, Coca-Cola, Wal-Mart Stores and Tesco.

Original article here.

Labels: Berkshire Hathaway, credit crunch, global recession, wall street, Warren Buffett