House prices 'to reduce by 25%'. (Hope it's only this low!)

This has the essence of a self-fulfilling prophecy!

[nb 25% from peak = 75% of peak - now at 89.5% of peak - therefore 
16% below present prices is their prediction.)

So don't buy - let the whole thing rot and give thanks to Nationwide 
for helping to cause it!  Who'd buy a house now when the experts say 
its price will fall a further 16%?

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BBC ONLINE   8.9.08
House prices 'to reduce by 25%'
BBC News exclusive
Robert Peston, BBC business editor

The chief executive of the Nationwide Building Society has told BBC 
News that he thinks house prices could fall as much as 25% from their 
peak.

This prediction implies that 2.5 million homeowners could be pushed 
into negative equity.

Graham Beale also said he does not expect to see signs of recovery in 
the housing market until 2010.

Nationwide is by far the UK's biggest building society and is closer 
to the housing market than many others.

Over the course of the business cycle it provides slightly fewer than 
one in ten of all the mortgages in the UK - though its recent share 
of new home loans has been a bit less.

So Nationwide's chief executive, Graham Beale, carries weight when 
prognosticating.

What he said in an exclusive BBC interview on Monday is that he does 
not expect the housing market to show signs of recovery till 2010.
"I think we are into 2010 [before we see signs of recovery]," Mr 
Beale said.

"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."

Negative equity
He also forecasts the peak-to-trough fall in prices will reach 25%..
That is a very significant drop.

It would mean that a typical house would have decreased in value by a 
quarter during the two-and-a-bit years from last autumn, when prices 
peaked, to some time in the next decade.

If Mr Beale is right, some 2.5 million homeowners would suffer from 
negative equity, according to research by Michael Saunders of Citigroup.

That would mean 22% of all householders with mortgages would have 
home loans greater than the value of their respective homes.
Beale believes that there is little the government - or anyone else - 
can do to stem in any significant way what he believes is a necessary 
adjustment of prices.

Confidence boost
He says that the US Treasury's colossal scheme to shore up the two 
great providers of housing finance, Fannie Mae and Freddie Mac, 
should help to restore confidence in financial markets.

But, he adds, it won't swiftly revitalise the UK housing market - 
even though Britain's prospects are inextricably linked to prospects 
for the US residential property market, because of its importance for 
the funding of the global financial system.

That said, the UK government is under pressure from banks and 
building societies to help them raise money so that they can lend a 
little more to us in the form of mortgages.

Treasury battle
The two options being considered at the Treasury are to provide a 
taxpayer guarantee for mortgages packaged up as bonds for sale to 
investors, or to extend an existing Bank of England liquidity scheme 
so that it could help banks to refinance new mortgages.

Both options would be designed to increase the confidence of global 
investors that money they provide to banks for lending in the form of 
mortgages would be safe.

And both options are loathed by the Governor of the Bank of England, 
Mervyn King, because he believes they could distort the housing market.

This creates the tantalising prospect of a serious showdown between 
the Bank of England on the one hand and the Treasury and 10 Downing 
Street on the other over the best way to revive our housing market, 
our banking system and our economy.

And it is one which needs to be resolved by 1 October, when the 
existing Bank of England liquidity scheme runs out