Property Prices down 47% in Cambridgeshire?

I have a vested interest in house prices falling - I sold up a couple of years ago, and cannot imagine what has been supporting the prices people have been prepared to pay to buy houses since.

With the average 2 year fixed rate mortgage interest hitting 7%, the financing costs alone of a £200,000 property are £14,000 a year, or £1,166 a month. (Even if you don't have a 100% mortgage, you are still forgoing interest on the deposit put down...). Added to this the additional costs of being a homeowner (redecoration, insurance, depreciation of the kitchen, bathroom, boiler, roof, windows etc), and the transaction costs of buying and selling. Then consider that property currently 'valued' at about £200k in Cambridge could probably be rented for about £700-£900 per month. In other words, unless there is a huge _rise_ in house prices to compensate owners for the additional costs, it is much much cheaper to rent, and landlords are subsidising tenants for each month they are living in a property. As tragic as it is for those who find themselves in a property worth less than they paid for it, and unable to pay the mortgage, either rents are going to rise significantly (unlikely in the current climate), or I can only conclude there are sharp falls still to come in house values.

One problem with a falling house market needing sharp correction is it becomes unclear how much a house is worth - i.e. when the bottom has been hit, but clues can probably be found by looking at auction results, and I came across a property up for auction last week - a flat in Cambourne High Street. Despite a reserve of only £85k, the flat failed to sell, attracting a highest bid of £82k. So looking at http://www.nethouseprices.co.uk/, I found out how much the flat last sold for. It's a bit unclear what happened here, because there are two transactions recorded for the property both on 14th December 2006, one at £115k, and one at an incredible £155k, but on the face of it the value of this property could have fallen 47% in only 18 months from £155k to £82k

If house prices do fall anything like this (and I think they are still overvalued by about 25-30% in Cambridge), there is going to be serious consequences for many people. But there will also be serious question marks over Government and the Council's housing policy - despite a decade of the biggest boom in house prices ever, policies designed to dramatically increase the desperately needed supply of housing have simply failed to deliver. On major sites around Cambridge, the big housebuilders are already downing tools - the Council has blown it. The reason - ever greater demands on developers to gift land to Housing Associations for homes to be let to the chosen few on subsidised rents (so called affordable housing), and to sign Section 106 agreements handing over millions of pounds to fund the Council's shopping list of projects in the local area, some with only tenous connections to the development in question. Because taxpayers don't pick up the bill directly, what is effectively millions of pounds of taxation has been sought locally with the minimum of democratic scrutiny, paid for by the unnecessarily inflated cost of new homes in the private sector, and most disadvantaging those in the middle - the hard working families with low paid private sector jobs, priced out of the private sector housing market, and not qualifying for the so-called 'key-worker' housing whatever that means. This is chronically unjust.

As the truth dawns on local Councils that their housing policies have failed, developers will just say no even to existing s106 agreements, and a major rethink will be necessary to allow the housing that people desperately need to be developed in a way that people will accept.