With house sales volume at a 30 year low asking prices will start slipping quickly.

With the announcement that the rate of housing sales is at its lowest for 30 years we know that we are hitting a tipping point for UK house pricing, especially with the 1.5% base rate cut by the bank of England.

The simple problem its seems is that as a result of the credit crisis, the world has lent money too easily for the past 5-8 years, systematically across all types of lending.  It is clear now that this leverage has to be reduced.  Mortgage lending was just the first type of borrowing to show signs that lending was too prolific and hence the first to hit the press.  We now see that corporate lending is also being reigned in, and will see corporations facing challenges as they try and renew their borrowings , as we have seen in the world of mortgages as people try and renew their mortgages at the moment.

The biggest change that has happened in the world of mortgaging that is reflective of this change is that Loan To Value(LTV) rations  have been reduced.  Gone are LTVs of 100%+, and now generally you see maximum LTVs of 75-85%, which is where we were in the late 90s, before credit started being relaxed.

The change in LTV is the most significant reason for the lack of mortgages being offered, as most people have not saved such deposit values.  Given time, first time buyers will be able to save these amounts again, buy this will still mean a year of two where we have few entry level buyers? and hence few house moves generally. 

With this pressure it is inevitable that house prices will continue to slide in 2009 and potentially 2010.  We see very little chance of this not happening, especially as the economies shrink as more and more credit is called in by the banks in the corporate world.  This unwinding of corporate lending will take 2-3 years to take place and is what will cause a continuation of recession pressure over the next 2-3 years, and hence suppress house sales and prices for a long while to come.  This will not be a good time for fast house sales.