refreshing honesty from Michael in Islington. Suggest you follow your instincts and get out while you can still get a half decent price..

ian hall, london,

"...As long as the rental income is ... close to the cost of borrowing this is the true value of property. Nothing else is important anymore, Clearly there has to be someone to rent the property ... and you cannot fail. There will never be a crash while there are people able to rent...."

simon, london,

SIMON, SIMON...

Voids? An average of 2 months p.a.? Maintaining the property? Even more expensive the pickier the tenants (say in the City) and the more properties that come onto the market (thus the more spread of rents)? Legal fees? Administrative fees (if you don't want to or cannot do this yourself)? All set against slowly (at first) falling prices. So who is first to jump? You, or the landlord down the road who just sold for 20% more?

And Simon, even a mildly left wing govt. could move rental back towards Rent Act 1977 secure / protected tenancy status for tenants (becoming sitting) particularly if they don't want to pay Housing Benefit or if there are votes...

Austin Tassletine, South West, UK

"I have bought over 30 properties over the last 10 years based purely on yield and you cannot fail. .... There wil never be a crash while there are people able to rent...simon, london"

Two points to counter this Simon

1) Though its unpalatable, read last weekend's Guardian (yes, hard, I know) - guy just like you bought 30 buy-to-let properties and he's now in the poo to the tune of 3 MILLION POUNDS.

2) Are you suggesting that in every previous crash no-one was renting ? That clearly WASN'T the case. Just because people are willing to rent, doesn't mean they're wiling to pay some figure you have dreamt up.

I'm currently renting. The previous place I rented was on a yield of less than 4 percent, and I suspect this house is also. Without capital growth, landlords are subsidising me - great !

Clive, Surrey,

House prices will not crash. The oil price will fall sharply in the next couple of months owing to market forces. This will free up billions in the UK economy and restore the feel-good factor. UK banks will soon start lending to each other - they will have to, otherwise half of those employed in the financial sector will lose their jobs ! There are not enough empty houses or flats to satisfy the demands of our population and all we are seeing at the moment is a temporary blip.

John, Edinburgh,

simon, london said "you cannot fail"

I'd love to know where you studied economics. Let's say I've borrowed 1m to buy 5 properties. My yield is 5%, but in the current climate my mortgage costs and other overheads equate to 7%. I'm therefore subsidising my tenants to the tune of 20k pa. Now, property prices fall by 20% so I owe 200k more that my properties are worth. Along with falling property prices goes an economic downturn, so those Eastern European tenants of mine begin to return home and I'm left with longer and longer voids. What a fantastic business model - if there are others like you out there I'm off to retrain as a bailiff to make my fortune!!

Graham, Oxford, UK

Simon, London,

You are right to say that rental yield is very important in valuing a house however i can't believe you use a rule of thumb against a nominal interest rate figure.

Your rental return must exceed the cost of borrowing which by coincidence has been 5.5% recently. As you can see from recent bank announcements mortgage rates are going up therefore rental yields should go up to compensate.

Realistically as individuals become more squeezed i can't see rents going up that significantly (30%) and so house prices must fall. As it is they are falling and banks keep tightening.

For your sake i hope you have low loan to value across your portfolio.

Howard, London,

Opportunism is alive and well in the form of the banks. The purpose of raising UK mortgage rates is not to limit new entry into the market. The raising of mortgage rates is an opportunity to fleece existing mortgage holders. It has the added benefit of driving house prices down. What will it cost you? Well, what do you have? You will have to make some sort of arrangement with your bank when your rate expires. They will take a view about whether you are worth more dead or alive. If you looked down your nose at those who overdraw their current accounts and get stung with userous penalties, you are about to experience it on a much larger scale. If you think that your equity will protect you, you are wrong. Your equity is their opportunity. If you have no equity, the question is still the same. What can you pay? If interest was fixed over the life of the mortgage as it is for the majority of mortgages in the US, you could simply ride this out. Unfortunately, you can't.

Larry, Stratford,

Lets be clear about this. Housing is a fundamental necessity of living and therefore, like food, should be as cheap as possible. The only reason why falling house prices are feared is that people who have been forced to buy houses in the UK in the last 10 years or more have had to pay over the odds, and those who have been on the home ownership ladder for longer and have been toiling to pay a mortgage for many years can see their investment / pension plan being devalued. Its about time that the market readjusts and society put a true value on housing. a house is basically just a box of bricks after all.

The problem is that the Government is happy to see rising house prices because it keeps peoples finances in check rather than spending their money on other, arguably more fulfilling but things , like travel and having fun. It also encourages home owners to spend money on thier houses, because they perceive them to be precious "Sacred cows" which stimulates the economy.

Steve Chapman, Liverpool, UK

Property prices since buy to let evolved are now based on yield. As long as the rental income is anywhere close to the cost of borrowing this is the true value of property. Nothing else is important anymore, Clearly there has to be someone to rent the property but with migration as it is this will not be a consideration for the next 10 years as long as you buy in a high net migration area. The rule of thumb is that if the property yield is >5% it is probably a good purchase. I have bought over 30 properties over the last 10 years based purely on yield and you cannot fail. If i like a property i find the rent and offer exactly the price based on a 5.5% yield and negotiate from there. Therefore work out what your property would rent for and work out the valuation based on 5.5%. Bingo we have a market in equilibrium as any property that comes on the market with 5.5% yield will be bought by me or some other buy to let agent. There wil never be a crash while there are people able to rent.

simon, london,

Now the gross lending has disappeared (5 times plus wage mortgages, 100% plus mortgages, interest only mortgages) the crutch for the inflated bubble has gone.

Everyone is talking about drops in prices and even estate agents are being truthful!

Now sentiment will take over, the reverse of the last decade will happen and the market will undershoot. The vast majority of the general public do not understand economics and that will be the key to a crash in prices. Negative sentiment.

The simple priciples of Greed and Fear are alive and well.

Nick, northampton,

Whatever happened to the mantra of Britain's limited supply of houses ? It looks like the jig is up and the "experts" that have been quoted like financial oracles in your paper for the past few years will now be seen for what they really are: snakeoil salesmen and women.

anthony, london, england

Yep, house price falls are a good thing, not just for those who are completely priced out, but for all of those who cannot afford to trade up. A return to sanity where the difference between a two-bedroomed house and a three-bedroomed house is £20K rather than £50K would be welcomed by most.

Paul, Coventry,

I think the banks will want house prices to fall so that their customers will apply for smaller mortgages. Smaller mortgages equates to less risk for the banks.

Khaled, London,

The main thing is......if you are thinking of buying, or you know someone who's thinking of buying and maybe they are not too well informed or they've been on another planet for six months; then please please tell them NOT TO BUY this year at least. Wait for this thing to truely bottom out. My personal prediction is for a prolonged slowdown through 2008 followed by a crash in 2009. Nothing can stop this now in my opinion and when the 'lagging indicators' like unemployment arrive (not long now) then things will get very messy I'm afraid. If you don't need to sell or don't want to sell, maybe because you've been prudent then this won't affect you anyway. Just sit tight for two or three years. If you really do need to sell then I'm afraid a discount of 20% immediately is the only way out and even then you'll be in a massive chain.

george, aylesbury,

I am going to seriously enjoy this downtown, all the delboys landlords who thought and taught everyone that buy to rent on a 100% mortgage made them some kind of einsteins will have a big wake up coming.

About time all these TV programmes promoting buying property and selling at a markup make me sick to my stomach about time they all vanished and stopped hyping up the myth lets see a programme about Johny and Sally who cant get a mortgage or about how my house just lost 7k with much more to follow.

Word of wisdom avoid any websites promoting the word 'property market is stablising' that have the words "property", "assetz", "move", "estate agents".

J Singh, Windsore, UK

You would be a fool to buy now.......just wait it out and save a fortune. Don't listen to the spin; listen to everyone on the street, people who have had their houses on the market for nearly a year. And that's in Oxford!
Why try to catch the 'falling sword?'

emma, oxford,

This is not just another downturn in UK house prices. It comes at the end of by far the biggest, most global and most highly leveraged credit bubble ever.

David Dillon, Cambridge,

Investing In Property

I hear a lot of people talk about how America is in bad shape because of property. Americans per se have not invested as much of their incomes and risked as much in this one sector as certain other countries.

Gordon Brown likes to point the finger at America as if they were foolish and deserved to be burned. But is America the worst offender? I can think of a country that has an economy that has a very wasteful and large public sector and a population that has a higher percentage of debt per head in housing. A double whammy.

In fact, it is difficult for people in said country to relocate because housing is becoming as gridlocked and stagnant as the roads. This has a bad effect on an economy when people can't find the right situation for the business.

America has problems. But I wonder if they are in worse shape than Britain. I doubt it. Americans will find it easier to relocate and will be in a better position to work the problem than us.

joe, Duns,

The most overriding factor that should be taken into account is that with all previous booms and busts the lending criteria always remained at around the world average of 3 - 3.5 x income. It was the conditions within the general economy that governed the house price, as well as many other elements as regards pricing levels. As this period - the last 5 -10 years, especially the last 5, we have seen multiples that even the great Mr Smith of the Times (Scarcasim) finally admitted this to be well above the norm. Mutiples of 5-7 times were common. Indeed the person that bought the rental we were using for a few months had a 10 x multiple with a 125% mortgage. One has to factor in that the market has not been a normal boom bust.

In order to really think about the UK market one should consider that the US never got into the multiple lending levels that the UK did. Then look at the mess in the US and really think about it for a moment.

Then perhaps write a letter to the BoE governor?

Paul, London, Canada

I just want to praise the Times for the choice of a truthful headline "values fall £7,000"
Compare with the Daily Tele "HOUSE PRICES STILL ON THE RISE, HOUSE prices have risen by more than £30 every day over the past five years, it was revealed yesterday"
That was a true revelation!

Richard, Maidenhead,

House price falls are great

1. They make property more accessible to the likes of me who've kept their cash thinking this would happen, and also to first time buyers.

2. They will teach a lesson to many people that taking equity out of their homes is plain wrong.

3. If people feel poor then so much better. Maybe they can stop drinking, eating and travelling in excess so we get less obese, drunkards and CO2 emisssions.

Let's hope for a 20% price correction.

Jerome, London, London

Two years ago 25% UP now only 3% DOWN - corporate riders!

and now value of pound almost the same like euro - pathetic!

tom, huddersfield,

Yes the feelgood party is over.
Years ago when I got my first mortgage you had to save that monthly amount for a year to show you could easily afford the repayments, then save at least 5% deposit, finally have a secure job for at least a year, finally you went cap in hand to the bank manager to ask.
I think we are yet to see our sub-prime lending come to bite us, and the banks know it, thats why they are pulling up the drawbridge as the property prices fall-still the Government will bail them out.

Steve, coventryuk,

The most recent official figures on repossessions reveal that there was only a small increase in the number of people losing their homes last year. But one statistic stands out; some 95,000 orders to repossess (the stage before actual repossession) were made last year, only 8,000 fewer than in 1990.

Those that are facing problems are selling prior to having to suffer repossession. As prices fall this option may no longer be available.

I favour a rapid decline in house prices, allowing for a rapid recovery. As opposed to a 3 year long slide in property prices which will drag the UK deeper into recession when compared to last bust.

Costas, Cyprus,

victor arram, westckiff. Not quite as simple as you make out for those who buy near to the top of the market. For example, my house is currently worth about 250k. It sold (not to me) in 1988 for 150k. If that buyer had hung onto it for the past 20 years he would have paid about 200k in mortgage interest, thus potentially making an overall LOSS of at least 100k. I know that you would like to think that the property market is very simple, but it isn't. Lots of amateur speculators are going to get their fingers very badly burned, even if they do manage to hang onto their properties.

Clive, Chichester, UK

Party's over. 40% fall in 3 years. This will be a GOOD thing for most people.

Jon Cooper, herts, UK,

“A moderate fall in house prices at this stage should not be unwelcome and should help to ensure stability in the market,”

Oh Fionnuala, I'd had you down as one of the more reputable vested interest commentators but now you've gone and spoiled it. You know that markets at the end of of a sustained bubble never react moderately. We're in for one massive crash. Perhaps the time is right for a job move, it will be very sad if you find yourself chasing down the market with more and more pathetically unconvincing attempts at trying to see the positive. This is positive news, but not for those in the property or lending industries.

Clint, Brighton, UK

Please house owners, do not panic. I look at property since 1970. Every 8 or so years the property market slows...drops up to 15% then levels out..and then.....rises. This has happened three times to my knowledge. The only ones to suffer are those who purchase for a quick profit. Hold on, wait. you will see a profit. But it will take another 18 months to see an increase.

victor arram, westckiff,

I'd agree that a 30-50% correction in prices in inevitable and very welcome, but feel it is important to note that that is in real terms. Actual inflation (not the manipulated CPII number) is running in excess of 5% pa and when you add this into the mix we see nominal falls of only 20%.

Paul Clark, London,

A fall of 35-40% over 2 years seems unrealistic - not the fall per se but the time frame. House prices are sticky. Unless property owners are forced to sell prices are more likely to drift down - but over 5 years falls of 35% + against inflation aren't inconceivable.
A lot of commentators have pointed to the lack of a rise in unemployment as one reson prices may remain steady. However we do have the buy to let phenomenon - that could see thousands of city centre flats dumped on the market. If that happens the question is whether any price correction that fuels leeches into other sectors such as family homes.
But it is interesting that there's a growing realisation that we've been living in a bubble. There was a nice line in The economist a while ago that the four most expensive words in banking are 'it's different this time.' Is it? We'll see.

Jonathan, Wadhurst,

House prices are far too high in the UK compared to quality available elswhere in Europe.House prices have doubled in the last 7 years.Do you expect this can go on for ever?

Bob woods, Grafenwoehr, Germany

The party's over. This ridiculous and obscene escalation in house prices has been driven by nothing more than cheap money and greed, not supply and demand. Both the UK government, Banks and the BOE have been up to their necks in this fiasco, and now many thousands will suffer because they are over borrowed. The promotion of the feel good factor above all else, and the grasping property, live like a celebrity culture has one hell of a lot to answer for. No economy can be totally dependent on the value of houses as we are about to be reminded of once again. The coddling of the City by the Government needs to be curtailed because of the unbalance in the real economy these people create. Come to sunny Cornwall and see the damage this crazy situation is having on real people, especially young couples. They stand zero chance of ever owning a home. At the same time the housing stock is being gobbled up by second homes and absentee landlords. Bring on a correction and a return to sanity...

willlefeurve, Falmouth, Cornwall

I am also in the 30-40% correction camp.
Back even as recently as 2000 you could only get 3.5 times mortgages. Suddenly 10 times mortgages appeared and house prices shot up. With these deals now being taken away, the lack of cheap debt and the quantity of it are no longer there so house prices are bound to fall. How far?

Well the long term average growth rate is 2.5pc and has been for hundreds of years. The need to fall 30% just to get back to the long term trend, but undoubtedly the fall will overshoot, hence my guess of 40%.

Mike Livingstone, Reigate, UK

My flat in Islington is valued at £325,000.

To buy that flat on a multiple of 3.5 - the standard benchmark immemorial - you need an income of £90,000.

Is it worth it?

Of course not. Assuming a well-paid young professional couple on a combined income of £50K pa you get to £175,000.

That's what I think the real value of my flat is.

michael , london,

I think drift is optimistic. Try fall or even crash. Prices will revert to long term multiples of earnings which indicates a fall of between 20 to 50%. This is not a risk but an unavoidable (welcome) correction.

david barker, eastbourne,

I hear that one leading economist has advised that prices may well fall by 35 to 40% over the next 2 years . On top of that a well known financial adviser is advising people to sell their houses now before the crunch comes. Hmm, what happened to the good old days ?.

Julian, London, UK