To me, the issue lies with the first sentence or so of the OP 'It's not looking good'.
Well, depends on who it needs to be good or bad for.
It certainly isn't good for those who leapt in, in the couple of years prior to 2007 and bought houses on 10x income, 105% mortgages at 4% interest, no, I grant you. Many factors motivated them, largely 'fear of never being able to afford a house/everyone else is doing it, it must be right/we'll make a killing as the only way is up, isn't it?', I guess but a bad financial decision is a BFD whatever way you look at it.
However, a continued fall in house-prices bodes well for those among us with children we'd quite like to see be able to leave the family home and become proper adults before the age of 35, say, albeit children already saddled with eyewatering HE debt.
The artificially constructed low interest is great if you are madly paying off a mortgage- it even gives breathing space to those who bought way over the odds. It's not so good for those who have Done The Right Thing and are trying or have tried to save a decent deposit, or are trying to save for their retirements, say- those who aren't otherwise in debt. The current IR does kind of 'reward' the more feckless end of the financial continuum over the prudent, doesn't it? Which do you think the country needs more of? (Actually, that isn't quite true- our current dog's breakfast of an economic model requires us to feel comfortable and relaxed about continuous consumption, even using money we don't have).
Renting is a pita in every sense of the word. We did it for 5 years when we arrived in the UK (in 2003) and refused to pay the house prices we saw. The idea that somehow 'they' will have to 'change the rules' to make a more equitable renting market as so many more people are forced into renting is rubbish. 'They' won't til they're forced to- bearing in mind a good slab of those who could change the rules to make renting a safer and more secure long term option for tenants are landlords themselves. The European model bears no comparison to ours at all. And until all the forced tenants rise up and as one demand change from their MPs, the status quo will continue.
I guess I am a bit older than a fair few on MN. I witnessed the last Bust first hand and had plenty of mates in London, in my early 20s, in negative equity once the 15% IR bit. Those who sat it out then got to see their flats become worth the sorts of sums you measure in fractions of a million. Also, my parents were war babies who grew up with a healthy respect for money and a fear of debt. Though I recall my grandad tell my mum, his DD in 1970 that he thought they were stretching themselves too far when, in a £3,500 pa wage, they bought a £4,500 house (now, yes, 'worth' 100x that- whilst dad's retirement nest egg was accruing 15% interest, but a whole other story about inequitable wealth distribution, there)..! I think the problem in our collective psyche is that as The Market cycles around again, those who lived through a particular phase are at a different phase next time round, wanting different things. As FTB we want a falling market, as a homeowner we want a rising market, thus there is no 'collective wisdom'.
FWIW I am a home owner with no mortgage (due to being overseas for a while etc etc) but I have no problem whatsoever with the concept that my house might fall in value- a good school catchment is all that's keeping it buoyant!- based on the fact that one sells and buys in the same market. But I would like my savings to be earning me more that 0.9% interest, thanks.
But what we all need is for this house-price casino to end. It it financially and socially damaging to everyone.