Will these price falls continue ?

[DrySherry]

So last year (late 2024) I was partly instrumental in the decision made by some younger family members to hold off buying a first property. They were worried about overpaying for a small first house and regretting it, becoming stuck, if values started to come down. With only a small deposit they could quickly be in negative equity, complicating the reality that both want to keep the financial flexibility to move house if better job openings appear in a different area.
I too thought that it was more likley than in has been at any point for the last couple of decades that prices will come back down in line with affordability. They didnt have a great deposit - so my advice was that they should focus on increasing that for a year or two. Giving them the option of more favourable lending rates when ready, and hopefully more house for the money if prices soften. We have since seen some falls in some areas but not as much as hoped for. They have over the last year done really well on saving and now have a good 10% plus deposit - instead of struggling to reach 5%. They are fortunate that they had, and still have, the option to stay put and continue to build a bigger starting fund and that's what they decided to do. Fortunately they rent from another family member and get a very reasonable deal.
After reading this latest rightmove report I have become hopeful for them that they may have made the right choice. I'm interested to hear what others expect to happen in the housing market in 2026 ? Do you think falls like this might continue or will values just dip a little again or flat line this year ?

https://uk.finance.yahoo.com/news/average-house-price-6-695-000100433.html

U.S jobs data today being interpreted by many as "January rate cut off the table", if U.S/Iran escalates all bets are off really? People need to watch their debt loads regarding property, it is the most illiquid of asset classes, you wpn"t be able to sell in a downturn/crash.

I suspect yields will rise internationally at some point but have also expressed the opinion on here several times that they go down first and then rise a little later. I could, of course, be wrong and obviously have no idea on the timing!

What is your reasoning for this?

Because I think we will (finally) enter a signficiant recession at some point in 2026. I think this will reduce inflation a lot.
I think the response will be massive QE, which will then help to fuel massive inflation again. I think there will be other factors which will stimulate rising bond yields again, as you say too.
As I said, I could be wrong. I'm absolutely no expert and even the 'experts' have nearly all been completely wrong in their predictions.

I agree with the potential for recession, massive QE? not so sure about that, it only worked in 2008 and beyond because they were all doing it, Japan is in a different cycle now and they are what, third biggest bond market in the world, what they do is massive for borrowers here.

https://coinalertnews.com/news/2026/01/06/japan-bond-yields-stablecoin-impact

I think they will definitely try massive QE. They have already been constantly adding liquidity to the system for several years now, just not yet in the precise QE form as yet. What we don't know is the effect it will have imo. I think it will cause a huge rise in inflation but, no doubt there will be other effects too. Whether it will help to stabilise various markets, with pressures on them from several factors, including the Yen carry trade, I don't know!
Are you familiar with Russel Napier and Luke Gromen at all? Both excellent if not and somewhat beyond my level of understanding!

I think there will be (needs to be) a massive credit squeeze. We really need to understand value again.

The value of what ?
Som are using credit cards at the moment to buy food with.

And mortgages are already difficult to obtain.

Surely they can't do more Quantitative Easing ? Isn't that a big part of the reason we suffered, and are still suffering massive inflation ? I know many would blame C19 and other global events - but surely the reasons those things hit so hard is actually because the previous financial tinkering left us exposed. I find it hard to believe that would happen again so quickly - in effect we haven't even had all the fallout yet from that. Never mind the policy of "emergency" low interest rates that became normal for a good decade. At some point continuing to make these kind of mistakes will cause a massive collapse. I don't believe that's not understood now.

Agree about the credit squeeze. I think there will be inevitable bank failures before too long, possibly not UK based ones though. At some stage, imo, there will be a financial system collapse.

I agree with all this. They have been kicking the can with ZIRP, QE, etc since the GFC and before that they were propping up the financial system with debt, which has clearly continued. As you say, at som point, we will have a massive collapse. Yes, I think 'they' definitely know this. However, if it comes to a choice between:
a) things are really bad, let's just allow a collapse and getting it over with
b) let's lower rates to zero again and practice yield curve control to the moon (not just central bank buying but comercial banks, pension funds) in a desperate to kick the can down the road so that things don't collapse on my watch
The answer will be 'b' every single time!

Not familiar with them but will investigate, thanks.

They need the sentiment of the public though, if people see house prices falling and people with large mortgage debt getting into trouble they won"t be gagging for property debt like they were after 2008 when everyone got bailed out? The other factor is BTL, that was a big part of loading secured debt onto the public as well, there is a much more negative sentiment towards being a landlord now, people don"t want the hassle and the regulation, and add to that the political mood towards mass immigration and I think it will be very hard to keep the plates spinning this time. Honestly can"t see Japan being interested in another zero rate bail out at this stage.

I don"t think any big market players are predicting a return to zero rate bail-outs?

https://www.msn.com/en-us/money/markets/jp-morgan-forecasts-2027-fed-hike-barclays-goldman-postpone-rate-cut-calls/ar-AA1U2siq