House prices to drop by 10% ?

We are slowly working through the period of denial as clever people who work in the property business run out of excuses for why prices for property should stay so high when people can't afford to buy at the bottom of the market.

I've posted on how the last months UK figures would allow for a 7% drop ( but the media prefers time averaged data of a +6% annual rise - which is only valid if nothing has changed - why do they do that ? ) Now in the Daily Mail we hearthat Morgan Stanley's chief economist is considering a record breaking 10% drop as likely.

Now the cracks are opening below and the drop looks big.

Lets be clear. This will destroy Labour and Gordon Brown and I think they know it. They may even have started planning for opposition - perhaps why they are willing to be a bit more flexible on party funding knowing that a partisan settlement won't stick and will be followed by a far less advantageous law on party funding.

It will also turn Northern Rock into the perfect storm for government incompetence as every bidder insists only only buying the sound mortgages business and leaving Alistair Darling and the rest of us with the stuff that's going to default. ( When you hear the BBC cheerily reporting that Branson and co will bay back £10billion or whatever straight away - remember he's buying the good stuff that's actually worth the money and leaving us with the dodgy stuff Labour have used our money to buy. - Don't get me wrong Branson and co are behaving quite properly they aren't charities or suckers - unlike HMG ).

Update: The FSA has apparently just issued a warning about business conditions to mortgage providers in the UK (FSA = Financial Services Authority). Ominously warning about some 'business models no longer being economic'. Well I think that stable door shutting is definitely post equine departure on that one ... Its more likely they're covering there behinds and of course the Dour One's behind whose complicated scheme has been failing so spectacularly with bank oversight.

Which way will bank shares head tomorrow.

By the way on the way to Woking's Homebase today I passed one of the many infill flat developments that New Labour have forced on the south east and there are piles upon piles of for sale and rent signs on the ground. I mean loads of them - perhaps they have got to a point that they are creating panic and dropping all the prices so have agreed to remove them all ?