Grim Real Estate News from the United Kingdom

Several of my fellow bloggers on The Creating Wealth Blog have gone on about debt. Having a great deal of debt inevitably makes it more difficult to create wealth, as payments and interest to creditors eat into money that could be better used for investments.

Yes, many people, including myself, have made money through borrowing for real estate investments. We did it back in 2005 with a 100% loan, something you can't even get here in South Africa anymore. When the housing market went up astronomically with no end in sight, aphenomenon experienced all over the world, there was nothing to worry about. If you could double your investment every two to three years, who cared about fine details of those loans. Everyone was making money.

Now, there's news from the United Kingdom, that repossessions have climbed yet again. The rate of repossession has almost doubled since the third quarter of 2007, compared to the same period in 2008. The UK is going through the same thing as the US, and there are a lot of people in need of assistance with their debts. My bet is that services that help people bring down their debts and negotiate with lenders will do well this next year and for several years to come.

People are going to have to tighten their belts to keep their homes; that is, those who have not yet been affected. Consumers' past overspending has caught up with them, and we're waking up with a collective financial hangover, wherever in the world you find yourself. UK Banks, like those in the US, are no longer lending as they did before the credit crunch, and the number of real estate deals in the UK is down by nearly 90%.

All of this affects my wife's sister and her family, who live in southeastern England. They are in a good position, in a way, as her husband still has decentemployment that may enable them to weather the storm. They have two properties, one the house they live in Kent and the other an investment property nearBasingstoke . They don't want to know how much either of them is worth, as both have plummeted in value, though at least the investment property has a decent renter and is finally paying for itself.

That said, perhaps the UK is through the worst of it. 2008 was a grim year, but that year's over. Maybe 2009 will be better...

(Originally published at The Creating Wealth Blog on 2/10/09)