UK house prices

[Atilla]

one of the real problems is
that when house prices are going up ,
people are happy to except the increase in price
and if the house has gone up say £20,000 in 6 or 8 months thats fine

but if its gone down by the same amount they don`t want to know
they will hang onto the higher price for a long time , thats why I think prices will not go down at the same speed as they went up

when I used to go and view a property

after I had looked around , and told them, I would only buy it if the price was right ,
and if it did not meet my price, then I would move on to the next one
I asked the question
what will buy it ?
you could save £10, 000 to £15,000 that way and save a lot of time

Yes true price falls like wages are always resistant to falls.

However, I think there are far more speculative players in the market than ever before. There is also the view that these speculative professionals will be more ready to off load few properties at the first hint of price falls and can speed up price falls and supply glut should the situation ever develop?

With rising rates there could be debt problem and repossessions to consider too.

If someone can think of the right question to ask I'm sure Chump who is on expert on the matter ( and he really is that's not a mickey take ) can give us his view.

 

[jacinto]

Hi Atilla,

guess the market needs to be segmented to give an opinion. Laptop gave a rather good "trigger" for selloffs, with which I could not agree more.

Also, there is the segment of those who own only 1 house, and when it comes to selling, if prices are stagnant or fall, will simply sit on their property (sticky prices as wages as you say). In this case, the price decline, in my opinion would come in real terms if the scenario described by laptop doesnt materialise.

finally, there is that segment that has gone crazy. 2 friends of mine, bankers both, buying houses and flats in hampstead right now, are faced with prices that are crazy. curiously, they are twins. one is mortgage free, the other one isnt.

Twin #1) the mortgage free one, is trading up and basically getting a loan of 100k for an extra room. (ridiculous), but will pay off mortgage in 2 years, so she doesnt care about negative equity, should it happen. I would say property is about 20% of her wealth.

Twin #2) not mortgage free. sold flat for a good profit. trading up. she has faced the vendor of her new house raise prices 3 times . the last time, yesterday, the vendor raised price by 150K!!!. Think the cumulative price increases in asking price by the vendor for her new house have almost reached 50% of her capital gain on her previous property . she has decided to look for something else.

well, dont know if I even gave an opinion, but well, just examples.

j

OH, by the way, I just bought a house last week. we decided to "trade down" :cheesy: We live in Windsor. The house we live in is worth about 600K, and the kid goes to private school. The wife commutes to work. Now the wife can work from home. So we are moving to Cheltenham. We got a similar house (similar in terms of space, zone, environment, etc.) for 50% the price. And on top of it, the kid will go to a state school (which is rated better than her current private school). so financially makes all the sense in the world. We will all be better off than than selling and renting in Windsor, and the kid going to private school :cheesy:

 

[Atilla]

Hi Atilla,

guess the market needs to be segmented to give an opinion. Laptop gave a rather good "trigger" for selloffs, with which I could not agree more.

Also, there is the segment of those who own only 1 house, and when it comes to selling, if prices are stagnant or fall, will simply sit on their property (sticky prices as wages as you say). In this case, the price decline, in my opinion would come in real terms if the scenario described by laptop doesnt materialise.

finally, there is that segment that has gone crazy. 2 friends of mine, bankers both, buying houses and flats in hampstead right now, are faced with prices that are crazy. curiously, they are twins. one is mortgage free, the other one isnt.

Twin #1) the mortgage free one, is trading up and basically getting a loan of 100k for an extra room. (ridiculous), but will pay off mortgage in 2 years, so she doesnt care about negative equity, should it happen. I would say property is about 20% of her wealth.

Twin #2) not mortgage free. sold flat for a good profit. trading up. she has faced the vendor of her new house raise prices 3 times . the last time, yesterday, the vendor raised price by 150K!!!. Think the cumulative price increases in asking price by the vendor for her new house have almost reached 50% of her capital gain on her previous property . she has decided to look for something else.

well, dont know if I even gave an opinion, but well, just examples.

j

OH, by the way, I just bought a house last week. we decided to "trade down" :cheesy: We live in Windsor. The house we live in is worth about 600K, and the kid goes to private school. The wife commutes to work. Now the wife can work from home. So we are moving to Cheltenham. We got a similar house (similar in terms of space, zone, environment, etc.) for 50% the price. And on top of it, the kid will go to a state school (which is rated better than her current private school). so financially makes all the sense in the world. We will all be better off than than selling and renting in Windsor, and the kid going to private school :cheesy:

Hi jacinto,

By speculative buyers I meant all the people who have more than one house or buy to let kind of people. I do agree with Laptop and your comments about the trigger for the price falls.

I think the problem with 1 property owners are the ones who have over stretched them selves. As if prices start falling they will not be able to sell reducing mobility. Changes in employment status likely to impact mortgage arrears and posessions too.

I prefer twin numbr 1's actions but twin number 2 seems to have done the right thing walking away from the price increase.

We are always looking at moving away from London but it's the commuting into the City that kills me and so we are still here. I think anything over an hour is a non-starter to get to work for me. Salisbury - Wiltshire way would be my ideal choice but no real fast BR trains (probably explains why the place is still so nice away from the commuter belt). Gloucestershire / Cheltenham way is equally wonderful. One of our old university friends lives their in a little village called Sheepscombe, built from traditional stone. Visiting them is like a holiday for us. Town mouse and country mouse kind of story. Also with the two primary school children; they are now well into their friends and as you say schools are very important and LB of Redbridge has a good crop of them. Perhaps in another 2 or 3 years time once the mortgage is paid off, earning City wages will not matter so much. I wouldn't feel the need to be in a high paid work to maintain household. (Hopefuly the trading will kick in too on turbo charge).

I asked this question for my sister really. She is engaged and considering whether to buy a house or get married first. I said I'll ask my friends in the know rather than just give her my opinion. We are meeting up for dinner and some poker with group of friends tomorrow so all your comments and opinions will be talking points.

Once again my sincere thanks to you all out there for responding. It is really interesting to hear all your views. I think my sister and friends will be impressed by all my friends called Jacinto, Hornblower, Zambuck, Laptop and Priceman. At least I do hope so.


Wishing you all a great weekend...

 

[neil]

French Property price reductions

To the man who pm'd me off this thread a long time ago re Spain....

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/25/cnspain25.xml

I recall I said to wait for at least 12 to 24 months for the accident waiting to happen ...you can start sifting the rubble for what you want from this point on, but bear in mind time is on your side in this...should make the US look tame by comparison.

No surprise in all this...the average punter is no better than a kid with a sweety jar ..and when the peeps controlling the jar are economists wearing central banker suits possessed of precious little commonsense in how to control little Johnny then you don't need to be able to read the future to know that you are going to see a major accident.

Looking around various Forums and related French property sites, I notice a lot of French property has undergone quite serious price reductions. Would this have anything to do with the herd of property speculators/buyers moving along to graze on Eastern European properties?

 

[chump]

I never got the feeling that France was as speculative as Spain...they had the same uplift as we all did from low rates and some areas of France also attracted significant higher external demand than others compounding the uplift. I suspect those are the same areas that are now offering more prospects for 'bargain' hunting. Frankly I'd be a bit surprised if that was a source of flow of funds for Eastern Europe...think some people just got caught with the rising costs of a secondary home via the rising cost of financing same and maybe trying to cash in anticipating that worse may be yet to come. I've felt the most vunerable countries in Europe were Spain , Turkey and Bulgaria because they were creating so much new supply based on an expectancy that external demand for it would stay high and move even higher. Eire and the UK have had great gains ,but the demand was not created in the same manner so I've not felt they were as exposed nor has supply been so overextended.
I didn't move out of property because I was frightened of a crash (dramatically appealing thought that might be to some). I got out because the potential returns from here over the time I am interested in doesn't warrant being in...as the saying goes ...having no position is a position.

 

[Atilla]

Interesting Article from IC Magazine...

Rain in spain


The fiesta is turning into a siesta for Spanish homeowners. Up until recently, the Spanish housing market was one big party - double-digit annual house-price growth was the norm, and the construction industry, which is responsible for a massive chunk of Spain's economy, was firing on all cylinders. But then that old party-pooper, the European Central Bank (ECB), spoilt all the fun with seven interest-rate rises in the past year-and-a-half.

So now for the hangover. Unfortunately, Spanish borrowers favour floating-rate mortgages - 75 per cent of Spain's mortgage debt is floating, according to the equity strategists at Credit Suisse. What's more, the consumer debt to GDP ratio is 80 per cent - described by Credit Suisse as "exceptionally high" - so a crash in the housing market could have serious implications for consumer spending. Then there's the fact that Spain, unlike the UK, has been building too many homes. Spain is building approximately 800,000 homes a year - that's more than France, Italy and Germany combined, and 200,000 more a year than it actually needs. That means there's a real possibility of a stockpile of unsold homes, and a few very lean years for the construction industry.

The stalling Spanish housing market could have repercussions here. Not only is Spain the most popular place for Brits to own a second home, but there are also a fair few UK companies that are exposed to the Spanish construction industry. Aim-traded Spanish homes developer Medsea must be feeling the chill, then there's Northgate, which leases its white vans to Spanish builders, as well as housebuilders Taylor Woodrow and McInerney, which both generate approximately 5 per cent of their housing profits there, and Costain, which has been busily building up its Spanish property development activities. It's also worth noting that Spanish companies, many of which are cashed up by the country's construction boom, have been big buyers of UK companies, with Ferrovial swooping on BAA and Iberdrola snapping up Scottish Power. If the housing market downturn really takes hold, those Spanish corporate raiders might pull their horns in.

Kirsty Green is Investors Chronicle's sectors editor

 

[jacinto]

mmm, so you are starting to think of a second home under the sun in the next couple of years, right

not a bad idea in about 3 years. plenty of time to think of it. :cheesy:

 

[Atilla]

mmm, so you are starting to think of a second home under the sun in the next couple of years, right

not a bad idea in about 3 years. plenty of time to think of it. :cheesy:

Yes but not Spain - as much as I love the country and it's people.

In fact I'm thinking of buying some old property with plenty of land as a form of investment... Less maintenance.

Haven't decided on the country yet though. Italy is a big contender. Mrs can speak the lingo too.

Key word is thinking about diversifying.


One question - why in three years? Is there something we should know or you are expecting?

 

[jacinto]

Yes but not Spain - as much as I love the country and it's people.

In fact I'm thinking of buying some old property with plenty of land as a form of investment... Less maintenance.

Haven't decided on the country yet though. Italy is a big contender. Mrs can speak the lingo too.

Key word is thinking about diversifying.


One question - why in three years? Is there something we should know or you are expecting?

nah, could be 2, could be 5. time to know if prices have crashed and hit a bottom. besides, that is how long it could take for all the guys with new projects in the pipeline to finish, not be able to sell them, and get a bargain.

lol.personally I would go to the basque country, but that is more expensive and less likely to get a crash, so will wait and see.
j

 

[laptop1]

Is buy-to-let still worthwhile?

The latest lettings market survey from the Royal Institution of Chartered Surveyors (Rics) showed tenant demand rising at its lowest level since the start of 2005 and tumbling returns, with almost one in five more surveyors reporting yields falling rather than rising.

Jeremy Leaf at Rics said: 'Rising borrowing costs and a subsequent drop in yields have also contributed to a worrying time for landlords. Interest rate rises later in the year will have a further dampening effect, but the underlying strength of the economy and an active housing market should ensure a soft landing for many.'

This tightening in the buy-to-let market is expected to provide a gentle slowdown for existing landlords, but those entering the market are increasingly finding that they are subsidising rents.

There are problems bubbling under the surface with both buy-to-let on off-plan flats, as recommended by Inside Track, and the existing properties model that Whitney suggests.

Of course, both companies promote the wealth of information they can bring to property investors, but much of this can be found for free on websites such as This is Money and in the array of books available on buy-to-let.

These sources may not have the charisma of a property education course representative, but they will be impartial and won't deliver a sales talk either.

In a tight buy-to-let market, £2,000-plus is a lot of money for a information that can be found elsewhere, so don't be seduced by the patter and think very carefully before you sign-up to be sold the property dream that might have already finished.

Other stories:
House prices slowest for a year
First-time buyers worst off for 15 years
Holiday homes tax crackdown
Taxman to swoop on buy-to-let
Low rates fuel buy-to-let bonanza
Warning over 100% buy-to-let
Take the buy-to-let reality check
Buy-to-let on landlord's salary
Ten tips for buy-to-let
Sell or hold buy-to-let flat?
Will buy-to-let still pay off?

 

[zambuck]

....Horror stories of properties evrywhere...??........hmmm...time to pick up bargains from panic sellers......

......I think the interest rates will FALL towards end of the year or remain the same.........But then I have been wrong before.....

...Nothing ventured....Nothing gained....

 

[chump]

IF ! interest rates fall it will be because of weakening employment /gdp , no latter then no former ....and that scenario is not housing bullish ..what you gain on the financing you lose on the demand .. I have yet to see any signs of panic selling .In fact HIP's or no HIP's in the area that I know I have rarely seen such scarce supply in general terms ...this has all the hallmarks of being a sticky / stagnant market unless something comes along to change current conditions.

Re rates the trend is up until it isn't ...rates rising in the East won't help rates to fall in the West ......it's called competition for money

 

[chump]

You may now rest easy...Granny Gordon has declared he will sort out the issue of UK house prices by building vastly more starter homes.
Just for the moment let us assume that he delivers on this target. As he considered what the impact of that would be upon the equity value of all those first buyers who have entered the market in the last years ?
It's obvious is it not that by interfering in the market any gains he makes on the behalf of yet to be first time buyers will come at the expense of existing first time buyers ! Or shall we say they would be in the first line of people to suffer financially.

Strange , the BOE amongst others creates the conditions for this issue with cheap money and then along comes the govt to compound it. Do they, I wonder, work at being thick ,or does it come as a genetic prerequisite to holding public office ?

Alternatively of course , we have heard promises along the current lines many times before ,but converting same into action as never happened to date so we might wish to write this off as simply yet more vote winning tactics which after said elections will disappear.

 

[jacinto]

Do they, I wonder, work at being thick ,or does it come as a genetic prerequisite to holding public office ?

it seems so.

 

[fat chance]

Strange , the BOE amongst others creates the conditions for this issue with cheap money and then along comes the govt to compound it. Do they, I wonder, work at being thick ,or does it come as a genetic prerequisite to holding public office ?

I'm prepared to give Herr Brown the benefit of the doubt and believe that he's evil rather than thick. In order to stay in power, Labour needed the votes of the home-owning middle classes that could easily go back to voting Tory, and what better way to secure these votes than to engineer a housing boom that would see many of them gain hundreds of thousands of pounds (or at least believe that they'd gained it). If I wanted to engineer a housing boom I would:

(1) use a measure of inflation that doesn't take property prices or rents into account

(2) pass interest rate control over to the BOE in order to trick the ordinary public into thinking I have no control over it

(3) block planning permissions left right and centre during the first several years of office to create an under-supply of housing

(4) allow far Eastern companies unrestricted access to our markets to keep consumer price inflation down so that interest rates remain low

(5) allow unlimited immigration in order to keep wage inflation down to help keep interest rates low, and to increase the demand for housing / prop up the bottom of the market by providing tenants for buy-to-let landlords

(6) increase housing benefits to provide greater security for buy-to-let landlords

(7) not introduce any legislation to encourage (and certainly not force) a greater amount of money going into pensions or savings so that as much money as possible is available for the housing market

(8) endlessly go on about how strong the economy is and how wonderful its growth is, when in fact a lot of the growth is due to the increase in population, productivity has decreased, the manufacturing sector is in decline and lots of people have non-essential jobs in the service sector that can easily be lost in a downturn

I probably a missed a few other things. Anyway, now that the potential for upside growth in housing is limited, the housing market is a net electoral liability as many young people will never be able to afford their own home at current prices. However he can't risk crashing the market before the next election, so his stated plan is to gradually build enough houses over the next fifteen years or so.

ps does anybody have any information regarding the property dealings and portfolios of the BOE MPC members?

 

[Atilla]

I'm prepared to give Herr Brown the benefit of the doubt and believe that he's evil rather than thick. In order to stay in power, Labour needed the votes of the home-owning middle classes that could easily go back to voting Tory, and what better way to secure these votes than to engineer a housing boom that would see many of them gain hundreds of thousands of pounds (or at least believe that they'd gained it). If I wanted to engineer a housing boom I would:

(1) use a measure of inflation that doesn't take property prices or rents into account
You mean take energy and fuel out of the index calculations as well as have three different indexes...

(2) pass interest rate control over to the BOE in order to trick the ordinary public into thinking I have no control over it This is true and one of the best things he has done. Perhaps the only good thing. Spade is a spade is a spade.

(3) block planning permissions left right and centre during the first several years of office to create an under-supply of housing More to do with councils than government. Check out Borough of Epping Forrest. I think they may be Tory

(4) allow far Eastern companies unrestricted access to our markets to keep consumer price inflation down so that interest rates remain low What on earth are you talking about. Foreign investment brings jobs and productivity.

(5) allow unlimited immigration in order to keep wage inflation down to help keep interest rates low, and to increase the demand for housing / prop up the bottom of the market by providing tenants for buy-to-let landlords Immigration is a net benefit to the UK and it's good it keeps wage inflation down. Also stimulates the economy and foreigners breed more. How do you think the pension crises and aging popullation problem will be solved. More people leave UK then enter it and that's a fact. The problem is the intelligent people are leaving and all sorts of 'less' intelligent people are entering... :cheesy:

(6) increase housing benefits to provide greater security for buy-to-let landlords. Better than councils managing the housing stock and making a balls up of it.

(7) not introduce any legislation to encourage (and certainly not force) a greater amount of money going into pensions or savings so that as much money as possible is available for the housing market. A second house is the pension. My accountant tells me to buy a second house instead of a pension. All the black taxi drivers tell me the same thing too. I tell black taxi drivers in the City are the dogs bollox when it comes to financial advice.

(8) endlessly go on about how strong the economy is and how wonderful its growth is, when in fact a lot of the growth is due to the increase in population, productivity has decreased, the manufacturing sector is in decline and lots of people have non-essential jobs in the service sector that can easily be lost in a downturn Get to the point. We currently have high employment, reasonable but growing inflation and you've never had it so good.

I probably a missed a few other things. Anyway, now that the potential for upside growth in housing is limited, the housing market is a net electoral liability as many young people will never be able to afford their own home at current prices. However he can't risk crashing the market before the next election, so his stated plan is to gradually build enough houses over the next fifteen years or so. Housing supply is inelastic and trends are usually visible in decades. So you work it out. By the time you are an old man and/or you decide to go and live in Costa del Sol, the housing stock may reach and equilibrium state if equilbrium ever exists outside of a text book.

ps does anybody have any information regarding the property dealings and portfolios of the BOE MPC members? Mind your own business

I don't believe he will build that number of houses. He may build more but not the figure he is quoting. Your points above are all off the mark though.

I had to read it umpteen times before it sank in. Do you work for the Daily Telegraph? :cheesy:

 

[fat chance]

Your points above are all off the mark though.

I had to read it umpteen times before it sank in. Do you work for the Daily Telegraph? :cheesy:

I wasn't being entirely serious... more like a random rant based on vague notions not particularly supported by facts. Fun though. I guess the points I'm raising are: has the housing boom in the UK been excessive, to the extent that it has harmed the long-term interests of the average UK citizen; and could the government have acted to reduce the housing boom without harming the economy but deliberately decided not to for short-term political gain?

 

[fat chance]

Just got round to reading the Daily Telegraph online today (I do read it, but I don't work for it and I've never posted on there. Honest)...

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2007/07/13/do1301.xml

 

[jacinto]

I had to read it umpteen times before it sank in. Do you work for the Daily Telegraph? :cheesy:

ROFLMAO

 

[Atilla]

Just got round to reading the Daily Telegraph online today (I do read it, but I don't work for it and I've never posted on there. Honest)...

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2007/07/13/do1301.xml

Hi Fat Chance, I too was cheeky about it all but yours and DTelegraphs point do tally up.

But when you look at why the housing market is so distorted - such that someone on an average wage must pay eight times his pre-tax annual salary in order to purchase an average house - it becomes clear that Mr Brown's Labour administration, far from providing solutions to this crisis, is in fact responsible for two of its most important causes: fractured families and unprecedented levels of immigration.

This is rubbish too.

Governments do not control families... If people decide to marry later or divorce more or decide to live independantly what is the government to do. So much for free markets touted by the DTelegraph.

As for immigrants, most of them can't afford their own house. Very few can. So take fill up the buy to let flats.

I would argue this makes the whole system more productive and less rigid.

For the DTelegraph to quote the government is responsible for two of its most important causes is UTTER BULL POOH.

I'm glad you weren't serious about it because just because a piece of print is in a paper written by some journalist twit with half baked ideas trying to score daft points for the Tories doesn't make it so.

I reckon GBrown has made a fantastic bid for election. I also feel most people will have bought it. Look at the Tories barking about tax breaks for married couples of £20?

Gee wow...

Do I go for the new house or stay with the old dog and get £20 extra...

Tough call. Guess who'll win the next elections.:cheesy: