Property Article

[SAINT]

Pop goes the UK; first housing, then the rest: James Saft | Special Coverage | Reuters

Good article on property from reuters.

 

[0007]

Pop goes the UK; first housing, then the rest: James Saft | Special Coverage | Reuters

Good article on property from reuters.

An interesting article which doesn't actually say anything new but is well worth a read by anyone unfamiliar with the territory. I agree his conclusions:

" First, Britain is likely to suffer a substantial housing decline, which easily could snowball and become steep -- as in the United States.

Second, that housing decline poses huge risks to an overleveraged economy accustomed to easy debt and house price inflation -- as in the United States.

Third, as prices fall and the economy struggles, a lot of UK mortgage debt will go bad, hitting banks and investors in Britain and abroad -- as in the United States.

All three will magnify and feed one another.
"

As far as Joe public in Uk is concerned, I don't think the truth has really hit home yet - they sense that something's wrong and that the government is making all sorts of excuses but they don't understand the seriousness.

In my locality (upmarket provincial Midlands market town with significant number of London commuters) the housing market is dead. No one (except possibly the estate agents - who are starting to reduce some prices by nibbles) seems to understand that to sell a property you've now got to offer a realistic price - and even that may not be sufficient in the current market of no easy mortgages. I bought here Dec 2006 and was laughed at when making what i considered to be realistic offers. I eventually found a nice house with a smart owner who took my offer and saved himself the problem of now, either not selling or taking even lower.

I've surveyed the housing market here pretty thoroughly since i first started looking in early 2006. Now, many many sellers have just removed their properties from the market - i dont think HIPS have helped - only politicians who've never even run a whelk stall could have engineered that one. The removals from market appears to be because they think the market will bounce back - has all the smell of those who continually adjust their stoploss downwards. I'm talking in the main, decent 4 bed detached houses which is what i was specifically searching. The situation now is that there are hardly any for sale and if i were looking now i'd be hard pressed no matter how much ready money I've got. This, of course, is the market in action. The sensible buyer will go into temporary rental, wait, and get a good deal later on. This is what I usually do and it is quite surprising how sellers' attitudes change when you turn up with a wallet-load of money and no chain.

The BTL (buy to let) & other get rich quick property merchants are going to get severely hurt. But they were, in the main, either greedy or stupid or both.

The people who i really feel sorry for are those struggling to earn a decent living who are going to get shafted by irresponsible bankers (i did say bankers), politicians and smart marketing whiz kids who've never seen a recession.

PS - didn't mean to make a rant but it does seem a bit like that on re-read. Ah well, it's all true!

 

[Trader333]

The housing market may be dead where you are but where I am it is still buoyant and prices have held their value.

I agree that HIPS have had a negative impact and have been responsible for around 30% of properties being withdrawn. The reason is that around 30% of all properties on the market were from people who would just test the market and move if they sold but didn't need to or maybe fancied a move just up the street. With the time limited HIPS coming in these people have just disappeared as they were only happy to sell if no upfront cost was incurred.

In my view the biggest factor in house price deflation and ultimate crash will be interest rates and there is talk of reducing them. If that happens then I don't think we will see the same problems as the US is seeing but with any market who can tell.


Paul

 

[0007]

The housing market may be dead where you are but where I am it is still buoyant and prices have held their value.

I agree that HIPS have had a negative impact and have been responsible for around 30% of properties being withdrawn. The reason is that around 30% of all properties on the market were from people who would just test the market and move if they sold but didn't need to or maybe fancied a move just up the street. With the time limited HIPS coming in these people have just disappeared as they were only happy to sell if no upfront cost was incurred.

In my view the biggest factor in house price deflation and ultimate crash will be interest rates and there is talk of reducing them. If that happens then I don't think we will see the same problems as the US is seeing but with any market who can tell.


Paul

I don't think there's much doubt that there are areas where the market is still buoyant and likely to remain so for the immediate future. Agree the "market testers" will be shaken out by HIPS but in a normal market, reduced supply would then keep it upbeat. Having said that I note that some agents are doing free or very cheap HIPS.

It will be interesting to see Land Reg data (which has considerable lag) towards the end of this year -this should give the truest picture even allowing for the fact that the "price paid" notification to the Registry may not be strictly accurate.

Not sure (ie I really don't know) about your point on interest rates - they have been reducing but that hasn't counteracted the effect of years of dodgy / inappropriate lending. I believe the biggest effect will be crowd sentiment ie what Joe bloggs thinks. That will be governed by jobs & economic effects and although the current portents are not totally upbeat that could conceivably change. I remember some outstanding property bargains at the time of the last recession but nobody wanted to buy. However, the likes of Warren B are always lurking to take advantage!

I think it will be interesting to see what transpires and whether this time, action by the central banks and politicians is effective. I'm pessimistic because no matter what they say, they can't control economic cycles.

 

[SAINT]

The recent '5 months of falling prices' is irrelevant, it's the next 5 that will have more bearing. As 0007 was saying, there's always a lag in how consumers react to the market. All the talk was of banks, but now we are starting to see coverage of house prices falling and mortgage supply being cut so we'll have to see how it plays out.

One of the main problems now is that 100% mortgages are being stopped and it's clear that few Britons have the 5-20k deposits they would now need to fill the supply gap.
Even though prices are falling it's actually harder for first timers to get on the ladder.

I think people are overall still a bit blase about the risks up ahead and take the recent boom days for granted. The strength of the UK economy had been built up by rising house prices and easy consumer debt, which filtered into retail (diy/furniture-even frivolous starbucks etc) so there's a risk that this will all disappear into the thin air it was built on.

The situation that the Central Banks find themselves in is a catch 22. The recent inflation reading was 2.5% so they don't have a lot of scope to cut rates at a time of $100 oil and rising food costs.

 

[zambuck]

Banks have cut rates and they will have to 'throw' the 'Inflation Standard Book' out of window if they want to survive....and they will have do that...

The stories about propertis now rhyme with the stories in 92-95 period when no one was buying....but some stuck their necks out and bought properties from friends who were 'migrating' elsewhere.....

A single most IMPORTANT decision for some.....To buy in a complete slump...and have guts to do that.....and have Banks who would lend....

Well even with today's market and horror stories some have lost NONE of their property value at all.....In fact in GL area the prices ROSE....as demand is still there.....

This is NOT a period to rant but period to think and see if you can make killing with a deal....

People from abroad - India, China and Russians are still buying in GL areas....

Will I buy...Yes....I will give a very silly offer and if that is taken then yes I will buy if price is right in my mind...

It's good to be back after long time as wifey bought a business in sticks and I was the main 'donkey' for few months....!!

 

[Atilla]

An interesting article which doesn't actually say anything new but is well worth a read by anyone unfamiliar with the territory. I agree his conclusions:

" First, Britain is likely to suffer a substantial housing decline, which easily could snowball and become steep -- as in the United States.

Not necessarily. Demand > Supply in the UK. A stall of price increases (which is good) and some fall in price perhaps 10% but I wouldn't call it substantial. No way... Plenty of cash around to for bargain hunters to pick up low price properties.

Second, that housing decline poses huge risks to an overleveraged economy accustomed to easy debt and house price inflation -- as in the United States.

I read somewhere that average mortgage remaining in the UK is £114K. That's is heck of a lot of equity in average price of properties. Some extended yes but not that much. More houses for others with money to pick up bargain house prices. Debt yes people are but I think these are more likely to be people who don't own their own homes I'd guess.

Third, as prices fall and the economy struggles, a lot of UK mortgage debt will go bad, hitting banks and investors in Britain and abroad -- as in the United States.

Not necessarily. Lack of house sales via the multiplier affect will feed into low sales in the real economy. A recession yes but not a collapse. Foreign money and net migration will prop up the housing market.

All three will magnify and feed one another. I don't think so. Subprime crises is 30% in US. Only 5% in the UK. Some people running away with their ideas. A cooling off is a good thing to the housing crises.
"

Bigger threats to the global economy are imho is

1. Inflation
2. Recession
3. Oil shock
4. Loss of dollar standard

If gold is going up - think about it, tangible asset prices will go up. Houses are better than failing stocks and shares with low returns. I know where I will be putting my money in the next couple of years for sure.

There are lot of self made property developers and BTL investors out there. I certainly am not pessimistic about the UK housing market. Price falls yes but not this kind of scale.

The fall in markets in the next couple of years will be based round recession and falling earnings as a consequence.

Some redistribution of the cake as there will always be winners and losers.

 

[fibonelli]

:whistling

 

[Atilla]

:whistling

Hi Fib,

Don't hold back chum. Tell us what you are thinking???

 

[chump]

No one knows how this will play out ,but the doom mongers are having a field day has usual (whats up guys ..didn't have the balls to buy when it was cheap so you want everybody else to be in the same state of panic has you? !).
Besides interest rates which will fall,don't think they will not as ALL central banks have an inbuilt skew towards growth over and above everything else (why else do we have inflation at all LOL (what about the ECB..dare I say if Germany was doing worse the ECB would have reacted by now)...so rates will fall,BUT if this govt has any nous it will understand that to support the wide economy and housing is one and the same thing and they could trot out measures eg reintroduce tax relief on mortgages for 1st time buyers for say a period of 5 to 7 years ...cut builders some tax relief slack via vat ..use stamp duty relief etc etc . Would mean finding the funds from elsewhere in the budget ,but it's certainly possible to go the fiscal route AND monetary route. I think they may try this approach ,but we may need to see more unemployment knock on before they get that particular message.

 

[zambuck]

You heard what Peter Spencer is saying, here on this thread first....!....See 6#

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