UK House prices: News & Views

[drbubb]

So the NSA was up 0.31%, doesn't the figure come in about 4% in a normal market this time of year that's why we get SA. How does it compare to 08/09 for the same month.

The offers need to start coming down, if the market is going to slide.

I reckon it will happen, but there's no real evidence in the data... yet.

 

Here are the Month-on-month changes in NSA - H&N Index

 

Mo : 2009 : =2010= : =2011= :

J. : = n/a= : -0.11% : - 0.33% :

F. :- 1.08%: -0.51% : +0.06% :

M.:+ 0.38%: +1.53% : +1.25% :

A.:+ 0.29%: +1.88% : +0.31% :

M.:+ 1.09%: -0.06% :

J. :+ 0.12%: -0.55% :

 

[tallim]

That £10,000 Terraced 2 Bed house in a Northern Town is getting closer.

 

Unsold at auction late April and now available with an asking price of £20,000.

 

50 Florence Street in Burnley

 

http://www.theauctionpeople.co/Lot/Manchester/20110428/140

[Meralti]

Well, that seems to have been ruled out - the bull is strong on BDEV.

Look for double top next.

 

Looks like it's happening on low volume though.

[drbubb]

Seasonal note added...

 

Mo / 2009 : =2010 : =2011 :

J. : =n / a : -0.11% : -0.33% :

F. :- 1.08%: -0.51% : +0.06% :

M.:+ 0.38%: +1.53% : +1.25% :

A.:+ 0.29%: +1.88% : +0.31% :

M.:+ 1.09%: -0.06% :

J. :+ 0.12%: -0.55% :

==========

SB +1.76%: +3.41% : 1.56% :

*Seasonal bounce: March-May.

(May not included yet in 2011.)

 

Could be the weakest bounce in the 3 year period.

[drbubb]

UK property prices may drop by as much as 20pc

 

- says headline in Bloomberg article

 

"UK house prices adjusted for inflation may drop as much as 20 per cent in the next five years as the BofE raises interest rates and regulators tighten lending rules, the National Institute for Economic and Social Research said."

 

+ Real house prices are overvalued by 10 pc

+ Combined impact of rising rates,a nd tighter mortgage rules may cut prices a further 10 pc

 

+ The key lending rate is at a record low of 0.5pc, but with 2011 inflation forecast to rise from 3.8 pc to 4.5 pc, this is unsustainable

[drbubb]

Looks like it's happening on low volume though.

yeah. : BDEV-chart

 

Resistance is about 116-118p

 

Old high there is being retested on lighter volume

[Van]

Halifax is now down 20% since mid-2007 peak, and general inflation accounts for another 12-13% since, so we can now accurately say that UK Property has had a third of its value wiped off in real terms since peak. We knew that real prices would have to fall by 50% to for them to revert to trend, and this now looks bang on target.

 

I still don't think that we'll get big nominal drops, however. More a long slow grind down over the next 3-4 years with inflation doing the rest.

[borassic]

Ex local authority two bed flats in Chesham (Tube to town 1 hour) going for £160,000 (yes, selling). Too much. God knows what they went for in 2007. I ain't buying as rent off housing assocation £400 a month. Bollox to buying for the next 5 years at least.

[Meralti]

Halifax is now down 20% since mid-2007 peak, and general inflation accounts for another 12-13% since, so we can now accurately say that UK Property has had a third of its value wiped off in real terms since peak. We knew that real prices would have to fall by 50% to for them to revert to trend, and this now looks bang on target.

 

I still don't think that we'll get big nominal drops, however. More a long slow grind down over the next 3-4 years with inflation doing the rest.

 

The inflation argument is nonsense. If anything inflation will decrease prices further. There are two kinds of inflation, cost push and demand pull. We're seeing cost push. Demand pull is where rising wages drive price increases; this is what is needed to make the mortgage more debt affordable are we're not seeing it. Cost push is where prices rise because of rising costs to foreign manufacturers or home currency devaluation. This does not decrease the relative debt levels measured in the home currency. It simply reduces even further the amount of income that can be expended on debt repayment and interest.

[Van]

The inflation argument is nonsense. If anything inflation will decrease prices further. There are two kinds of inflation, cost push and demand pull. We're seeing cost push. Demand pull is where rising wages drive price increases; this is what is needed to make the mortgage more debt affordable are we're not seeing it. Cost push is where prices rise because of rising costs to foreign manufacturers or home currency devaluation. This does not decrease the relative debt levels measured in the home currency. It simply reduces even further the amount of income that can be expended on debt repayment and interest.

 

 

 

 

The demand-pull period will come after a few years of cost-push as workers demand better wages when the economy is recovered enough for them to be able to, without fear of losing their jobs (or being able to find better jobs). Wages will catch up- eventually.

 

 

[drbubb]

The demand-pull period will come after a few years of cost-push as workers demand better wages when the economy is recovered enough for them to be able to, without fear of losing their jobs (or being able to find better jobs). Wages will catch up- eventually.

Maybe. Just maybe.

We cannot be certain of that.

And if / when wages rise, the rise may be accompanied by higher rates - which would undermine house prices.

[drbubb]

MORE Seasons...

 

Mo / Aver. :: =2004= : =2005= : =2006= : =2007 : =2008= : =2009 : =2010= : =2011= :

J. : - 0.38%:: +0.29%: - 0.47%: - 0.45%: - 0.03%: - 1.50%: - 0.37%: -0.11% : -0.33% :

F. : +0.68%:: +2.76%: +0.29%: +1.17%: +1.85%: +0.28%: -1.08%: -0.51% : +0.06% :

M.: +1.23%:: +2.76%: +0.98%: +2.08%: +1.75%: -0.83%: +0.38%: +1.53% : +1.25% :

A.: +1.50%:: +2.72%: +1.23%: +2.18%: +2.23%: -0.06%: +0.29%: +1.88% : +0.31% :

M.: +0.53%:: +2.59%: +0.61%: +0.68%: +0.62%: -2.56%: +1.09%: -0.06% : ? ? ? ? :

J. : +0.11%:: +1.74%: +0.55%: - 0.14%: +0.70%: -1.63%: +0.12%: -0.55% : ? ? ? ? :

==========

SB +3.26%:: +8.07%: +2.82%: +4.94%: +4.60%: -3.45%: +1.76%: +3.41% : 1.56% :

*Seasonal bounce: March-May.

(May not included yet in 2011.)

 

2011 seems to be running well below the seasonal average.

[BoldAsBrass]

The demand-pull period will come after a few years of cost-push as workers demand better wages when the economy is recovered enough for them to be able to, without fear of losing their jobs (or being able to find better jobs). Wages will catch up- eventually.

 

Like regional house prices, wages have huge variation by sector. Many people have had no real, or nominal, wage increases for years. When I do a bit of software contracting - rates are the same as 10 years ago.

 

If you drive a bus or lorry for a living - wages now are the same as 20 years ago. For a lot of people globalization has meant static wages for a long time - as jobs have disappeared to the Far East - the demand here for semi-skilled jobs in enormous. If you have 10 people applying for every job, wages will, at best, stay still.

 

The reality at the moment is that many semi-skilled admin jobs have hundreds of people applying for them.

[drbubb]

Like regional house prices, wages have huge variation by sector. Many people have had no real, or nominal, wage increases for years. When I do a bit of software contracting - rates are the same as 10 years ago.

 

If you drive a bus or lorry for a living - wages now are the same as 20 years ago. For a lot of people globalization has meant static wages for a long time - as jobs have disappeared to the Far East - the demand here for semi-skilled jobs in enormous. If you have 10 people applying for every job, wages will, at best, stay still.

 

The reality at the moment is that many semi-skilled admin jobs have hundreds of people applying for them.

Not only that...

 

The TRANSFER PAYMENT BRIGADE (those on benefits) which did very under Labour, are likely to find their incomes squeezed too.

[borassic]

There you are:

 

http://www.telegraph.co.uk/finance/personalfinance/8511223/Families-have-lost-500-over-past-12-months-says-think-tank.html

 

They've eased interest rates, they've eased money supply, what's left to go easy?

[John Doe]

Ah, you all worry too much.

 

Asking prices are up and median time on market falling "sharply"

 

http://www.home.co.uk/asking_price_index/HAPIndex_MAY11.pdf

 

However, new numbers coming to market rocketing

[BoldAsBrass]

It's worth a look at the estateagenttoday web site from time to time. It has a forum (of sorts) (news items with comments section). Every now and then you get a news item that provokes an outburst of candour.

 

One such news item is entitled "House sellers cutting more off their asking prices"

 

A few of them actually admit things are dire and vendors haven't twigged what is going on. One of them (in that story, I think) even mentions transaction levels of a QUARTER what they were a few years ago. Another admits he's sold 9 houses this year but claims to be making an average 12k commission - states overheads of 8k a month including staff so says he is happy enough.

[Pixel8r]

A few of them actually admit things are dire and vendors haven't twigged what is going on. One of them (in that story, I think) even mentions transaction levels of a QUARTER what they were a few years ago. Another admits he's sold 9 houses this year but claims to be making an average 12k commission - states overheads of 8k a month including staff so says he is happy enough.

12k commission has got to be a best case scenario, I doubt that all of the sales are achieving that. I sold a commercial property last year and it was on sole agent for 1.5% commission, which worked out at £3,300 on a £220k property.

[BoldAsBrass]

12k commission has got to be a best case scenario, I doubt that all of the sales are achieving that. I sold a commercial property last year and it was on sole agent for 1.5% commission, which worked out at £3,300 on a £220k property.

 

He said he was in the South East - not too far from London (I think). There are (amazingly) lots of pleasant towns within an hour of London where lots of houses are in the 500k to £1m range. He, presumably, has sold 9 this year and has made £60k - 70k net and it's only the middle of May. I have no reason to think he is exaggerating - he's only claiming 9 sales but probably operates in somewhere like Gerrards Cross or Esher or Tunbridge Wells. Maybe he specialises in the top end of the market as some of them do.

 

I know a one man agent in a pretty grotty town in Wiltshire where the average price is about 200k. Flats are 100 - 150k. Terraces 150k to 225k. 3 bed semis 200k to 275k and detacheds (mostly estate boxes) are 250k to 300k. He rents a bit of his office out to a bloke who runs a lettings business - and they answer each other's phones etc. He's been running his agency for 25 years now and seems to survive okay.

 

Even in these dire times he is selling an average of 3 a month. Which at 1.5% keeps his head above water and makes him a living. He has a secondary position shop and a tiny ad in the local rag - which he doesn't always run. He gets a lot of repeat business because he is actually good at his job and has integrity. People who buy or sell through him use him again - even if it's 10 years later. The boom in house prices has, in a way, saved the industry. Transactions are low but they're earning two or three times the commission they were in 1997.

[drbubb]

Ah, you all worry too much.

 

Asking prices are up and median time on market falling "sharply"

 

http://www.home.co.uk/asking_price_index/HAPIndex_MAY11.pdf

 

However, new numbers coming to market rocketing

 

Optimistic Sellers Push Prices to the Limit

“The prospects for the housing market are very weak indeed over the next five years,” Ray Barrell, director

. . .

The number of properties reduced in price increased during the month of

April to 77,510, 29% more than in April 2010.

Typical time on market has fallen sharply by 26 days to 107 days (median),

but remains 12 days more than in May 2010.

Supply of new properties to market increased to 134,704 in April, 14% more

than in April 2010.

(there are not 14% more buyers- that much is clear.)

 

This is a Portend of Disaster - I reckon

[G0ldfinger]

Hmmm, friends bought around that time (2007) in Dublin. I think I warned, said something about gold... Ahhhh, what do you know...!?

 

http://news.yahoo.com/s/afp/20110513/bs_afp/irelandeufinanceeconomyproperty

New Irish index shows extent of property crash

...

DUBLIN (AFP) – The collapse of an Irish property price bubble that has blitzed the country's banks has seen values plunge by up to 52 percent since a 2007 peak, a new government index showed on Friday.

 

The first results from a new Central Statistics Office (CSO) index show that, countrywide, prices of all residential property are down almost 40 percent on 2007 -- and they are still falling.

 

The apartment market in Dublin has been worst hit by the property crash with a 52 percent drop in prices from February 2007.

 

House prices in Dublin are down about 45 percent and the fall throughout the rest of the country has been lower at just over 35 percent.

[Chartered Surveyor]

A quick update on the London housing market

 

Since April 2011 the market has gone quiet in the volume of instructions received. I must add that I am at the coal face and tend to get the cream of all instuctions.

 

The remortgage market is getting stronger with applications applying for either 2 year fixes or tracker rates though it must be said the applicants are 60-75%LTV (Loan to value)

 

An intersting trend is 75% of those sales I deal with are for BTL (Buy to let). This market suggests cash rich buyers are geting out of sterling.

 

It is only an opinion of mine that I consider a sell off (the money markets that is), over the summer with a very short deflationary period about to set in. Gold silver will go down as well as all commodities. This is all contrived and to me is only a ruse, as the FUNDAMENTALS are only getting worse. Gold and silver will hold well.

 

Here is an antidotal tale. Today I did a remortgage valuation. The house was bought in 2005 at £485,000 at just shy of a 100% LTV. The same house today is worth £750,000 yet the applicant now owes £490,000. This is replicated all over.

 

At the end of the day most people waiting for a house price crash need to preserve their purchasing power. A significant nominal crash will NOT happen. So far against gold they have crashed spectacular. One should have sold out in 2008 and converted their £ savings and bought gold. Did you know Prime London for a house over £2milion has gone up 57% since 2008. Compare this agaisnt golds rise since 2008 and you will calculate a huge drop against Gold.

 

I do not see this position changing even if you are late to the party in buying gold today.

 

There is an old Biblical saying 7 years good 7 years bad. With Uk debt long dated I can see a few years hardship up to 2013/2014 just before the next general election were alot of money will be injected into the market to create the feel good factor. From 2015 onwards housing in the UK set against gold will be the sweet spot. The UK housing crash is not in nominal terms in sterling but against inflation and gold.

 

My point is get out of sterling even now and buy and hold gold. The cycle will eventually reward you and I will say in 2015. If I am wrong as the markets can stay irrational longer that you can stay solvent then I will hold my hands up and say get on with you life as you only live once. But i am confident that I will not be wrong as I have put my money were mouth is and hold no sterling any more. Yes I am waiting to buy.. The value of a house in sterling is irrelevant. It is the amount of gold ounces is the measure. From now till 2015 housing values in gold onces will go down. My only regret is I never listened to my gut instinct and bought all the gold I could aford in 2008. I would be a content man now.

[Jake]

A quick update on the London housing market

 

Since April 2011 the market has gone quiet in the volume of instructions received. I must add that I am at the coal face and tend to get the cream of all instuctions.

 

The remortgage market is getting stronger with applications applying for either 2 year fixes or tracker rates though it must be said the applicants are 60-75%LTV (Loan to value)

 

An intersting trend is 75% of those sales I deal with are for BTL (Buy to let). This market suggests cash rich buyers are geting out of sterling.

 

It is only an opinion of mine that I consider a sell off (the money markets that is), over the summer with a very short deflationary period about to set in. Gold silver will go down as well as all commodities. This is all contrived and to me is only a ruse, as the FUNDAMENTALS are only getting worse. Gold and silver will hold well.

 

Here is an antidotal tale. Today I did a remortgage valuation. The house was bought in 2005 at £485,000 at just shy of a 100% LTV. The same house today is worth £750,000 yet the applicant now owes £490,000. This is replicated all over.

 

At the end of the day most people waiting for a house price crash need to preserve their purchasing power. A significant nominal crash will NOT happen. So far against gold they have crashed spectacular. One should have sold out in 2008 and converted their £ savings and bought gold. Did you know Prime London for a house over £2milion has gone up 57% since 2008. Compare this agaisnt golds rise since 2008 and you will calculate a huge drop against Gold.

 

I do not see this position changing even if you are late to the party in buying gold today.

 

There is an old Biblical saying 7 years good 7 years bad. With Uk debt long dated I can see a few years hardship up to 2013/2014 just before the next general election were alot of money will be injected into the market to create the feel good factor. From 2015 onwards housing in the UK set against gold will be the sweet spot. The UK housing crash is not in nominal terms in sterling but against inflation and gold.

 

My point is get out of sterling even now and buy and hold gold. The cycle will eventually reward you and I will say in 2015. If I am wrong as the markets can stay irrational longer that you can stay solvent then I will hold my hands up and say get on with you life as you only live once. But i am confident that I will not be wrong as I have put my money were mouth is and hold no sterling any more. Yes I am waiting to buy.. The value of a house in sterling is irrelevant. It is the amount of gold ounces is the measure. From now till 2015 housing values in gold onces will go down. My only regret is I never listened to my gut instinct and bought all the gold I could aford in 2008. I would be a content man now.

Thanks for that CS. So you would buy gold over the summer, averaging in, I suppose? Looking to hold until when? 2015? Then use gold to buy property? The property crash against gold prices must be around 70+% now. I'm wondering if it would not be opportune to buy property (for those in the UK) now with gold before prices retreat? But you think this will only be temporary.

Ummm...Why do you think no NOMINAL crash?

[drbubb]

Hmmm, friends bought around that time (2007) in Dublin. I think I warned, said something about gold... Ahhhh, what do you know...!?

The apartment market in Dublin has been worst hit by the property crash with a 52 percent drop in prices from February 2007.

House prices in Dublin are down about 45 percent and the fall throughout the rest of the country has been lower at just over 35 percent.

It sounds like a big drop.

But Hong Kong fell 69 percent from 1997 to 2003 (6 years) - so maybe Dublin's drop is not done yet.

[drbubb]

Here is an antidotal tale. Today I did a remortgage valuation. The house was bought in 2005 at £485,000 at just shy of a 100% LTV. The same house today is worth £750,000 yet the applicant now owes £490,000. This is replicated all over.

 

At the end of the day most people waiting for a house price crash need to preserve their purchasing power. A significant nominal crash will NOT happen. So far against gold they have crashed spectacular. One should have sold out in 2008 and converted their £ savings and bought gold. Did you know Prime London for a house over £2milion has gone up 57% since 2008. Compare this agaisnt golds rise since 2008 and you will calculate a huge drop against Gold.

This story demonstrates my contention:

 

The UK has not "bit the bullet" on Housing yet - particularly in the London area.

 

With the US, Ireland, Spain, and practically every other country in the Western world have seen a large correction, why has the London area escaped?

 

ANSWER:

Banks never really became disciplined in London, the government kept pumping out housing benefits, and ultra-low rates arrived in the "nick of time" back in late 2008.

 

I think the bullet will get bit, and London will suffer too, and when prices come down, all those debt fueled households that have built their debt up to beyond the high prices they paid back in 2004-2007 are going to be in a world of pain.

 

There is no magic way of boosting incomes in the UK, and UK interest rates cannot stay at ultra-low levels forever. Inflation rates are now well above base rates. This type of negative rate cannot be sustained for long, since it encourages malinvestments and distorts the economy.

 

The debt crisis which is now ravaging Greece and Ireland, will sometime soon show up in the UK. That will push borrowing rates for the UK government up, and I think this will be the pin that finally bursts the UK housing bubble.

 

The sad news is that Go-down Brown is no longer in centre stage to absorb the full share of the blame that he richly deserves.