UK House prices: News & Views

[John Doe]

That's odd as Home.co.uk reported prices ticked up in London this month

 

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

 

the rightmove index is rather noisy month on month

 

Strange how all those that slated Rightmove for years because of its unrealistic data, (and all the “but but it’s asking prices” comments) choose now to splash it all over the place because it suddenly agrees with their stance.

 

Rightmove has always been way out, on the way up, and on the way down.

 

 

I think everyone is agreed that prices will fall over the next 6 months (and possibly longer), but to use Rightmove in any analysis is a risky strategy, especially when they start reporting massive jumps in asking prices as they do each spring.

 

Home.co.uk have always had a better grasp, and always reported in a realistic (and genuinely bearish) way for many years.

 

They were the ones constantly saying it wasn't sustainable, they were the ones that always said sellers were unrealistic.

 

Rightmove, on the other hand were the ones always coming up with false reasons why prices kept rising.

 

How quickly people forget.

[John Doe]

True.

But it tends to lead the other indices also

 

Hi Dr B. Do you have one of your graphs to show this?

 

Interestingly on the last page of the Home.co.uk report was this snippet

 

Investors often talk of investment cycles. The cycle for property in the UK

appears to be around 18 years.1 The last bottom in house prices was around 1996;

hence, based on this rule of thumb, we should expect house prices to find a new low

around 2014. However, the unprecedented acts of quantitative easing perpetrated by

the western central banks may well have served to lengthen the current cycle. Only

time will tell if this is to be the case, but a good indicator of the next market low will

be when the number of ounces of gold required to buy the average UK home stops

falling.

 

Nice!

[Van]

Let's remember what the Rightmove represents - new sellers' expectations. Therefore it only ever tells us half of the story, as it completely disregards buyers' ability to buy.

 

It's very common for it to be all over the place and suspectible to big seasonal swings as delusional sellers shift their expectation on short term mood swings. Rightmove is the least useful index out of all of them, but at least it is still somewhat useful as a gauge of sellers' sentiment.

[marceau]

Hi Dr B. Do you have one of your graphs to show this?

 

Interestingly on the last page of the Home.co.uk report was this snippet

 

 

 

Nice!

 

 

The cycle is dependent on behaviour and affordability, not time. Previous cycles matched because they were not subject to government intervention. Critically this intervention can only delay the reckoning and change behaviour, it does not fix the affordability problem.

 

I can see the case for the US bottoming being in 2014, but reaching the bottom of the UK cycle will take much, much longer IMO. Real or nominal, we haven't even really started yet - and that's coming from someone who now has had a 5-fold increase in house purchasing power thanks to gold.

[drbubb]

Strange how all those that slated Rightmove for years because of its unrealistic data, (and all the “but but it’s asking prices” comments) choose now to splash it all over the place because it suddenly agrees with their stance.

 

Rightmove has always been way out, on the way up, and on the way down.

 

 

I think everyone is agreed that prices will fall over the next 6 months (and possibly longer), but to use Rightmove in any analysis is a risky strategy, especially when they start reporting massive jumps in asking prices as they do each spring.

 

Home.co.uk have always had a better grasp, and always reported in a realistic (and genuinely bearish) way for many years.

 

They were the ones constantly saying it wasn't sustainable, they were the ones that always said sellers were unrealistic.

 

Rightmove, on the other hand were the ones always coming up with false reasons why prices kept rising.

 

How quickly people forget.

Is that directed at me? If so, you are off-the-mark once again, JD.

 

I have been using Rightmove data within my historical base for a long time, and was even one of the people on HPC who developed the so-called "Delusion Index", which is a ratio between RM's UK Asking prices, and the H&N Index.

 

This helps to tell you when Asking prices are unrealistically high. And even RM's economist has been telling you that this the case.

 

In fact, their writing has been quite sensible (for the most part) for the last 2-3 years.

[drbubb]

"Investors often talk of investment cycles. The cycle for property in the UK

appears to be around 18 years.1 The last bottom in house prices was around 1996;

hence, based on this rule of thumb, we should expect house prices to find a new low

around 2014. However, the unprecedented acts of quantitative easing perpetrated by

the western central banks may well have served to lengthen the current cycle. Only

time will tell if this is to be the case, but a good indicator of the next market low will

be when the number of ounces of gold required to buy the average UK home stops

falling."

Nice!

Hmm. Yes.

That looks like something that could have been written on GEI !

[drbubb]

The cycle is dependent on behaviour and affordability, not time. Previous cycles matched because they were not subject to government intervention. Critically this intervention can only delay the reckoning and change behaviour, it does not fix the affordability problem.

 

I can see the case for the US bottoming being in 2014, but reaching the bottom of the UK cycle will take much, much longer IMO. Real or nominal, we haven't even really started yet - and that's coming from someone who now has had a 5-fold increase in house purchasing power thanks to gold.

I mostly agree with that, and I want to point out that timing tends to be consistent, because the Cycle represents an ongoing "learning process" and since we are all human and wired in similar ways, the learning process tends to take a similar amount of time from one cycle to the next.

 

But the last cycle encountered the stubbornness and ambition of Gordon Brown and his absurd intention to put an end to boom and bust. So he delivered a bigger boom, and stretched out the bust, using various tricks that I frequently describe here.

 

Result:

The down-phase of the cycle has been delayed, and delayed in London and particular. So it should take AT LEAST 3-4 years, and maybe 6-7 from the London peak, which I reckon we are seeing this year. Along the way, we may get a big fat "bounce" in the prices of UK Houses expressed in Gold, and that might be followed by a long period of further stagnation of Prices-in Pounds and an eventual lower low.

[John Doe]

Is that directed at me? If so, you are off-the-mark once again, JD.

 

I have been using Rightmove data within my historical base for a long time, and was even one of the people on HPC who developed the so-called "Delusion Index", which is a ratio between RM's UK Asking prices, and the H&N Index.

 

This helps to tell you when Asking prices are unrealistically high. And even RM's economist has been telling you that this the case.

 

In fact, their writing has been quite sensible (for the most part) for the last 2-3 years.

 

I know you use several indices and would have named you if I had meant you. Although, saying that I think that you were one of those who in the past ridiculed their methods and analysis, did you not?

 

that aside, I was actually referring to the years and years of HPC comments slating rightmove (as I said once before).

 

Rightmove have only recently changed their tune. For years Miles Shipside (spell?) was way way off the mark and I stand by the fact that they are a very poor component for any analysis.

 

As for being "off-the-mark", it seems my predictions over the last year are closer to the mark than anyone else here (so what exactly did you mean by that comment?)

[John Doe]

The cycle is dependent on behaviour and affordability, not time. Previous cycles matched because they were not subject to government intervention. Critically this intervention can only delay the reckoning and change behaviour, it does not fix the affordability problem.

 

Are you sure about that?

 

We used to have for example, MIRAS and boom bust policies (Lawson boom etc etc).

 

There has always been political interference of some form.

 

I can see the case for the US bottoming being in 2014, but reaching the bottom of the UK cycle will take much, much longer IMO. Real or nominal, we haven't even really started yet - and that's coming from someone who now has had a 5-fold increase in house purchasing power thanks to gold.

 

Agree regarding the US, although I would guess they are practically there now.

 

Regarding affordability in the UK, IR's aren’t moving for years, and that's going to mean affordability remains OK for the majority. Look around, UK gilts are their highest value (lowest rates) for 50 years!

 

You can now fix for 5 years at less than 3.7%!

 

If (when) there is an IR shock, then, as I have always said, all bets are off. But, until then, the nominal low could well be in soon.

[romans holiday]

Are you sure about that?

 

We used to have for example, MIRAS and boom bust policies (Lawson boom etc etc).

 

There has always been political interference of some form.

 

 

 

Agree regarding the US, although I would guess they are practically there now.

 

Regarding affordability in the UK, IR's aren’t moving for years, and that's going to mean affordability remains OK for the majority. Look around, UK gilts are their highest value (lowest rates) for 50 years!

 

You can now fix for 5 years at less than 3.7%!

 

If (when) there is an IR shock, then, as I have always said, all bets are off. But, until then, the nominal low could well be in soon.

My 2 pennies worth. "HPC" is still possible even in nominal terms. More probable is a grinding Japanese-style deflation in house prices over a decade or two. That said, the crash has occured, and is proceeding, in terms of gold.

 

Note to Goldfinger: how about changing the title of the thread to HVC [House Value Crash].... there always seemed something incongruent about hyper-inflation mixed in with HPC.

[John Doe]

My 2 pennies worth. "HPC" is still possible even in nominal terms. More probable is a grinding Japanese-style deflation in house prices over a decade or two. That said, the crash has occured, and is proceeding, in terms of gold.

 

Very true, and also in many other currencies too.

[Jake]

My 2 pennies worth. "HPC" is still possible even in nominal terms. More probable is a grinding Japanese-style deflation in house prices over a decade or two. That said, the crash has occured, and is proceeding, in terms of gold.

 

 

 

Gosh! I'm going to agree with JD on this. Though I would say that I don't expect a Japanese style deflation in house prices over a decade or two. I'm sure the gov would go with that given the chance. Is there time? I don't think we've all got a decade or two of playing time. So..I expect a Japanese style grind until the system/currency collapses 2014-16 or debt kills us with inflation and deflation rocking our little boats. Is this out of the question? Are not the Euro, Dollar, Pound, Yen and a load more fiats on quiksand now?

Crash may come in gold/silver as price rockets for another few years. 3000-5000 gold would be just fine, I guess, (ch)av houses at 80oz each or thereabouts.(presently 160 or so).

I'm sticking with gold and silver, my woodburner and water purifier, bicycle, musical instruments and geiger counter for the duration, probably.

[BoldAsBrass]

Perhaps she thinks she is doing her job by lying thru her teeth

 

I find that a very odd reaction.

 

These are the facts. We walked into a sales office on a new housing estate and said we've got 500k to spend. She said 'the 5 bed houses are £525k' and my wife said 'Would they take an offer?' just assuming she'd say 'yes, most people offer under the £500k to get below the 4% stamp duty'. But, no, she said 'not 25k less'.

 

I wheeled round and said 'Really?! They won't take an offer in this market?!' - and she said; 'No, they are selling well at the current prices'.

 

During my 20 odd years in construction, I spent the last few years managing large housing developments in Berkshire, Oxfordshire and Surrey (having moved out of London where I used to work on big office developments). So I know how the sales process works on these sites. I asked her what was being released in the next few months and it is only about 20 units (the site is, like all big sites these days, mixed development - from 1 bed flats to 5 bed detached with a smattering of affordable housing in there too. Whereas in the old days they would have been building at at least twice the rate. So they are being sensible - they are matching the building rate to local demand so they don't end up with houses standing empty that they have to discount to sell.

 

So, I can assure you she was not lying through her teeth. Why would she lose a good potential buyer by doing that? (We'd already told her we were in rented and were cash buyers (bit of a porkie there). She'd been selling on the same site for the last 6 years so she knows what she is doing and what she was doing was telling us how it is - that particular developer on that particular site in that particular part of the Home Counties is not taking offers of 500k on 525k houses - and they are selling them at the rate they are building them. There were no finished houses sitting there with 'Available' stickers in the windows. Not one.

 

And, before I get accused of being a troll - I'm just reporting what happened to me on Sunday afternoon.

 

And, out last night for my regular stroll around a neighbouring estate - two houses opposite each other that have had For Sale signs outside for the last 3 to 4 months have both got Sold signs outside (okay, a long way from exchanging contracts).

 

So, what do we know? Well very little from such miniscule anecdotal observations but, in my area, sales are half what they used to be but prices seem to be holding up.

 

My eldest lad is getting more and more fed up with the realization that unless something changes, he is going to be living with us indefinitely. I'm having to seriously discuss with him selling the house we have just bought and looking for something we can do up/extend so he can have independent living accommoodation.

[John Doe]

And, before I get accused of being a troll - I'm just reporting what happened to me on Sunday afternoon.

 

Indeed, there is a new development of 4,5,6 beds up by the reservoirs in Milngavie that all sold very quickly (a few affordable units too).

 

They started well above £500k. (Some very much above this!)

 

(Edit to say found this old advert £895k for the 6 beds!)http://www.s1homes.com/newhomes/2011010608372813.shtml

 

Here is the link showing them all sold (just in case you don't believe me ).

 

http://www.cala.co.uk/homes/development/Milngavie/Availability.aspx

 

There is some rich money out there, but the medium to lower end (<£250k) are not moving in the same way.

 

A couple of friends here, that STR'd about the same time as us, are now looking to buy in the depths of this winter.

 

But again, they will be big places, not small, and they are a good 10-15% below peak, so with another 10-15% discount (which is what they are after) and stupidly low rates, I can see why they are looking.

[drbubb]

...I can assure you she was not lying through her teeth. Why would she lose a good potential buyer by doing that? (We'd already told her we were in rented and were cash buyers (bit of a porkie there). She'd been selling on the same site for the last 6 years so she knows what she is doing and what she was doing was telling us how it is - that particular developer on that particular site in that particular part of the Home Counties is not taking offers of 500k on 525k houses - and they are selling them at the rate they are building them. There were no finished houses sitting there with 'Available' stickers in the windows. Not one.

Okay. I suppose someone has to buy at/near the top.

 

But The message of a falling market is getting out now, I reckon

[John Doe]

Okay. I suppose someone has to buy at/near the top.

 

But The message of a falling market is getting out now, I reckon

 

Of course, it is possible that these would have sold for > £625k in 2007?

[G0ldfinger]

I think house prices might continue to fall nominally for a while. I also think real interest rates might go more negative. Because they're throwing not only the sink at it but also the rest of the kitchen, it is a very slow process. The same applies to the onset of hyper-inflation.

 

A mistake almost all of the good forecasters have made (e.g. Jim Sinclair) is that they have overestimated the speed of the process. I made this mistake too, by the way. The delusion out there is huge, i.e. it perishes very slowly (but perish it does indeed!) and all moral principles have been thrown overboard (this will continue) to cover up (i.e. paper over) the gravity of the situation.

 

At the moment, inflation in necessities is very high while there is some price deflation in disgressionary goods like (owned) property, luxury items (second homes, yachts, iPoops). This has been predicted by a lot of people (including me) and should be seen as the rosiest time of this unfolding inflationary catastrophe. I fear and predict that it won't last though. Forward looking assets like gold and silver, however, and keep in mind that these are bought by generally better informed people, are discounting for much higher future rates of inflation. They will continue to function as an insurance and will protect capital.

 

It has been discussed many times before on here that (and why) houses will suck big time as a hedge against hyper-inflation. However, if most of your assets are in highly liquid high quality assets (i.e. precious metals), it might turn out as a brilliant investment to buy a house on a fixed(!!) interest mortgage in the early stages of the truly hyper part of the inflation catastrophe that we are in.

 

My 2 pennies worth. "HPC" is still possible even in nominal terms. More probable is a grinding Japanese-style deflation in house prices over a decade or two. That said, the crash has occured, and is proceeding, in terms of gold.

 

Note to Goldfinger: how about changing the title of the thread to HVC [House Value Crash].... there always seemed something incongruent about hyper-inflation mixed in with HPC.

[Van]

Yesterday's DLCG figures show:

 

+0.6% for June; the nsa raw figure was actually +1.1.

 

 

However, the medium term picture remains one of stagnation:

 

 

J/ 206,099

F/ 202,583

M/ 205,178

A/ 204,414

M/ 202,767

J/ 204,981

 

 

http://www.communities.gov.uk/documents/statistics/pdf/1966772.pdf

[drbubb]

Yesterday's DLCG figures show:

+0.6% for June; the nsa raw figure was actually +1.1.

However, the medium term picture remains one of stagnation:

 

J/ 206,099

F/ 202,583

M/ 205,178

A/ 204,414

M/ 202,767

J/ 204,981

http://www.communities.gov.uk/documents/statistics/pdf/1966772.pdf

This one is a LAGGING Indicator, I believe

[John Doe]

This one is a LAGGING Indicator, I believe

Yes it says it's June, we are in August

[harold bishop]

A mistake almost all of the good forecasters have made (e.g. Jim Sinclair) is that they have overestimated the speed of the process. I made this mistake too

 

Yep, me too. I really thought we would be seeing 1% per month drop in UK house prices in Sterling. It's not, it's glacial. It just isn't happening were I am. Decent family homes within reach of well paid jobs are still holding up. So, to get to G0ldfinger's sub 100 oz average house price, gold alone will need to make the moves as Sterling prices stagnate. And this is happening before our eyes. The Government's plan is panning out nicely. Add in future wage inflation, which I think is inevitable if necessities keep rising, then house prices will slowly loose their bubble status. Could take a decade or more. And HPC may as well close down their web site.

 

What effect on the real economy ? More of the same. Savers being screwed over to bail out borrowers. Higher taxation and those with property are sitting targets.

[drbubb]

Yes it says it's June, we are in August

And even when the August figure is reported, it will still be a laggard.

 

BDEV foreshadowed a Good spring, and is now foreshadowing a lousy fall,

and maybe even a "drop off a cliff." I'll go with that until I see convincing

evidence to the contrary.

[Van]

Yep, me too. I really thought we would be seeing 1% per month drop in UK house prices in Sterling. It's not, it's glacial. It just isn't happening were I am. Decent family homes within reach of well paid jobs are still holding up. So, to get to G0ldfinger's sub 100 oz average house price, gold alone will need to make the moves as Sterling prices stagnate. And this is happening before our eyes. The Government's plan is panning out nicely. Add in future wage inflation, which I think is inevitable if necessities keep rising, then house prices will slowly loose their bubble status. Could take a decade or more. And HPC may as well close down their web site.

 

What effect on the real economy ? More of the same. Savers being screwed over to bail out borrowers. Higher taxation and those with property are sitting targets.

 

That's how I see it playing out, too.

 

Perhaps though that is the "least painful" way forward for UK PLC. I've been thinking about this, and realistically what are the alternative? A return to lax lending would restoke the bubble. I don't believe anyone except the BTL landlords want to see that. Even existing homeowners now recognise that high house prices simply make it more difficult to trade up. Conversely a rise in interest rates any time soon would send house prices down further and probably plunge the UK back into a *deep* consumer recession, and unemployment would rocket again. So it looks like we'll continue to run negative real interest rates for several years until inflation fades and then wages can begin to catch up. In the meantime the UK will remain a high-debt, low growth economy.

[John Doe]

That's how I see it playing out, too.

 

Perhaps though that is the "least painful" way forward for UK PLC. I've been thinking about this, and realistically what are the alternative? A return to lax lending would restoke the bubble. I don't believe anyone except the BTL landlords want to see that. Even existing homeowners now recognise that high house prices simply make it more difficult to trade up.

 

Let's hope so. I really hope the house price bubble days are over and the next time prices start to surge ahead of wages etc, I hope swift decisive action will be taken. (Note lots of hope there ).

 

Conversely a rise in interest rates any time soon would send house prices down further and probably plunge the UK back into a *deep* consumer recession, and unemployment would rocket again. So it looks like we'll continue to run negative real interest rates for several years until inflation fades and then wages can begin to catch up. In the meantime the UK will remain a high-debt, low growth economy.

 

Quite.

 

And interest rates are going nowhere for a good long while. Even the last two hawks on the BoE have thrown in the towel.

 

All 9 are now voting for no change (One still wants more QE now, I expect more will in the coming months).

[stunlee]

However, if most of your assets are in highly liquid high quality assets (i.e. precious metals), it might turn out as a brilliant investment to buy a house on a fixed(!!) interest mortgage in the early stages of the truly hyper part of the inflation catastrophe that we are in.

 

I fully agree with your analysis. My only question would be that, given that the politicians in Britain have firmly shown that they work for the banks and against the people and given that a hyperinflation would see the banks lose a lot of their power over debt-holders, what would be the possibility of the Government allowing retrospective changes in mortgage interest rates, i.e. allowing banks to annul the fixed interest rate and move the home-loaner to a much higher rate?