UK House prices: News & Views

[drbubb]

Nice of them to finally catch up and realise what many (esp here) have been saying for years.

 

Owning a house outright might just be a great hedge.

 

So could having a long term fixed rate mortgage.

 

Especially if (when) we get to the great debt jubilee!

Maybe. (And that is one of the reasons I thought about buying a property in the UK.)

But only if QE leads to higher incomes which allows people to more easily cover their mortgage payments (and also pay higher rents.)

 

What has QE delivered so far?

 

+ A weaker Pound

+ Higher food and energy costs

+ No significant increase in incomes (except maybe for speculators in the City)

+ A squeeze on household spending as people struggle to pay higher essentials, and some higher rents

 

+ A windfall to BTL Wizards who held onto their properties, and saw their interest costs drop.

 

 

So who do you think are going to be the main beneficiaries of this latest round of QE?

[tallim]

Maybe. (And that is one of the reasons I thought about buying a property in the UK.)

...

I was a bit surprised that you went as far as placing a small deposit, was there anything in particular that drew you that far?

 

I have to admit that I'm certainly tempted to buy a cheapish house to let that would be acceptable to me if TSHTF and topping up the rental income from that with a bit of my earnings and renting somewhere nicer. If it wasn't for worry about preservation of capital it would be a good little arbitrage trade, you can buy open market in my bit of the UK at the cheap end for >8% gross yield (>10% if you go a bit rougher at auction) and then rent somewhere nice where gross yields are much lower.

 

A quick example:

 

Buy: 2-Bed end of terrace in a noisy area, but with decent gardens for your veg plot at £80k that would let for £550pcm

http://www.rightmove.co.uk/property-for-sale/property-30995857.html

Rent: 2-Bed flat conversion in the best part of town for £895pcm

http://www.rightmove.co.uk/property-to-rent/property-19700781.html

 

Or if you're feeling really lucky;

 

Buy: 7-Bed HMO in at £90k(?) in an roughish area, but that's good for jobs and transport that's letting for £975pcm

http://www.eddisons.com/pages/auctioncatalogue/default.aspx?ShowLot=161&ForAuction=161&Page=7

Rent: 4-Bed detatched in a decent area for £1100pcm

http://www.rightmove.co.uk/property-to-rent/property-31671646.html

[drbubb]

I was a bit surprised that you went as far as placing a small deposit, was there anything in particular that drew you that far?

 

I have to admit that I'm certainly tempted to buy a cheapish house to let that would be acceptable to me if TSHTF and topping up the rental income from that with a bit of my earnings and renting somewhere nicer. If it wasn't for worry about preservation of capital it would be a good little arbitrage trade, you can buy open market in my bit of the UK at the cheap end for >8% gross yield (>10% if you go a bit rougher at auction) and then rent somewhere nice where gross yields are much lower.

 

A quick example:

 

Buy: 2-Bed end of terrace in a noisy area, but with decent gardens for your veg plot at £80k that would let for £550pcm

http://www.rightmove.co.uk/property-for-sale/property-30995857.html

Rent: 2-Bed flat conversion in the best part of town for £895pcm

http://www.rightmove.co.uk/property-to-rent/property-19700781.html

 

Or if you're feeling really lucky;

 

Buy: 7-Bed HMO in at £90k(?) in an roughish area, but that's good for jobs and transport that's letting for £975pcm

http://www.eddisons.com/pages/auctioncatalogue/default.aspx?ShowLot=161&ForAuction=161&Page=7

Rent: 4-Bed detatched in a decent area for £1100pcm

http://www.rightmove.co.uk/property-to-rent/property-31671646.html

Several things:

+ A decent price: £367 per square foot

+ High expected yield: 6.5%+ Gross, 5.2%+ Net

+ Proximity to jobs and prospective tenants: 10-12 minutes walk from Canary Wharf

+ Beneficiary of big infrastucture spending: Olympics, Crossrail

+ The breakthrough in gentrificattion represented by the NFQ development

+ The flat I reserved was a trophy (best views, two balconies) without an extra-special price

 

If I don't go ahead, I may regret it one day, but it is hard for me to overcome all the negative fundamentals that I see coming.

 

If you are willing to live with some possible security risk in living in a still-gentrifying area, you should have a look in the immediate proximity.

 

/see: NFQ area: http://www.greenenergyinvestors.com/index.php?showtopic=15306

[John Doe]

Maybe. (And that is one of the reasons I thought about buying a property in the UK.)

But only if QE leads to higher incomes which allows people to more easily cover their mortgage payments (and also pay higher rents.)

 

What has QE delivered so far?

 

 

 

Officially?

 

Well, ~2% GDP growth,

higher bond prices = lower rates (lowest in history on gov bonds right now),

lower mortgage rates (best fixed rates ever at present, likely to get slightly better than that now too), less repo's = floor on prices,

lower pound (better for our exporters, yes we have a few good ones left, RR, JCB etc etc),

a nice sunny October (warmest so far)

and a nice big bonus for the bankers

 

Unofficially, not much except for the last one

[James]

Moody’s downgrades 12 UK lenders

 

The rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook). As outlined in the May press release, we have reviewed the standalone ratings of all entities prior to concluding on the debt ratings. A separate announcement today covers the upgrade of the standalone rating of Co-Operative Bank to C- (mapping to Baa1 on the long-term debt scale) from D+ and earlier announcements cover the upgrades of the standalone ratings of Santander UK, Nationwide, Yorkshire, and Principality Building Societies.

 

Sovereign CDS Pricing

Name Level Change Time

Spain 377 14 (3.9%) 12:00

Italy 457 3 (0.7%) 12:00

France 178 3 (1.7%) 12:00

Germany 101 4 (3.9%) 12:00

United Kingdom 955 (5.8%) 12:00

 

Will the mortgage rates stay this low for longer.

[drbubb]

Moody’s downgrades 12 UK lenders

 

The rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook). As outlined in the May press release, we have reviewed the standalone ratings of all entities prior to concluding on the debt ratings. A separate announcement today covers the upgrade of the standalone rating of Co-Operative Bank to C- (mapping to Baa1 on the long-term debt scale) from D+ and earlier announcements cover the upgrades of the standalone ratings of Santander UK, Nationwide, Yorkshire, and Principality Building Societies.

 

Sovereign CDS Pricing

Name Level Change Time

Spain 377 14 (3.9%) 12:00

Italy 457 3 (0.7%) 12:00

France 178 3 (1.7%) 12:00

Germany 101 4 (3.9%) 12:00

United Kingdom 955 (5.8%) 12:00

 

Will the mortgage rates stay this low for longer.

Probably not

 

Does anyone know what Mortgage rates are in Greece, Spain, or Portugal ?

[James]

Probably not

 

Does anyone know what Mortgage rates are in Greece, Spain, or Portugal ?

 

Hi Dr Bubb,

 

Thank you.

 

Would this be of any helpEMF Quarterly Review - Q1 2011

[warpig]

That's the most intelligent thing I've heard you say on this forum.

 

blah blah blah blah blah....

[warpig]

Are you mad? London has to be one of the most over valued cities in the world in terms of housing and the housing market is hanging by a thread, why would you buy now?

 

I have even put down a small deposit* on one of the best flats in the development

[drbubb]

Are you mad? London has to be one of the most over valued cities in the world in terms of housing and the housing market is hanging by a thread, why would you buy now?

I phoned up friends, and asked them to talk me out of it, and they wound up being intrigued by the possibilities. I think it will be a "quite okay investment" if prices drop only 10-15%, and ditto with rents. But if the slide is more than that, it might be a mistake. (A mistake that I can afford to make, especially if I can see myself living in the UK in the next 2-3 years, which is uncertain.)

 

I may or may not go ahead, on my own, or with a partner. But given the news background of the last 2-3 weeks, it looks less likely.

[John Doe]

Moody’s downgrades 12 UK lenders

 

The rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook). As outlined in the May press release, we have reviewed the standalone ratings of all entities prior to concluding on the debt ratings. A separate announcement today covers the upgrade of the standalone rating of Co-Operative Bank to C- (mapping to Baa1 on the long-term debt scale) from D+ and earlier announcements cover the upgrades of the standalone ratings of Santander UK, Nationwide, Yorkshire, and Principality Building Societies.

 

Sovereign CDS Pricing

Name Level Change Time

Spain 377 14 (3.9%) 12:00

Italy 457 3 (0.7%) 12:00

France 178 3 (1.7%) 12:00

Germany 101 4 (3.9%) 12:00

United Kingdom 955 (5.8%) 12:00

 

Will the mortgage rates stay this low for longer.

 

Probably yes, as this was all expected (and priced in), and now there is another £75,000,000,000.00 to push up bond prices yet again (higher bond prices = lower IR's).

 

That's the most intelligent thing I've heard you say on this forum.

Or anyone else for that matter

[warpig]

This is the chink in your armor, a 10-12% drop from here only takes us back to the low of 2008, it's going way lower than this. Personally I do not see a wage price spiral happening here, assets will devalue because salaries will not rise, in fact the opposite is happening again. Housing in this country needs to fall 50+% in nominal terms to give it a long term view of sustainability and you know these markets always over shoot. Housing in this country is dead as an investment for the next 20 years. My advice is ditch it.

 

if prices drop only 10-15%, and ditto with rents.

[drbubb]

JUST ONE YEAR AGO, I was banned on HPC.

Since then...

 

COMPARISON == : ( HPC ) / ( GEI )

Alexa Traffic Rank : 21,725 : 296,911

Traffic Rank in GB : ==753 : =30,077

Sites Linking In .. : ==318 : === 53

 

HPC has 138 Reviews (ave. 3.5 stars) : http://www.alexa.com/siteinfo/housepricecrash.co.uk#

COMPARISON == : ( HPC ) / ( GEI )

Alexa Traffic Rank : 27,303 : 186,889

Traffic Rank in GB : ==909 : = 9,150

Sites Linking In .. : ==456 : === 83

 

HPC has 138 Reviews (ave. 3.5 stars)

GEI has 003 Reviews (ave. 5.0 stars)

 

GEI is gaining on HPC, if only slowly, as HPC fades a bit

 

THANKS FOR THE POSTS, everyone !

[azazel]

JUST ONE YEAR AGO, I was banned on HPC.

Since then...

 

 

COMPARISON == : ( HPC ) / ( GEI )

Alexa Traffic Rank : 27,303 : 186,889

Traffic Rank in GB : ==909 : = 9,150

Sites Linking In .. : ==456 : === 83

 

HPC has 138 Reviews (ave. 3.5 stars)

GEI has 003 Reviews (ave. 5.0 stars)

 

GEI is gaining on HPC, if only slowly, as HPC fades a bit

 

THANKS FOR THE POSTS, everyone !

Your buying London property is entertaining, like watching people eat Ghost Chillies. Its sure entertaining and increases site traffic!!

 

http://www.youtube.com/watch?v=bRhRLip9Nwo

[John Doe]

Your buying London property is entertaining, like watching people eat Ghost Chillies. Its sure entertaining and increases site traffic!!

 

http://www.youtube.com/watch?v=bRhRLip9Nwo

Fantastic

[drbubb]

Your buying London property is entertaining, like watching people eat Ghost Chillies. Its sure entertaining and increases site traffic!!

http://www.youtube.com/watch?v=bRhRLip9Nwo

Az,

That's not accurate, it is misleading. Perhaps I was not clear.

 

I have not bought a property yet. I have "gambled" something like the average day's trading profits (that I actually made over the last two weeks) on a "holding deposit" that was good for over a month while I analyzed the merits of an interesting-looking investment. At one level, this was a very cheap Call option. If I don't buy, I lose very little. I know a bargain-priced option when I see one.

 

 

If I do buy, I will have an investment which looks better positioned (to do okay in a mild downtuirn) than anything London-based I have seen come through here over the past 2-3 years. A quick drop of more than 10-15% would make it look like a mistake. But even then , I will not know until I see how it comes through a property slide, whether it was a genuine mistake or not. In fact, my latest idea is to buy with the idea of flipping in the Spring, and the prospects of that look good, if the London markets holds up reasonably well.

 

I bought 10 properties in HK in 2007-8. At first, they ran up in price, and then they got hit with a big drop in late 2008. Ultimately, I sold nine of them, each one at a profit.

 

Some here may think it is odd that a self-confessed Bear would consider buying at all. I look at it differently. When I see a Bear buying (someone like Merryn at Moneyweek), I ask myself: Might he/she have spotted a genuine bargain? Does anyone know if Merryn SW is happy with her purchase of a few years ago? When a long term Bear or Bull does something out of character, there is often an interesting reason.

[warpig]

Why don't you buy 10 of them?

 

When a long term Bear or Bull does something out of character, there is often an interesting reason.

 

 

 

[drbubb]

Why don't you buy 10 of them?

Haha.

 

1/2 is more likely than one - In fact, I might only buy with a partner.

And 0 is more likely than 2-10. The UK is at the wrong point in the 18 year cycle to think about getting aggressive.

If there was some cost efficient way of buying this property and shorting the index, I would probably do it. But alas...

[azazel]

I think Merryn SW bought a house as a home for her family. She said at the time, that it might not be a great financial decision but it was right for her family to make a home. Property is so over priced in UK, and money is drying up. I cant see prices being sustained at this level for long. The expected inflation from the QE2 will just make houses even more unaffordable as money is needed for food, fuel and utility bills.

[Van]

I think Merryn SW bought a house as a home for her family. She said at the time, that it might not be a great financial decision but it was right for her family to make a home. Property is so over priced in UK, and money is drying up. I cant see prices being sustained at this level for long. The expected inflation from the QE2 will just make houses even more unaffordable as money is needed for food, fuel and utility bills.

 

I think for prices to fall meaningfully, we have to see a fall in rental values too so that buying becomes more expensive. Rents have run up and prices have moderated enough that is now cheaper to rent that it is to buy in most parts of the country.

You can argue and theorize that eventually incomes will be so squeezed that rents must fall, but the hard evidence is that it is not- quite the opposite. The UK may be going through a lot of problems, but by European standards it is still an attractive place to come to live and work, so more people are still coming here which is keeping housing demand high. You can argue and theorize that HB reforms and more housebuilding will eventually lead to lower prices, but again the *hard* evidence is that it is having naff all effect.

 

 

Of course the other thing that would cause buying to become more expensive than renting is a rise in interest rates - devastatingly so (imo). But it is clear that ZIRP *will* be maintained for as long as required, which is looking like many years ahead now. The price for this is that savers will be robbed, and that inflation will be higher so we'll all slowly get poorer, but lower oil and commodity prices suggest that inflation will moderate by this time next year (and I stand by this statement - let's see what inflation is in 12 months' time).

[John Doe]

Of course the other thing that would cause buying to become more expensive than renting is a rise in interest rates - devastatingly so (imo). But it is clear that ZIRP *will* be maintained for as long as required, which is looking like many years ahead now. The price for this is that savers will be robbed, and that inflation will be higher so we'll all slowly get poorer, but lower oil and commodity prices suggest that inflation will moderate by this time next year (and I stand by this statement - let's see what inflation is in 12 months' time).

 

+ VAT rises dropping out.

[John Doe]

Wow!

 

the number of estate agents in Britain has almost halved from 16,000 at the peak of the market in 2007 to less than 9,000 now, says Hometrack's research director Richard Donnell.

 

http://www.guardian.co.uk/business/2011/oct/09/housing-market-prices-mortgages-recession

 

Might just have to look into becoming an EA after all

[drbubb]

Wow!

http://www.guardian.co.uk/business/2011/oct/09/housing-market-prices-mortgages-recession

Might just have to look into becoming an EA after all

EXCERPT - The Wisdom of Staying Put

 

Donnell says the economic backdrop is scaring off both buyers and sellers. By his calculations, 14m households could afford to move, or would not struggle to get a mortgage – 8m own their home without a mortgage, 6m have a mortgage of less than 50% loan to value. But the cost of moving is prohibitive.

 

"Mortgage application fees are higher, the cost of new mortgages is often higher, there are the direct costs of moving like stamp duty and people tend to spend money on a new home as well," he says. "Staying put is the obvious thing to do."

[LauraB]

the number of estate agents in Britain has almost halved from 16,000 at the peak of the market in 2007 to less than 9,000 now,

 

Excellent. At least this is one ten-year 'Final Solution' plan that is on course. Next?

[drbubb]

WAS THIS TOO MUCH WORK for a project I will probably not invest in now ? : NFQ-post#28

 

Looks like a bit of a dump. How much are places? Anything 'sustainable' about the area (excluding crime)? Think I'd rather stay in Kowloon. At least you can go out at night without fear. Church is a monstrosity, too. But what do I know?

"Looks like a bit of a dump. How much are such places?"

(It isn't Kensington, of course. You can buy something new in Kensington for maybe GBP1,000-1,500 psf. To get a new property like this at under GBP400-500 psf, you have to go far away from London, or into a "gentrifying area", like Poplar's Lansbury Estate, which was for a long time a working class area. The other obvious areas at similar distance to Canary have already been developed, and are more expensive and more crowded.)

 

"Anything 'sustainable' about the area (excluding crime)?"

(Sure - the jobs! As you know, there is nothing within London that can really be considered "sustainable" from a food-growing point of view. You are unlikely to find that within one of the top cities of the world. You will have to go to some bombed out third world city like Havana, or maybe the Detroit of the future to find a place where a city grows a substantial amount of its own food. What you look for is jobs to sustain your investment. Nearby jobs will mean that people can afford to pay the rent. From NFQ, you can walk in 10-12 minutes to Canary Wharf where there are many high-paying jobs in law, finance, accountancy, etc. We can expect a decline in the earnings in that sector. Paradoxically, that might increase demand for good quality properties in the immediate area, as people with falling incomes choose to save money by living in something nice-but-cheap which is close to work and so has less commuting time and expense. But whether or not it will play out that way, time will tell.)

 

"Crime?"

(Again, the area is obviously not as safe as Kensington, or other "safer" and much-more-expensive neighborhoods. But neither is it the first new development in the area - Look around (!) there are many. But this one is large enough to begin to change the character of the neighborhood - which was the main reason that I was interested. I think this might represent the "inflection point" wherein the gentrification really starts to take hold and change the neighborhood. The fact that it is next to a park (Bartley Park), where the developers will spend GBP 1 million on landscaping and other up grading expenses will also help. Reading these future changes in not a science, it is more of an art. I have years of experience in making these assessments, and if I can walk around on the ground, I usually get it right. But I did not do the walk in this case, and of course it will take months and years to see if the gentrification really happens."

 

 

"The Church is a monstrosity."

(Beauty, or the lack of it may be in the eye of the beholder. The Church of St. Mary and St Joseph is a Grade II listed church, prized as an example of the work of architect Adrian Gilbert Scott. Like you, I would prefer a church by Thomas Hawksmore. But this one is meant to be very nice from the inside, and would look far better if/when it is cleaned up, and the landscaping is improved. Fortunately, the flat I choose was a top floor flat, looking across the top of the church, so it would be a small but important part of the view, rather than completely dominating it.)

 

I do appreciate the questions, but am disappointed that you seem to have not bothered to at least skim the many hours of research that has already been put into developing this thread. But thanks for the questions whether you looked at the prior posts or not. It does help to clarify the thought process.

 

Part of the reason I did all this work, and then left it posted on GEI, was to show the sort of work that I think a person should do on a large property investment before they invest 100,000's of Pounds. As someone once said, many people will invest 5 years or 10 years worth of income in a property without doing as much work as they do in deciding what stereo system to buy.

 

I think it would be great if others would do research like this on a property investment, and then post the results oin GEI/GPC. What a wonderful resource this website would become !