UK House prices: News & Views

[Undertaker]

http://www.telegraph.co.uk/finance/persona...age-scheme.html

 

 

 

I’m surprised that National Australia Bank Group (Clysdale + Yorkshire Banks) have joined the scheme. They appear to be the only non-nationalised bank taking part.

 

May be they are about to get some government help? Time for a short?

[ecoface]

May be they are about to get some government help? Time for a short?

 

They were aggressive with development lending particularly from 2006 onwards. Indeed I would suggest competing for clients with RBS, HBOS and the Irish banks - that in itself may tell us something.

 

[G0ldfinger]

http://www.walletpop.co.uk/2009/04/24/hous...ces-to-fall-50/

I've just come out of a meeting with Robin Hepworth. He's a city fund manager with Ecclesiastical, but he's one of the nice ones, because he runs ethical funds.

 

However, there was nothing nice about his prediction for house prices, which he says are going to fall 50%

 

But how can he know?

 

He bases his prediction on a particularly complex part of the market, known as derivatives. This is where the experts buy and sell each other promises for the future - like "I'll sell you this share for half its current price in one week's time". They only make any money if they correctly predict what is going to happen in the market, so they are a reasonable indicator of where things are going to go.

 

And at the moment they are predicting a 50% fall.

 

http://www.telegraph.co.uk/finance/persona...cond-homes.html

Budget 2009: Blow for second homes

From next April, you will lose tax benefits available on your holiday home.

...

Holiday homeowners will no longer be able to write off “trading” losses from second homes against your tax bill, while capital allowances and capital gains benefits will also go.

...

“This could result in a rush to try to sell qualifying properties before 5 April 2010 and the resulting surplus of properties for sale could delay any recovery in the housing market in seaside towns around the UK,” said Richard Mannion, tax partner at Smith & Williamson.

 

[tinecu]

May be so, but to make things worse, houses are selling like hotcakes here in Cambs. A friend of ours put their house on the market for £195k (from a peak price of £200k?!!??) and they have just Sold STC. There are loads of properties in Sold STC state in Cambridge.

 

I just wish this house price crash hurried a bit, I want to get a house for my wife and kid at a reasonable price

 

When the government has to cut higher education spending Cambridge will be slaughtered. In fact they collapse has already begun:

http://www.home.co.uk/guides/house_prices_...mp;endyear=2009

 

Companies are already shying away from joint R&D projects with the Uni cos they charge too much, esp. for admin.

 

Sounds like your friend got lucky!

[tinecu]

Take a look at the Time on Market graphs in this report:

http://www.home.co.uk/asking_price_index/HAPIndex_APR09.pdf

 

How long before average marketing time is over a year?

 

Or will sellers wake up?

[Concrete Jungle]

Two sets of figures out today from the land registry and Nationwide.

 

http://www1.landregistry.gov.uk/assets/lib...-eng-300409.pdf

 

Land registry -0.4% mom and -16.2% yoy.

 

http://www.nationwide.co.uk/hpi/historical/Apr_2009.pdf

 

Nationwide -0.4% mom and -15% yoy

[jinbal]

Jesus

 

Look at the sales volume figures for London -65% yoy

 

agents surely can't take much more of this - they must be praying for volume to rise soon

[lowrentyieldmakessense(honest!)]

http://blogs.telegraph.co.uk/emma_hartley/..._says_nonexpert

 

from a telegraph blog

 

http://www.oecd.org/document/61/0,3343,en_...1_1_1_1,00.html

 

Forget unemployment, forget insolvency - the answer to the question is here:

 

www.oecd.org/document/61/0,3343,en_2649_...

 

Find 'Annex table 54' near the bottom of the page and then click on the line below ('Other background data'). Save or open the spreadsheet and then find the tabs at the bottom related to 'house prices' and 'house price ratios'.

Here's what you need to know: on house price ratios, as at 2007, UK 'price-to-rent' ratio was 170 and 'price-to-income' ratio was 149.7

 

To get back to 100 on the latter, there needs to be a fall in prices of 33.3% approx. and price-to-rent to get back to 100 needs a fall of 40%.

 

Look at previous data - e.g. 1991-1996, and you'll see it can be expected to fall below 100 - well below and it took a long time to recover. Add in the fact that wages are going DOWN according to most reports, so price-to-incomes ratio is going down more than a third.

 

What do you reckon? 50% total fall top to bottom? Or more?

 

If you look at the previous tab on the spreadsheet - 'house prices' - you can see the whopping percentage increases since 2002, worse in the UK than USA! Compare that with stable Germany and the deflationary Japan.

 

The 'green shoots' stories relating to the stock market should also be treated with great care. I can understand there are those wanting to talk the markets up, but I suspect many of them are just wanting to dump property and shares before the next collapse in prices.

 

This guy's my hero - take a look:

 

wbrussee.wordpress.com/

 

edit to add

 

 

 

 

[Perishabull]

Very interesting pdf, thanks for posting

[Compounded]

Very interesting pdf, thanks for posting

 

+1

 

These figures make it look like the HPC has a long way to go in the UK.

 

[notanewmember]

From here http://www.housepricecrash.co.uk/forum/ind...howtopic=113491

 

[drbubb]

edit to add ... statistics

 

Wonderful stats!

I have edited the chart, to make this:

 

 

A chart that should keep every UK homeowner and every UK Prime Minister awake at night !

The UK is truly bankrupt if incomes fail to rise alot, and/or we do the "normal" overshoot on the downside.

 

[G0ldfinger]

...

A chart that should keep every UK homeowner and every UK Prime Minister awake at night !

The UK is truly bankrupt if incomes fail to rise alot, and/or we do the "normal" overshoot on the downside.

Great charts!

[alexreeve]

Wonderful stats!

I have edited the chart, to make this:

 

 

A chart that should keep every UK homeowner and every UK Prime Minister awake at night !

The UK is truly bankrupt if incomes fail to rise alot, and/or we do the "normal" overshoot on the downside.

Does the "normal" price to income ratio still apply? I can't help feeling that excessive taxes and debts combine to reduce the available share of that gross income for discretionary spend (like food and shelter), or is that the reason for the anticipated overshoot?

[drbubb]

Does the "normal" price to income ratio still apply? I can't help feeling that excessive taxes and debts combine to reduce the available share of that gross income for discretionary spend (like food and shelter), or is that the reason for the anticipated overshoot?

 

There's normally an overshoot, as people lose confidence in property after some years of losses, and banks dump foreclosed property at distress prices, driving the market still lower. Once they begin to work they way through foreclosures, 3-4-5 years after the peak, the market bottoms at levels where it is cheaper to own than to rent. And people can use the savings as a sort of risk buffer.

 

[G0ldfinger]

Let's re-evaluate this statement in a couple of years.

 

http://www.bloomberg.com/apps/news?pid=new...id=adlIMDYRN_r0

“The U.K. property market is a screaming buy compared to rivals in continental Europe.”

[G0ldfinger]

http://www.bloomberg.com/apps/news?pid=206...Bk&refer=uk

U.K. Home-Loan Delinquencies Worse Than for Subprime (Update1)

Share | Email | Print | A A A

 

By John Glover

 

May 20 (Bloomberg) -- Delinquencies on some U.K. non- conforming home loans exceed those by subprime borrowers in the U.S., and losses on the securities they back are accelerating, according to independent research firm CreditSights Inc.

 

Almost 30 percent of non-conforming mortgages made in Britain in 2005 are 90 or more days delinquent, compared with a rate of 27 percent on U.S. subprime loans made that year, analyst David Watts wrote in a report today. Non-conforming loans are similar to subprime in that they typically have low, or no, documentation requirements and may be made to borrowers with poor credit scores.

[Compounded]

Wonderful stats!

I have edited the chart, to make this:

 

 

A chart that should keep every UK homeowner and every UK Prime Minister awake at night !

The UK is truly bankrupt if incomes fail to rise alot, and/or we do the "normal" overshoot on the downside.

 

 

Logically the over shoot should be proportional to the boom.

 

+ There is nothing like dispair now

 

+ Capitulation is nowhere all I see is hope of return to normality and that "normality" is reckless lending consistent with peaking credit in Kondratiev autumn.

 

My conclusion we are in a property bull trap.

 

 

 

[ziknik]

http://www.bloomberg.com/apps/news?pid=206...Bk&refer=uk

 

[surprisingly] there are only $47bn of bonds backed by the UKs non- conforming home loans. That’s 20 times smaller than the USAs ‘subprime’.

 

Does that mean all the 6+ times salary multiples are considered to be ‘prime’ in the UK at the moment?

 

Our banks went bust before the UK housing market collapsed. The credit crunch has only just begun in the UK.

 

[lowrentyieldmakessense(honest!)]

 

US housing still over valued never mind the UK

link

 

 

The authors of the Case-Shiller index had assigned the index a value of 100.0 in January of 2000. This figure does not represent a dollar value for home prices but is simply a benchmarking tool. In December 2008, after a severe 28% decline from its June 2006 peak of 226.29, the Case-Shiller 10 City index stood at 162.1. However, if home prices had followed the 3.4% annual 100-year trend line from December 1997 (when the index was at 82.3), then the index would have arrived at only 118.92 in December 2008.

 

This would suggest that the index would need to decline an additional 27% to get back to the historical trend line. Extrapolating along the sunnier 50-year annual average increase would put the index at 132.2 by December 2008. This would still put the trend line 18.5% below current prices.

 

A cursory look at the chart below should disabuse anyone of the notion that home prices have now hit bottom. Policymakers and economists should by no means rely upon projections that see home prices turning around in the near term.

[G0ldfinger]

Las Vegas houses are down 57% from the peak in 2006. Expect this for the UK.

[drbubb]

Las Vegas houses are down 57% from the peak in 2006. Expect this for the UK.

 

RIGHT.

Gambling was rife in both places.

But the gamblers in the UK still think they can "beat the house"

 

[Paddles]

Well, the economists' favourite joker, Anatole Kaletsky begs to differ, again.

 

Today's article is a classic top drawer effort from him, full of contradictions ("the UK is back on the historical trend line BUT the trend line means little because the market varies so wildly BUT we're back within 3% of the the trend line so it's time to buy"), statistics quoted without source, a comparison with the previous crash with regards to depth of drop but not duration, etc. etc.

 

He does however, have the humility to point out that his article of 13 months ago demonstrated the quality that we've come to associate most strongly with Moscow's finest commentator on capitalism; getting it almost perfectly wrong.

 

One day I will discover the real reason he is still employed, until then I will satisfy myself with inventing ever more elaborate and amusing conspiracy theories.

 

http://www.timesonline.co.uk/tol/comment/c...icle6329346.ece

Anatole Kaletsky

What goes up must come down. But the opposite is also true, at least in finance and economics.

 

While individual companies, share prices and investment portfolios can collapse and disappear without trace - as is all too obvious to former shareholders in Northern Rock, Lehman and Chrysler - this never happens to entire economies or financial markets. That is why a relatively sanguine approach is likely, in the end, to pay off for anyone with the patience and wherewithal to ride out the ups and downs of the crisis. Nowhere is this truer than in the most cyclical, but ultimately most reliable, of financial markets: residential property.

 

As panic at the end of capitalism ebbs away, with banking systems and economies clearly stabilising, at least outside Japan and continental Europe, confidence seems also to be returning to housing markets - with the exception of certain markets, such as the Irish Republic and Spain. In Britain, recent signs of recovery in the property market include an increase in transactions, although not yet in prices, a big rise in mortgage applications and the most positive monthly report from the Royal Institution of Chartered Surveyors since January last year.

 

Anecdotally, many properties that have been on sale since last summer, have suddenly been snapped up in the past two months. In London there are even reports of foreigners, emboldened by a weak pound and perhaps the prospect of a Tory government, gazumping local buyers.

 

But more important than such juicy anecdotal tit-bits are the dry statistics illustrated in the chart. This graph - showing the relationship between house prices and personal incomes in Britain and America - is an updated version of one that we published in April last year.

 

I argued then that the boom and bust in US housing was moderate in comparison with Britain's, so anyone who saw the American housing correction as a catastrophe, should consult the Book of Revelation for the right word to describe the prospects for Britain's housing market in the year or two ahead.

 

What I didn't know then - in fact, what I specifically denied would happen- was that the US housing correction would precipitate a generalised economic catastrophe, via the collapse of Lehman and the entire global banking system.

 

As the chart shows, Britain's housing market has moved a long way in the 13 months since my previous article (the point marked with a spot). Such has been the speed of adjustment that a collapse that was spread over three years in the 1989-92 housing crash has been squeezed into just over a year.

 

As a result, the relationship between house prices and personal incomes has returned to its long-term average much faster than expected a year ago. As recently as March last year, the ratio was 40 per cent above its long-term average, suggesting that British houses were still vastly overvalued. Today the ratio is just 3 per cent above its historic average. This means that it would take only modest growth in personal incomes - which remains likely despite the recession - to push house prices below their historic level in relation to incomes, even without any further decline.

 

I am not predicting that the property market will stabilise this month, or even next. While personal incomes are the most important fundamental influence on prices, many other factors drive them in the short term: at present, the main bearish forces are unemployment and the squeeze on mortgage financing, while rock-bottom interest rates for those able to borrow are a very powerful factor pushing the other way.

 

Although my own view is that these cyclical conditions will become increasingly bullish, macroeconomic forecasting has been a mug's game in the past year or two. There is, however, a more fundamental objection to my suggestion that it is becoming safe to invest in houses.

 

Why assume that property will simply revert to its long-term average valuation and stop falling? Given that the ratio of house prices to incomes overshot by 40 per cent on the upside, why shouldn't property values fall far below their average and stay there for many years? By the very definition of an average, valuations should be just as likely to undershoot this level as to rise above it.

 

And exactly this kind of undershooting is now happening in the US market. Shouldn't Britain expect something similar in the years ahead?

 

To judge by past experience, the answer is an emphatic - and alarming - yes. In the 1990s British property valuations fell far below their long-term average and stayed there for most of the decade.

 

I believe that this experience is unlikely to be repeated, but my main reason for this partly undermines the argument presented above. A second glance at the chart reveals a big difference in the behaviour of US and British house prices over long periods. While American property was, until the present boom and bust, rather stable near the long-term average, British valuations have fluctuated much more wildly.

 

In fact, the swings in British prices have been so wide that to posit an average valuation around which prices fluctuate is probably misleading. The main reason for this difference is fairly clear. While America builds more houses whenever growing demand starts to push up prices, housing supply in Britain is limited, so changes in demand lead straight to much bigger swings in prices. But the limited supply of housing in Britain suggests that prices should rise in the long run in relation to incomes, rather than remaining fairly steady over long periods as they have in the US.

 

If this is the case, housing valuations in Britain are unlikely to revert to the horizontal line - or undershoot it - as they do in the US. Instead of a horizontal average, the long-term trend in Britain's house price-to-income ratio is likely to be an upward sloping line.

 

This is essentially the mathematical bet being made by anyone who buys a house in Britain at today's prices. It may sound obscure, but my hunch is that it will pay off.

[lowrentyieldmakessense(honest!)]

slightly related

 

commercial not resi

 

http://news.sky.com/skynews/Home/Business/...ish_Land_Wipes_

UK property giant British Land has seen £3.2bn wiped from the value of its portfolio, sparking new fears that banks will suffer huge losses from their commercial mortgage lending.

 

Britain's second-largest property firm, which owns most of the City's Broadgate office development, said its net value had tumbled by almost two thirds.

 

Its land portfolio is now valued at £8.63bn, 28% down on the valuation for the end of March 2008.

Yet chief executive Chris Grigg said the firm's performance has shown "real resilience".

 

The figures will be uncomfortable reading for many of Europe's largest property lenders.

 

Jeff Randall Live

 

Banks such as Royal Bank of Scotland Commerzbank and Lloyds Banking Group are sitting on billions' worth of vulnerable commercial property mortgages at risk of being devalued.

 

Last week, British Land's larger rival Land Securities blamed a record 2008 slump in the UK property market for slashing £4.74bn from the value of its assets.

 

UK banks have so far broadly turned a blind eye to borrowers breaching the terms of their lending agreements so long as they have been able to meet interest payments.

 

Yet an uncertain economic outlook has cast doubts on their ongoing ability to collect rent from tenants struggling to cope with recession - ramping up the risk of default

 

real resilience

 

orwellian speak

[lowrentyieldmakessense(honest!)]

Well, the economists' favourite joker, Anatole Kaletsky begs to differ, again.

 

another joker - but at least we know his motive

 

dont panic

By Duncan Weldon

 

S&P, the ratings agency, has placed the UK’s AAA bond rating on ‘negative outlook’. This means they are ‘considering’ downgrading it in the future. The full S&P statement is here.

 

In the context of the large expected rise in public sector debt, this is not surprising.

 

First off – let’s not panic.

 

They are talking about moving us, at some point in the future, to AA, the second highest rating. They are not saying we are heading for bankruptcy/the IMF whatever. Let’s keep some perspective.

 

Second, at 10.30am this morning (after the negative outlook), there was bond auction. We sold £4.5bn of 5 year gilts at an average interest rate of only 2.91%. Clearly the markets are not as paniced as the right is about to suggest they are. We received £13bn of bids, in other words there were plenty of people willing to lend to us.

 

Third, it’s worth reading the actual S&P release (my emphasis):

 

"We note that there is support across the political spectrum for additional fiscal tightening. However, the parties’ intentions will likely remain unclear until the next administration is formed after the general election, due by mid-2010. How quickly the government can stabilize and then reduce the government debt burden will also depend on the timing and shape of the economic recovery and whether the cost of government support of the banking system is higher than we currently assume, areas where we also see continued downside risks.

 

The rating could be lowered if we conclude that, following the election, the next government’s fiscal consolidation plans are unlikely to put the U.K. debt burden on a secure downward trajectory over the medium term,” Mr. Beers said. “Conversely, the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a sustainable footing, or if fiscal outturns are more benign than we currently anticipate.”

 

This downgrade, if it happens, will not happen until after the election. At that point it will be imperative for the government to set out a credible plan to return the finances to balance, I favour doing it mainly through tax rises, the Tories through mainly spending cuts. Either way, the new Government will be forced to act very quickly in setting out plans.

 

I am not trying to ignore the significance of all this. But let’s keep some perspective.