UK House prices: News & Views

[G0ldfinger]

http://blogs.telegraph.co.uk/finance/ambro...operty-bubbles/

Reckless Europe beats reckless America at property bubbles

 

[ecoface]

Sorry but the IR will only "have" to go up when the market demands.

 

Until then, the BoE want them to be low. It appears that you think that the BoE want them to rise?

 

They absolutely do NOT want them to rise, as they know the damage that this would cause.

 

They believe a weak pound is great for the UK, and inflation (which they secretly want a bit of) will trump potential deflation every time for the CB's.

 

Even with a couple of indicators looking slightly positive, it seems generally agreed that the risks are all still to the downside.

 

That coupled with the looming cuts (many of which have already begun) is forecast to further suppress demand and inflation expectations for a considerable time to come.

 

If anything, there will be more money printing to come.

 

Oh, and I never said anything about "IR's remaining the same regardless of the economic indicators"

 

JD:

 

Here's an article about IRs raising:

 

Telegraph

 

Then read this:

 

ArabianMoney

 

...for a frank view from the middle east.

 

 

[dietcolaaddict]

Just when it was feeling good to be a housing bear again...

 

"UK house prices rose 0.6% in July, Halifax says"

http://www.bbc.co.uk/news/business-10863152

 

The annual house price inflation rate fell from 6.3% to 4.9%, with the average property now costing £167,425

 

I guess the first point is that YoY is still falling and the cyclical pattern from the (very clear and nicely presented) BBC chart is still holding. But in a few months time, should prices fall as I and many others expect, this July value will really help support the YoY at above zero. Its only when this goes negative that, IMHO, we will start to see 'Ordinary Joe' panic and any large future falls materialise.

 

[jerpy]

I reckon them may be somewhat sheltered, and have little idea what is happening across GB.

 

Demand from builders across the U.K has been good the last few months since the bad weather, they have been busy putting down pads by comparison to last year. But forward visibility is still "built" somewhat on hope rather than demand. Many I spoke to in the sector at all levels kept making comments along the lines of HOPEFULLY we are now coming out of the recession, WHEN things get better next year, COSTS have been trimmed down, we are are much LEANER and able to benefit from the uplift WHEN it comes blah,blah.

 

Did you see TW. figures yesterday? Bears out all this with the exception of their "relatively robust" comment, probably attributed to 2009 sales "secured". But it was a good churn, last week first time i've had a long position for some time in the sector; expect others will make similar noises.

 

Taking profits fairly quickly though.

 

[drbubb]

Demand from builders across the U.K has been good the last few months since the bad weather, they have been busy putting down pads by comparison to last year. But forward visibility is still "built" somewhat on hope rather than demand. Many I spoke to in the sector at all levels kept making comments along the lines of HOPEFULLY we are now coming out of the recession, WHEN things get better next year, COSTS have been trimmed down, we are are much LEANER and able to benefit from the uplift WHEN it comes blah,blah.

Sounds like "wishful thinking", which in my way of thinking, could lead to disaster

[jerpy]

Sounds like "wishful thinking", which in my way of thinking, could lead to disaster

 

Possibly. There are those wishing and those being realistic. Makes for trading stock opportunities round the negavity though. As for house prices well...

 

[ecoface]

Did you see TW. figures yesterday? Bears out all this with the exception of their "relatively robust" comment, probably attributed to 2009 sales "secured". But it was a good churn, last week first time i've had a long position for some time in the sector; expect others will make similar noises.

 

Taking profits fairly quickly though.

 

That's funny as I've I just taken a short position at 31 on T-W after that non-sensical spike yesterday. I mean, really, that company is in all sorts of mess. May be that's priced-in, may be not.

[jerpy]

That's funny as I've I just taken a short position at 31 on T-W after that non-sensical spike yesterday. I mean, really, that company is in all sorts of mess. May be that's priced-in, may be not.

 

Bought Monday morning myself as expected half bullish update and sold first thing this morning. Didn't time it perfect but i'm not greedy so sat on fence.

 

Mind think the bullishness was no doubt in part down to George Osboune's banks must lend more comments which swayed me for a punt. Just my opinion.

[ecoface]

Bought Monday morning myself as expected half bullish update and sold first thing this morning. Didn't time it perfect but i'm not greedy so sat on fence.

 

Mind think the bullishness was no doubt in part down to George Osboune's banks must lend more comments which swayed me for a punt. Just my opinion.

 

I could understand Persimmon or Berkeley, or even Barratts, but T-W??

 

[jerpy]

I could understand Persimmon or Berkeley, or even Barratts, but T-W??

 

Know what you're saying but 86% forward sales and people knew it was coming. Add the little pick up in prices, bit more fluff, banks being told to lend more and everyone goes to la,la land happy....for a day or two maybe.

 

The interesting comment I picked up was U.K concentration going forward, but of course no intention of pulling out of the U.S!

 

[John Doe]

JD:

 

Here's an article about IRs raising:

 

Telegraph

 

Then read this:

 

ArabianMoney

 

...for a frank view from the middle east.

Ah, see what you mean.

 

When I talk of IR rises, I am thinking more of the long term average of ~5%. That I think is still some way off (assuming no major shock like sov default etc, in which case all bets are off).

 

However, I wouldn't say 2.5% is impossile within a year or two. But think it is still a very low IR and won't hammer the population anywhere near as much as 5%

[ecoface]

Ah, see what you mean.

 

When I talk of IR rises, I am thinking more of the long term average of ~5%. That I think is still some way off (assuming no major shock like sov default etc, in which case all bets are off).

 

However, I wouldn't say 2.5% is impossile within a year or two. But think it is still a very low IR and won't hammer the population anywhere near as much as 5%

 

Sort of agree - historically 2.5% is half the 300 year average of 5%...

 

...but 2.5% on massive amount of debt, is a lot worse than 5% on less debt.

 

I used to have a similar debate with property bulls in the boom years when they said rates "are so low", and they couldn't see my view that it is not solely about the rates per se, but the rate in relation to the size of the loan or debt. The cost to maintain the debt will be grotesque at 2.5%, because the debt is obscene.

 

Similarly, a rise from 0.25% to 2.5% is 900%.

0.25%/ 250 basis points to 5% / 500 basis points is only 100%.

I think it works this way? Basically the point I'm making is that a rise from a low level should theoretically have more of a disproportionate impact than the same rise from a higher foundation.

 

[Bosworth]

Isn't it largely irrelevant what the CB rate is anyway? Mortgage and savings rates broadly decoupled a long time ago. If the Bond markets demand it, rates will rise irrespective of what the CBs do.

 

The question for me is: how much of a real rate rise is needed before mortgage rates would be pushed up?

[VictorBroom]

Isn't it largely irrelevant what the CB rate is anyway? Mortgage and savings rates broadly decoupled a long time ago. If the Bond markets demand it, rates will rise irrespective of what the CBs do.

 

The question for me is: how much of a real rate rise is needed before mortgage rates would be pushed up?

 

I think mortgage rates will continue to go up at a slow pace. Like you say, there isn't a correlation any more. When the CB rate goes up it may be too late for 'homeowners' to obtain a decent mortage, if at all. The governments 'special liquidity scheme' ends in January I think. Don't know much about it but it may affect banks funding abilities. Anyone know more about this?

[G0ldfinger]

They should do that in the UK too.

 

http://www.bloomberg.com/news/2010-08-04/c...ome-prices.html

China Tests to Check Risk of Cash Crunch Among Developers

...

Aug. 4 (Bloomberg) -- Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, talks with Bloomberg's Scarlet Fu about China's housing and banking industries. China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said. (Source: Bloomberg)

 

China’s stress tests of banks will assess the risk that a possible slump in property prices may strain developers’ finances and cause homebuyers to default, a person with knowledge of the matter said.

 

The banking regulator told lenders to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.

[G0ldfinger]

Great comment on the Edinburgh bubble.

 

http://www.heraldscotland.com/comment/iain...erest-1.1046011

Watching the housing bubble with ever increasing interest

...

Published on 5 Aug 2010

 

Sorry, but I just can’t share in the enthusiasm for the rebound in Scottish house prices or the return of bumper bank profits which underpin it.

Is it sensible for a city such as Edinburgh, so dependent on public services and bank subsidies, to be growing its very own housing bubble on the eve of the biggest cuts in public spending in British history? Cuts that will lead to many thousands of job losses. Perhaps they know something we don’t.

[Mabon]

Local Property Rag to me Homes-Harrow.co.uk (north-west London) has many reductions.

 

A quick estimate would be that 20% of properties have either 'new instruction' or 'price reduction' on them.

 

Of course 'New Instruction' could be someone bumping the price up on their salubrious semi...but I doubt it.

 

Also a few 'cash buyers only' Ads appearing.

 

Interesting times (again), just like early 2009.

[ziknik]

...

I think it works this way? Basically the point I'm making is that a rise from a low level should theoretically have more of a disproportionate impact than the same rise from a higher foundation.

Yes that's right. It tells us that the first base rate rise will be 0.1% or 0.05%.

 

Anyone expecting a 0.25% rise (50% increase) is living in dream land.

[ziknik]

Isn't it largely irrelevant what the CB rate is anyway? Mortgage and savings rates broadly decoupled a long time ago. If the Bond markets demand it, rates will rise irrespective of what the CBs do.

 

The question for me is: how much of a real rate rise is needed before mortgage rates would be pushed up?

You'd need total panic in the bond market to cause the price of SVR mortgages to go up.

 

Bond prices are normally linked to fixed rate mortgages, rising bond prices lead to rising fixed rate mortgages (for new customers) fairly quickly and directly.

[ziknik]

I think mortgage rates will continue to go up at a slow pace. Like you say, there isn't a correlation any more. When the CB rate goes up it may be too late for 'homeowners' to obtain a decent mortage, if at all. The governments 'special liquidity scheme' ends in January I think. Don't know much about it but it may affect banks funding abilities. Anyone know more about this?

If things stay as they are now, the SLS can probably be closed as a lot of the dodgy assets have increased in price over the last 10 months.

 

 

[G0ldfinger]

If things stay as they are now, the SLS can probably be closed as a lot of the dodgy assets have increased in price over the last 10 months.

But the next leg down is approaching rapidly.

[G0ldfinger]

http://www.telegraph.co.uk/finance/china-b...ging-wages.html

Meanwhile, China Daily reports that 70pc of all flats in Hainan, 66pc in Beijing, and 51pc in Shanghai are empty, based on a survey of electricity use. They are presumably owned by investors and speculators.

Oh-hauerhah! Anyone seeing a problem here?

 

EDIT: A comment below AEP's article then claims:

err no, this was a online 'survey' of somebody looking whether the lights were on at a number of apartment buildings at a certain time. I do hope that your other articles are based on more than this kind of spurious data.

 

EDIT 2: Also interesting:

http://www.bloomberg.com/news/2010-08-17/c...y-andy-xie.html

Million-dollar flats in Mumbai have panoramic views of the city’s slums. Hong Kong’s real-estate prices have almost reclaimed their 1997 peak, though the economy has barely grown since then in per-capita terms.

[drbubb]

Great comment on the Edinburgh bubble.

http://www.heraldscotland.com/comment/iain...erest-1.1046011

 

Right he is!

The villain bankers are gorging themselves fat on the "blood" of the savers:

 

EXCERPT

The other key component of banking profits is zero interest rates. Banks such as HSBC, Lloyds and RBS would not be delivering profits at all had the Bank of England not slashed the cost of borrowing to the lowest level in 300 years. This has been a no-lose bet for the bankers. They borrow at 0.5% and then lend it out again at many times that to homebuyers and small businesses – or, rather, they don’t because the banks don’t really like lending to small business. They’d much rather use the cheap money to buy government securities or other bonds which give them a guaranteed profit without any risk. It is, quite literally, money for nothing.

 

By the way, anyone interested in how all this works would do well to consult my top holiday reading tip: Freefall by the Nobel prize-winning economist Joseph Stiglitz, who is coming – appropriately enough – to the Edinburgh Book Festival later this month. Freefall is a brilliant piece of work written in a clear and engaging style free from economic jargon or the mystifications of the financial services industry.

 

Stiglitz, the former chief economist with the World Bank, reveals how the public in America and Britain have been taken for the greatest ride in history by monopoly financial institutions that have been given access to almost unlimited sources of public finance. They brought the world to the brink of financial disaster, and they were rewarded with a blank cheque.

 

The handful of banks that have emerged from the 2008 crash are now bigger and badder than ever, precisely because they know beyond doubt that when the next crunch comes, they can rely on governments to ride to their rescue. There has been no serious attempt to restructure the banks, to separate casino investment banking from retail lending or to break up the monopolies.

==

 

Banks are carrying their assets at fictitious valuations, which allows them to report big profits, and pay excessive bonuses.

 

Instead:

+ 80% of banker bonuses should be retained in bank preferred stock, paid out over 5 -10 years from award date

 

+ Banks should not be allowed to lend more than 70%, and if they do, it should be from subsidiaries financed by preferred stock from banker bonuses - Let the villains take "first loss", not the poor taxpayers !

 

+ Top bankers (like Fred Goodwin*) should be forced to give speeches, up and down the land, entitled; "How to get away with it", explaining how he managed to legally steal so much, so taxpayers would understand how the system works. (And Gordon Brown should be forced to sit in the front seat, and applaud his every pause.)

== ==

 

VAMPIRE ?

A senior banker has compared the public condemnation of Sir Fred Goodwin (above), the disgraced former chief executive of Royal Bank of Scotland, with the persecution of the Jews in Nazi Germany.

 

Sir Angus Grossart said that the attacks on his "good friend" bore "shades of Kristallnacht", a 1938 anti-Jewish pogrom.

 

Grossart, who chairs the private bank Noble Grossart Limited, said Goodwin had been made a "scapegoat" for the banking crisis in which RBS had to be bailed out by the government to the tune of £20bn.

 

Goodwin left his native Scotland for a hideaway in the south of France after the furore over his £16.9m pension pot, which was later halved under pressure from the government and the new management of the bank.

 

In an interview with Scotland on Sunday, Grossart said: "A lot of people, including those in government, were also involved in mistakes and they did not have bricks thrown through their windows."

/see:

[G0ldfinger]

A Friend's Capitulation

http://www.housepricecrash.co.uk/forum/ind...=31314&st=0

 

Posted 07 June 2006 - 09:07 PM

It's a familiar story of a priced out professional in London. Met up with a friend in London the other night and he told me he was going to buy.

 

He's buying because he's 32, earns 27k and is utterly pissed off with living in scummy HMOs on 6 month leases. What other choice does the average earner have?

 

Well, you can buy a 3rd of a new build in Elephant. He's borrowing 5k for a deposit and sharing with a mate. He's getting an IO mortgage because he can't afford a repayment. He is well aware that it is like renting from the bank and that unless he gets a large pay rise (unlikely) then he will never own the flat. He is also aware that house prices may not continue to rise and it might not be a 'good investment'. He's buying because he feels he has no other choice.

 

It's times like that you realise the extent of the housing crisis in Britain in 2006.

 

 

Posted 08 June 2006 - 08:42 AM

View PostCinnamon, on Jun 7 2006, 10:21 PM, said:

What happens when one of the three owners:

 

1. wants to move and rents out the room to someone random to cover his mortgage?

 

2. defaults on the mortgage payments, stuffing the other two?

 

Your friend has an interesting way of committing financial and social sucide!

 

The other two have very small mortgages, they had a flat to sell. Why then are they moving on to shared ownership? Because they believe it's a 'good investment', afterall they were sharing before and they 'made' loads of money so of cause house prices can only go up!

 

It does however highlight the myth that if you start by sharing you will eventually be able to afford your own place. They're getting a 3rd sharer. Madness!

 

Renting a room to a random person is probably out of the question. It would be ironic if he ended up in a HMO that he had 'owned'.

 

 

Posted 08 June 2006 - 08:56 AM

 

View PostOzzMosiz, on Jun 7 2006, 10:54 PM, said:

If your friend realises all the pitfalls why is the idiot buying now?

 

I might go and borrow some money to buy a lamborghini because I've got no choice and i'm sick and tired of just driving a rover 214

 

You are correct, it's bloody stupid and it's about expectations, but you have to understand the nightmare this guy's had in HMOs. He's been unlucky with antisocial flatmates, the stories he has to tell are very funny (if they haven't happend to you!). He's basically thrown in the towel, speaking to him, he has the attitude that you see with posters on here sometimes - the "I don't give a shit anymore" attitude.

 

To be fair 27k is not a bad wage. You would have thought that someone on an average wage like that should be able to afford a modest flat to live in, even renting.

 

 

Posted 12 June 2006 - 10:49 AM

 

View PostFirstTimeBonkers, on Jun 11 2006, 08:26 PM, said:

There is nothing particularly inaccurate or unfair about this view, but the problem is that the balance between maximising career prospects and wanting not to live in a hovel changes as the days of your life go by.

 

Most people find this balance by commuting from the surrounding counties.

 

London does not have the monopoly on highly-paid jobs with good prospects. As another thread has shown, for example, it seems that one way forward is to become a local government executive.

 

 

Yes, it's mainly about expectations. At the moment if one earns 27k, one 'expects' to be able to enjoy a basic standard of living. The fact that due to HPI and the housing crisis you cannot do that makes you feel hard done by, especally as this guy earns more than the people he is sharing with but they are in their early 40s and have been able to take advantage of HPI rather than suffer under it.

 

However, if you change your expectations and realise that in fact 27k does not afford you a decent standard of living in London, you are left with a couple of options. Either increase your wages or move to somewhere cheaper. This is the situation as is.

 

The reality is that the only reason 27k doesn't give you a decent standard of living in London is because of accomodation conditions/ costs. If you live in an HMO hovel for £400 a month you have plenty of money left over for luxuaries such as eating out, buying gadgets and going on holiday even saving for the future, however if you want somewhere decent to live (small one bed flat - 200k?) your mortgage would be about £1200 - £1500 per month which means you are poor.

 

There isn't much in between financally speaking (apart from shared ownership).

 

 

Posted 27 October 2007 - 09:53 PM

Interesting to see this thread resurrected. I guess I should give an update.

 

Since he moved in last July, there has been a shooting outside the front of the building (bullet holes still in the wall of the block) He's witnessed a murder from his balcony, and someone has managed to get planning permission to build another block next to his, spoiling his view (and potentially affecting the value)

 

He can't park (legally) within walking distance, and has rightly backed away from getting a loan for the £25k required for a parking space under the building. Apparently most of the parking spaces for the block remain unsold, as many appartments were bought by BTLs who haven't bought a parking space to go with the flat. It seems there's something of a parking-space price crash there, as people who have sold have had to give away the space with the flat (you're not allowed to park in it if you don't own a flat there)

 

He now has 18 months left on his fixed rate IO, and we've has a good few IR rises and a credit crunch. It's not looking good. Oh, and Elephant is still a crap hole (in case you didn't know)

 

 

 

Posted 28 October 2007 - 07:59 PM

 

To be fair, the flat itself is very nice and it is within a walled area or compound so the undesirables stay away from your personal space. He works in a nice part of town and it's pretty easy to get in to town from Elephant, there's nowhere to go out without getting away from the locality but there are plenty of places like that. The day to day (murders and third world style deprivation on your doorstep aside) is a huge improvement from the HMO hell that he had endured before moving in.

 

Longer term things don't look so good though, He is currently single and mortgaged to the hilt. With or without HPI or a HPC, I don't really see where he goes from here.

 

 

 

Posted 04 June 2009 - 09:30 AM

 

I shall give you an update. It is as expected!

 

Not surprisingly Elephant is still a crap-hole. The last time I went around to his place there was an angry woman being wrestled into a police van outside the gate of the building. I had to wait until the 3 policeman it was taking to restrain her managed to bundle her into the back before I could press the bell and get the "concierge" to buzz me in!

 

My mate also witnessed a murder last summer. A woman was thrown from the balcony of flat opposite. I won't go into too much detail, suffice to say he was rather shaken up by the experience. (edited: it was actually the summer before last - how time flies!)

 

I can imagine that the value of the flat has fallen substantially since he bought, I haven't checked selling prices in the block, and it isn't something that gets mentioned a great deal. He also now has a serious girlfriend and they want to move in together. Unfortunately, selling up isn't really an option as he and his flatmate almost certainly in neg equity.

 

The only consolation is that because he is on an IO tracker mortgage, the repayments have fallen massively since the drop in IRs. This will make it viable (if he can agree with his flatmate) to rent the whole place out, and use the proceeds to pay the interest and have some extra income to pay rent on another place in a nicer area.

 

Of cause the risks are huge. If IRs rise, they have tenants problems, or there are large voids etc. there is a problem.

 

On top of this redundancies have started at his work and he says he doesn't have much to do day to day, so he is worried about his employment prospects.

 

My feeling is that he will scrape through (unless IRs rise), however this flat will be a millstone for many many years to come.

 

 

Posted 08 January 2010 - 11:23 PM

I guess I should update this - as I do periodically. I will try and keep it anonymous as I don't want anyone to be identified.

 

After 7 months of dithering and waiting for the market to recover - it seems to have recovered (or at least that what they say on the telly) so they have decided to put the flat on the market.

 

An estate agent came around and has valued the flat at the same price they paid for it. (£355k) Whether this is realistic is another matter but that's what has happened. "Great!" I said - trying to avoid an awkward conversation, but apparently it's not great. They are well aware that they will lose out once you include stamp duty and EA fees, and that's if they achieve full asking, which it seems even the Mr Optimism the EA has advised that they will probably not.

 

To add to this, the official valuation was for "flat with parking space" and they haven't bought a parking space. Now I have mentioned earlier in the thread that although there were fewer parking spaces than flats built, the prevalence of BTL has resulted in many un-bought spaces. However these cost £25k and are non-negotiable.

 

So it looks like moving out, letting the place and renting a home is on the cards again. This will work for now as interest rates are so low, but if rates go up it's game over.

 

Judgement day posponed (again).

 

 

Posted Today, 06:23 PM

Time for another update. It's all too predictable!

 

The flat has now been on the market for over 7 months and there have been no offers. I'll say that again, NO OFFERS. Not even "cheeky" offers. Viewing stopped altogether about 2 months ago along with the general slowdown in sales nationally and now the reality begins to dawn. They are not going to sell it for anywhere near £355k.

 

I've explained before that less than that is problematic as they will sustain a large loss. So the only option left is to rent it out and move on. The only problem is that moving on is proving difficult.

 

My mate's flatmate dosen't want to move on. He will have to rent or take on more debt (if he can get another mortgage) he is now struggling financially having had to take a less well-paid job and is now a "homeowner" so sees it as going backwards.

 

My mate wants to move in with his gf (and rent) and is coming under pressure from her to get a move on, so the tensions are building. I suggested getting her up the duff and forcing the situation to a head, but that didn't go down too well

 

I haven't got any better ideas though!

 

Stalemate!

[drbubb]

A Friend's Capitulation

You are correct, it's bloody stupid and it's about expectations, but you have to understand the nightmare this guy's had in HMOs. He's been unlucky with antisocial flatmates, the stories he has to tell are very funny (if they haven't happend to you!). He's basically thrown in the towel, speaking to him, he has the attitude that you see with posters on here sometimes - the "I don't give a shit anymore" attitude.

How sad and utterly foolish!

 

The bears are now winning the battle, the market is beginning to slide, and he's running around trying to make himself a target for one of the last bullets. If he was my friend, I'd slap him hard on both sides of the face and say: "What are you doing, man! You've waited this long, and your going to 'throw in the towel' just as the market starts to move your way!" Getting frustrated, and not 'giving a shit anymore', is a great way to lose money. When fools like this wake up, and realise that they have lost much of their wealth, they will get little sympathy from those who have disciple and real strength in their convictions.

== ==

 

Whoops! that was 2006, so then you can read on and see what happened....

 

"NO OFFERS. Not even "cheeky" offers. Viewing stopped altogether about 2 months ago along with the general slowdown in sales nationally and now the reality begins to dawn. They are not going to sell it for anywhere near £355k... they will sustain a large loss. So the only option left is to rent it out and move on. The only problem is that moving on is proving difficult."

 

The "tough love" would have been correct, if it had worked, and stopped the purchase.