UK House prices: News & Views

[John Doe]

And, as everyone knows, prices are set at the margins. You only need one person earning the requisite money to buy a house - you don't need the whole population earning the requisite money. And thinking in terms of averages etc. doesn't help either - in an extreme situation you might only sell one house a year in a town - but as long as one sells it sets the price for the others.

 

I know this can't go on forever ... I know that in 20 or 30 years time, eventually, sometime, there will not be enough people earning enough money to keep the market where it is ... but, by then, my sons might be getting on for 50 years of age. And if gradual inflation keeps the boat afloat, somehow, in the intervening period - all we are going to see is a change in the structure of home ownership with fewer people owning more properties and more people renting.

 

I think it's a pretty depressing outlook.

 

It's actually a bit worse.

 

Another thing the statistician mentioned was that the 2.3% average earnings rise reported was an underestimate as there was a large increase in part time workers over the last year. This brings the average wage figure down.

 

I got a big fat 0.5% rise (yes, a 5% real drop) this year. Woopee doo.

[drbubb]

It's actually a bit worse.

Another thing the statistician mentioned was that the 2.3% average earnings rise reported was an underestimate as there was a large increase in part time workers over the last year. This brings the average wage figure down.

 

I got a big fat 0.5% rise (yes, a 5% real drop) this year. Woopee doo.

And yet RENTS ROSE in London.

How did that happen? I find it puzzling.

Yet I think it must have been thanks to the moment supplied by a generous Housing Benefits programme, matching "market" rents

[John Doe]

And yet RENTS ROSE in London.

How did that happen? I find it puzzling.

Yet I think it must have been thanks to the moment supplied by a generous Housing Benefits programme, matching "market" rents

Not sure, but I see immigration averaging ~180,000 per annum for the last several years (was even high in 2009!), so that can't help.

 

Also more and more people renting that could "afford" an equivalent-to-rent mortgage, but who haven't got the necessary deposit.

 

Assuming it takes ~ 5 or so years to build up a 10% deposit, I guess these people will end up buying about 2012-2014. As they work through this 5 year gap (where they cant get a mortgage), the demand for rent should decrease as these people become buyers.

 

Won’t do the BTL brigade much good, wonder if they have thought about this?

[drbubb]

Dr Bubb

 

I would suggest you warn Hong Kong/.Chinese buyers about new builds in London. I recall Dickens yard you mentioned in Ealing. I have just advised a couple of lenders on the background to a new build in Ealing Common were the vast majority were Chinese investors who bought under companies held in the Virgin Islands. These new builds are trying to be resold onto the market. Surveyors are marking the value of these flats with very big haircuts. It would appear that fraud is still alive and well except new suckers are being sought in the far east.

THIS HEADLINE (from an full page advert in today's SCMP) was so bizarre, I had to share it with you:

 

"When you grow rich, head to Shoreditch."

 

(I wonder if this is meant in jest?)

 

The ad goes on to say:

"Famous English nursery rhyme features a trendy London area where a 25-storey will be the ultimate in luxury living."

 

/source: http://www.avantgardetower.com/

 

It goes on to promote a development called :

Avant-Garde, "a striking new Zone 1 landmark development for The City of London"

(Prices start from Pds 250,000.)

[drbubb]

Assuming it takes ~ 5 or so years to build up a 10% deposit, I guess these people will end up buying about 2012-2014. As they work through this 5 year gap (where they cant get a mortgage), the demand for rent should decrease as these people become buyers.

???

That comment is common, but does it really make sense?

 

If people buy or rent, they still need to live somewhere.

If they "shift to buying", then they occupy a property which might otherwise be rented out

[John Doe]

???

That comment is common, but does it really make sense?

Yes I think it does. (I know you understand the point, but perhaps I didn't put it very well).

 

Those that used to buy with a 100% mortgage are having to rent (as they do not want to (or can not) live with parents etc) and are having to save for a few years to get their 10% deposit.

 

Once that period is over, those coming behind will continue the cycle. So we have a 3 to 5 year gap where the first start saving for their deposit. But once that has worked through the system, the demand for rent levels back (and if mortgages become more available, the demand for rentals will drop.

 

That is one of the reasons why I think there is a rise in rents (and demand for rented property) at present. ie 3-5 years of new renters that normally would have been new buyers.

 

 

If people buy or rent, they still need to live somewhere.

If they "shift to buying", then they occupy a property which might otherwise be rented out

 

True, hence the increase in rental demand now, while in a few years the demand for rental should drop back as the demand to buy returns.

[Pal]

Another thing to consider is that many people who have been unable to sell have rented out their properties (accidental landlords). As they manage to pay down their debt and/or prices pick up slightly, many of these will probably sell. I see this as having a balancing effect on supply of rental property.

 

One of the main issues with UK property is supply & demand and until the governments decide to relax planning laws I expect the lack of supply to put a floor under prices (though I still expect some further falls, especially as interest rates rise).

 

 

 

Yes I think it does. (I know you understand the point, but perhaps I didn't put it very well).

 

Those that used to buy with a 100% mortgage are having to rent (as they do not want to (or can not) live with parents etc) and are having to save for a few years to get their 10% deposit.

 

Once that period is over, those coming behind will continue the cycle. So we have a 3 to 5 year gap where the first start saving for their deposit. But once that has worked through the system, the demand for rent levels back (and if mortgages become more available, the demand for rentals will drop.

 

That is one of the reasons why I think there is a rise in rents (and demand for rented property) at present. ie 3-5 years of new renters that normally would have been new buyers.

 

 

 

 

True, hence the increase in rental demand now, while in a few years the demand for rental should drop back as the demand to buy returns.

[drbubb]

Thanks, I hear you both.

 

But the SUPPLY of properties for renting and selling is the same Supply - there is no barrier between.

 

+ A property that is not easily rented, may get sold, and

+ A property that is not easily sold, may get rented

 

So if people shift from BUYING to RENTING, then the Supply will just shift to match their preference.

 

To put it another way, fewer houses being SOLD, means more available for rent. So a drop in selling, means a greater supply of homes and properties to be rented.

[Pal]

I totally agree with you DrBubb, hence why I said it would balance out.

 

There is a major problem with supply in this country, deliberately orchestrated by government planners, which keeps house prices high. If land was cheaper, due to more supply being released, house prices would fall and we would not have a shortage.

 

Realistically no govenrment is likely to deliberately engineer house price falls as this would alienate a large percentage of voters but they could easily manage the supply of land to ensure we had stagnant nominal prices and erosion in prices through inflation. This would make the country more competitive in the longer term as we would not need to spend so much on housing.

 

Whilst I believe this would be the right way to go I have no faith in any governments doing this, as they like the feelgood factor that HPI gives the general population. Plus of course the constant mewing for consumer spending stimulates the economy and provides jobs. Bearing all this in mind I try to base my investment decisions on what I "think" will happen, rather than what I believe should happen.

 

Thanks, I hear you both.

 

But the SUPPLY of properties for renting and selling is the same Supply - there is no barrier between.

 

+ A property that is not easily rented, may get sold, and

+ A property that is not easily sold, may get rented

 

So if people shift from BUYING to RENTING, then the Supply will just shift to match their preference.

 

To put it another way, fewer houses being SOLD, means more available for rent. So a drop in selling, means a greater supply of homes and properties to be rented.

[drbubb]

...Bearing all this in mind I try to base my investment decisions on what I "think" will happen,

rather than what I believe should happen.

I agree with that comment.

 

But eventually "think" will line up with "should".

That has been the case for the UK as a whole, and sense may spread to London soon IMHO.

[John Doe]

I agree with that comment.

 

But eventually "think" will line up with "should".

That has been the case for the UK as a whole, and sense may spread to London soon IMHO.

 

The next several years could be an opportunity. Perhaps they could release land when prices start to stabilise / go up with inflation. Let the land out at a measured pace to keep the rises slow.

[Pal]

The next several years could be an opportunity. Perhaps they could release land when prices start to stabilise / go up with inflation. Let the land out at a measured pace to keep the rises slow.

 

 

This is what I think they should do also. However, I very much doubt they will do this as the incumbent government will want to show how they have sorted out the problems caused by the last government and the economy is now beginning to grow nicely. HPI adds to this feelgood factor and will be sort after as an election looms.

 

There can still be some good opportunities with this scenario but you need to be alert to them and the part of the cycle we are in at any particular time. If you can add to that with some expertise allowing you to buy at significant discounts to the current market value it can be very profitable. I'm not by any means trying to suggest that people should all go out and become landlords, as that is a business in itself but there can also be trading opportunities.

 

Having said all the above - It is difficult to argue against simple commodity and option trading and investing at the current time. I guess to a degree they are different beasts though as property is more of a business than a passive investment, unless we are talking about just purchasing your own home rather than profiting from property.

[drbubb]

This is from the first page of: http://tinyurl.com/UKtrap , where

 

I RE-WROTE THE DESCRIPTION IN THE HEADER...

 

Barratt closer / BDEV.L ... update : Longer Term : Last 12 months : 6 mos

 

BDEV has given us excellent early warnings of TURNS in UK house prices.

 

From a low in July 2008 (at 22p), Barratt/BDEV had a long rally into a Sept. 2009 high at 280p. We noticed a key point in the rally, and in early April 2009, predicted a 12 months "Dead Cat bounce" in UK property prices, and that duly arrived.

 

We watched BDEV for a sign that the house price rally was petering out. And from Sept. 2009 and the 280p peak (184p, on a split-adjusted basis), BDEV began to fall. This drop in the share preceded a fall in actual house prices, as measured by various property indices. A key point in the decline, was when BDEV slid back below its 250 day/1 year moving average. That occurred in Feb 2010. Within a few weeks, in Spring 2010 a second downleg in UK property prices began. And it was clearly reflected in the H&Nindex (the average of the non-seassonally adjusted Halifax & Nationwide indicies), which peaked in April 2010 at £169,287. The new slide in UK prices came despite continued ultra-low interest rates.

 

BDEV continued to fall for most of 2010, but the rate of decline slowed and the stock bottomed in late Nov.2010 at near 71p, which was well above the Nov 2009 low of 31p. Then, a year-end rally in BDEV stock began, taking BDEV back near 90p by the end of 2010. We watched to see if the bounce in stocks was going to be strong enough to push back above the 250d/1 year MA, and if that occurred, if there would be a reverse the downturn in UK property prices.

 

In early 2011, Homebuilder prices rose further. BDEV rose above 110p, and pushed beyond the 250d MA, suggesting a Spring 2011 "PAUSE" in the decline in UK-wide home prices. Will the house price rally last? I think not. The failure of the Homebuilder rally and a drop in BDEV back below 100p on high volume (If we see that), would be a sign that Crash Cruise Speed (with falls averaging more than 0.5% per month), is likely to resume.

 

 

I still expect a long slide in UK House prices into 2012/13 or later.

Next Buy signal would be: after the Builder shares break up above key resistance levels on high volume.

[John Doe]

One Hyde Park, remember that?

 

Well guess what, one of the flats has just sold for a record breaking £136m, yes, £136,000,000!!

 

And, the owners going to spend another £60,000,000 doing it up

 

Looks like many of the others have now sold and a good number of the rest are under offer.

 

http://www.metro.co.uk/news/861069-london-flat-breaks-record-by-selling-for-136m

 

Wonders never cease.

 

In other news, house asking prices up, but so is level of stock (record increase) and a bearish veiw by Miles

 

http://www.rightmove.co.uk/news/house-price-index/april-2011

[drbubb]

One Hyde Park, remember that?

Well guess what, one of the flats has just sold for a record breaking £136m, yes, £136,000,000!!

And, the owners going to spend another £60,000,000 doing it up

Imagine having so much money, that you are willing to spend £200 Million on a "Trophy" !

== == ==

 

The comments in the Report are clearly Bearish:

 

Increased seller numbers not matched by increase in purchasers’ ability to buy, resulting in biggest

monthly jump in agents’ unsold stock since May 2007 – up from 70 to 74 properties per branch

 

• As property supply is increasingly outstripping demand, this month’s jump in new sellers’ average

asking prices of 1.7% (£4,032) looks misplaced

 

• London remains the exception as buyer demand pushes asking prices to a new record of £431,013

 

• With base rate rises looming, sellers who are keen to sell in the spring window should adopt ‘serious

seller’ tactics

. . .

Estate agents report that sales success this year has the following three main elements:

 

- Price low. “Undercutting similar properties for sale is a must. Agents report that in order to

stand out in an increasingly crowded marketplace the asking price has to look like a real

bargain rather than merely competitively priced. With the transparency of the internet,

potential buyers can easily judge which properties are over-priced”, says Shipside.

 

- Push the ‘added value’. “If your property has real ‘added value’ features that give it an edge

over similar looking ones, then ensure your marketing really promotes the differences those

extra benefits will make to a new occupier’s life. If your advert fails to stir the emotions, then

don’t expect to shake local buyers into life”, adds Shipside.

 

- Polish till it sparkles. “Remove your rose-tinted spectacles, and look at your property with a

diamond dealer’s loupe, as that is the level of critique that many buyers now apply.

Immaculately prepared and presented property gems not only stand out, but give less reason

for buyers to squeeze you on price”, advises Shipside.

 

/see: http://www.rightmove.co.uk/news/files/2011/04/april-2011.pdf

 

I also note that the Delusion Index looks like it is pressing up near a high. (near 144%?)

 

So it is a great time for Vendors to "get serious" and look cheap, by offering a realistic "discount" in relation to other delusional sellers

[BoldAsBrass]

One Hyde Park, remember that?

 

Well guess what, one of the flats has just sold for a record breaking £136m, yes, £136,000,000!!

 

And, the owners going to spend another £60,000,000 doing it up

 

Looks like many of the others have now sold and a good number of the rest are under offer.

 

http://www.metro.co.uk/news/861069-london-flat-breaks-record-by-selling-for-136m

 

Wonders never cease.

 

In other news, house asking prices up, but so is level of stock (record increase) and a bearish veiw by Miles

 

http://www.rightmove.co.uk/news/house-price-index/april-2011

 

Yes, a reminder that, whatever happens, there is an elite that not only does not suffer, but they seem to benefit from every situation.

 

A couple of years ago I was certain that developments like that would be white elephants, that the developers would go broke, that the half finished developments would stand as a stark reminder of the price to pay for the greed and avarice of so many.

 

Yet, here we are, finished and sold at prices that make you gasp.

 

I ought to be getting used to being wrong by now. How DO people make so much money?

[drbubb]

I ought to be getting used to being wrong by now. How DO people make so much money?

... And do they pay any tax on it?

 

The rising offer prices haven't helped London based builder : Barratt/ BDEV

 

It is hard to take advantage of rising offers, when NO ONE IS WILLING TO PAY THEM:

 

"But the leap in prices in March is due to misplaced optimism, as homes are not selling.

The mismatch between supply and demand led to the number of unsold properties on estate agents' books rising at its fastest level since May 2007, to an average of 74 homes per branch.

 

Rightmove warned that with interest rate likely to rise, vendors wanting to take advantage of the traditional spring window needed to adopt 'serious sales tactics'."

 

Read more: http://www.dailymail.co.uk/news/article-1378011/Overly-optimistic-sellers-raise-house-prices-1-7-market.html#ixzz1JsAXilJx

[drbubb]

FUN-in-the-SUN EXPAT BOZOS are being handed their Red Noses...

 

Those that could not afford to buy with small mortgages, or finance in Euros are finding it is no party in Spain

 

 

Figures from Smart Currency Exchange show that the average increase in mortgage repayments after the ECB rate rise will be £1,750 a year. Rates are expected to increase further to a possible 1.75pc.

 

Mr Jordan said he has seen an increased number of clients choosing to remortgage their main home in the UK in order to pay off the mortgage on their second home, and thus avoid making regular payments in euros.

 

Charles Purdy, director of Smart Currency Exchange, said that he was advising customers to be "very realistic" about the rates they will get on sterling. "If they have a large mortgage, the liability will have gone up in sterling terms," he said. "They need to realise that the size of their mortgage has effectively increased, and there is inflation in Europe, too, so that makes it even worse. People who are buying abroad now are more worldly wise than they were a few years ago, but I am telling them that they need to budget for €1.10 to the pound rather than €1.20 or €1.30."

 

For many, the rise in rates combined with slumping sterling has put paid to dreams of living in France or Spain. A survey from website www.primelocation.com showed that interest in acquiring a French property was slumping due to an increase in living costs and weaker sterling.

 

David Vindel, a senior public relations consultant from London, is one of those who has been hit by the changes in sterling. He has bought two properties in Spain to rent out during the past five years. "They were meant to be good investments, but things have turned out rather differently than I expected," he said.

 

/more: http://www.telegraph.co.uk/finance/personalfinance/8454000/British-expats-forced-to-sell-up-and-come-home.html

[BoldAsBrass]

... And do they pay any tax on it?

 

The rising offer prices haven't helped London based builder : Barratt/ BDEV

 

It is hard to take advantage of rising offers, when NO ONE IS WILLING TO PAY THEM:

 

"But the leap in prices in March is due to misplaced optimism, as homes are not selling.

The mismatch between supply and demand led to the number of unsold properties on estate agents' books rising at its fastest level since May 2007, to an average of 74 homes per branch.

 

Rightmove warned that with interest rate likely to rise, vendors wanting to take advantage of the traditional spring window needed to adopt 'serious sales tactics'."

 

Read more: http://www.dailymail.co.uk/news/article-1378011/Overly-optimistic-sellers-raise-house-prices-1-7-market.html#ixzz1JsAXilJx

 

I wonder why Rightmove feel qualified to advise people that interest rates are likely to rise. Do they have the ear of the MPC?

 

I wonder why Estate Agents are not telling people that 'homes are not selling'.

[drbubb]

I wonder why Estate Agents are not telling people that 'homes are not selling'.

I think they are ! (Rightmove offers property for sale, doesn't it?)

 

In a "Buyers market" - like now - the job of the agent is "to talk the sellers down."

If they fail to do that, they are going to do little business. And there are so many seller around, the chances of finding one who is "flexible" is better than find a Buyer clueless enough to be talked into paying more.

[wee Jinky]

I think they are ! (Rightmove offers property for sale, doesn't it?)

 

In a "Buyers market" - like now - the job of the agent is "to talk the sellers down."

If they fail to do that, they are going to do little business. And there are so many seller around, the chances of finding one who is "flexible" is better than find a Buyer clueless enough to be talked into paying more.

 

putting property on at an overvalued price then dropping the price

to a point where it is still overvalued may trap the gullible into

thinking they are getting a bargain

customer is happy and agent achieves a higher commission than marking the price low from the start

Putting a sale sign in a shoe shop window catches my wife every time

[neil324]

putting property on at an overvalued price then dropping the price

to a point where it is still overvalued may trap the gullible into

thinking they are getting a bargain

customer is happy and agent achieves a higher commission than marking the price low from the start

Putting a sale sign in a shoe shop window catches my wife every time

 

Trouble is though your not scrutinizing when buying shoes.

[wee Jinky]

Trouble is though your not scrutinizing when buying shoes.

 

I heard someone the other day telling me it was a good time to buy

I've known people who have bought a house in under a day

and the lack of scrutiny shown in the UK Ireland Spain Us etc etc

doesnt seem to have been that great in the past

as long as the Daily Express and Co are spinning property in a positive light

then there will be gullible people who will be taken advantage of

The church of Brick n Mortar has some very devoted believers

the predicted collapse didnt happen ,we know why and we know it will in time

but right now spinning a house prices stable story isnt difficult

[geisaver]

putting property on at an overvalued price then dropping the price

to a point where it is still overvalued may trap the gullible into

thinking they are getting a bargain

customer is happy and agent achieves a higher commission than marking the price low from the start

Putting a sale sign in a shoe shop window catches my wife every time

 

I think the plan is to make their unsold properties look cheaper.

 

If say they have one on at £300k that isn't shifting putting a similar property on at £350k makes it look cheap. Then once the original one sells they reduce the £350k to £325k then put the next one on at £350k or £375k to make that look cheap. Then a floor of at least £300k is established instead of dropping the original £300k further. If they had put the second house at £300k both that and the original £300k might have been reduced.

 

An agent near me has a 4 bed that's been on for ages. They have just put a 3 bed on at the same price. The 4 bed will now sell because it looks "cheap" to someone.

[neil324]

I heard someone the other day telling me it was a good time to buy

I've known people who have bought a house in under a day

and the lack of scrutiny shown in the UK Ireland Spain Us etc etc

doesnt seem to have been that great in the past

as long as the Daily Express and Co are spinning property in a positive light

then there will be gullible people who will be taken advantage of

The church of Brick n Mortar has some very devoted believers

the predicted collapse didnt happen ,we know why and we know it will in time

but right now spinning a house prices stable story isnt difficult

 

Ive no doubt if the banks starting lending like they did before there would be a stampede to buy. The trouble is though they are not and anyone who wants to chuck their hard earned away, who is in a position to, kudos to them.

 

The price being paid now is more likely to be scrutinised more closely, hence the low volume.

 

If the EA's are happy with this volume, well good luck to them.