UK House prices: News & Views

[John Doe]

 

Anyone have the figures for the UK?

 

Here you go.

 

http://www.belfasttelegraph.co.uk/business/business-news/families-are-squeezed-by-rising-prices-and-static-wages-16192306.html

 

Note they talk about REAL incomes too

 

Real incomes per head also dropped by 0.6% in the first three months of this year compared with the fourth quarter of 2011, to £4,444 across the quarter, the lowest figure since the summer of 2005.

 

Read more: http://www.belfasttelegraph.co.uk/business/business-news/families-are-squeezed-by-rising-prices-and-static-wages-16192306.html#ixzz22ISQQl7D

[drbubb]

Here you go.

http://www.belfasttelegraph.co.uk/business/business-news/families-are-squeezed-by-rising-prices-and-static-wages-16192306.html

Note they talk about REAL incomes too

Yeah - that;s what I thought.

UK Incomes are NOT KEEPING UP WITH INFLATION:

 

EXCERPT

Families are (being) squeezed by rising prices and static wages

 

"Real disposable incomes across the UK dropped to their lowest levels in nine years in the first quarter of this year, as families were squeezed by high prices and sluggish wage growth.

Taking inflation into account, take-home income dropped by 1% on the quarter to reach £273 a week, the lowest level since 2003, an Office for National Statistics (ONS) study showed."

 

With Real Incomes falling, how can you expect UK home prices to Hold up in Real Terms?

(In other words, if you want to use Incomes as a deflator, you cannot deflate home prices by the CPI inflation measure.)

 

IMHO: The only thing that has allowed some home prices to rise, is the "financial represssion trick" of the BofE in bringing rates down to ultra-low levels, but even that trick has stopped working. I reckon that rates will soon stabilise, and at some stage, perhaps even within this year, rates will start rising again.

 

This is my fundamental argument for lower UK prices.

 

Another argument relates to Sentiment, and I think that Sentiment will become increasingly Negative after the Olympics.

[John Doe]

 

 

With Real Incomes falling, how can you expect UK home prices to Hold up in Real Terms?

 

 

Well I think we're all agreed that in "real" terms (which you just called a useless measure ) they aren't (and likely wont).

 

(In other words, you cannot deflate home prices by your inflation measure.)

 

Yes you can if you use my example. "** So if someone sold at peak in 2007, then put that money in an RPI +0.5% bond, then they wouldn’t be looking at a great discount today? Of course they would."

 

The only thing that has allowed some home prices to rise, is the "trick" of the BofE in bring rates down to ultra-low levels, but even that trick has stopped working, and at some point rates will stabilise, and they will also rise again at some point.

 

Mostly yes, (although ultra low rates by themselves haven't helped in many other countries), but it's also been a bit to do with the S.East attracting lots of foreign money etc. For the rest of the UK, prices haven't risen and I think pretty much everyone is expecting prices to fall over the coming 6 months or so.

 

However, the level of the falls could well be tempered by the latest mortgage offerings (The new funding for Lending initiative came into force today) and the possibility of the EU getting their head out of their arse (although this could result in money being shifted back into the southern EU, putting pressure on London prices).

 

As for rates rising in the foreseeable future, good luck with that one (they'll possibly come down further first). Things are gonna have to get a lot lot better before they even think about bringing them to old fashion levels (i.e not a paltry 1 or 2% rise), and by then most of the correction should be done.

[drbubb]

However, the level of the falls could well be tempered by the latest mortgage offerings (The new funding for Lending initiative came into force today) ...

 

As for rates rising in the foreseeable future, good luck with that one (they'll possibly come down further first).

You have way more confidence than I do in the monetary authorities.

 

I think it is likely that problems in Europe will soon spread to the UK - we are already seeing problems with the banks.

 

When that happens, I expect bank lending to get tighter, and rates to rise.

 

What is interesting is that UK Property prices seem to be rolling over already, before banks tighten, and before rates rise. Add the negative impact of bank tightening, and the price fall will accelerate.

[GenghisKhan]

A completely useless measure. Why use that?

(You are thinking like Bozo-the-clown, over on HPC - in other words, not really thinking.)

 

The BEST thing to use is: an index of Net Income per capita,

since that is from whence people pay their mortgages, that's what matters.

And growth in that measure has been poor, less than CPI.

 

If the prices of beans ( or gasoline, or food ) goes up fast, that doesn't help people pay a higher mortgage.

In fact, slow growth in incomes, plus rapid growth in the price of other essentials, can leave LESS money in people's hands to pay mortgages. THAT is exactly what we have seen.

 

How about an alternative view which is looking at house prices in terms of affordability. I've had an attempt here http://www.retirementinvestingtoday.com/2012/08/uk-house-affordability-august-2012.html

 

Thoughts as always welcomed.

[GenghisKhan]

...

Anyone have the figures for the UK?

I used to have them, but lost them when my computer crashed a few months ago

...

 

I had a good look at GDP per Capita and compared the BRIC's, the PIGS, the UK and the US here http://www.retirementinvestingtoday.com/2012/07/gdp-per-capita-bric-vs-pigs-vs-uk-usa.html It really is quite interesting to watch globalisation doing it's bit. We get poorer while others get richer...

[BradleyWong]

How about an alternative view which is looking at house prices in terms of affordability. I've had an attempt here http://www.retirementinvestingtoday.com/2012/08/uk-house-affordability-august-2012.html

 

Thoughts as always welcomed.

I like it

[John Doe]

How about an alternative view which is looking at house prices in terms of affordability. I've had an attempt here http://www.retirementinvestingtoday.com/2012/08/uk-house-affordability-august-2012.html

 

Thoughts as always welcomed.

 

Nice work GK.

 

Have you based your affordability index based on Net income, Gross, or even Disposable income - once essentials (not including housing) have been accounted for?

 

Just that Dr B points out that household disposable income has been hit with tax rises and commodity price rises, which could have an effect.

 

However, I would think that, while there is no doubt there would be some effect, this effect would likely be relatively small, as, although wages have been rising less than inflation during this time, such expenditures do not necessarily constitute such a large proportion of take home pay, especially when compared with mortgage/rent costs.

 

PS On a separate note, and looking at your specialism, have you got a good link to general info on SIPPs?

[drbubb]

Maybe the London housing shortage is worse than we thought:

 

 

Where are the Galactic Visitors going to stay?

 

http://www.greenenergyinvestors.com/index.php?showtopic=16613

[GenghisKhan]

Nice work GK.

 

Have you based your affordability index based on Net income, Gross, or even Disposable income - once essentials (not including housing) have been accounted for?

 

Just that Dr B points out that household disposable income has been hit with tax rises and commodity price rises, which could have an effect.

 

However, I would think that, while there is no doubt there would be some effect, this effect would likely be relatively small, as, although wages have been rising less than inflation during this time, such expenditures do not necessarily constitute such a large proportion of take home pay, especially when compared with mortgage/rent costs.

 

PS On a separate note, and looking at your specialism, have you got a good link to general info on SIPPs?

 

Hi JD

 

Apologies for the delay in replying. Your question on SIPP's prompted me to get off my backside and finish a post that I had been working on for a while. It's here http://www.retirementinvestingtoday.com/2012/08/the-cheapest-low-cost-sipp-self.html Hopefully might give some general information.

 

For the UK House Affordability work I use the ONS KAB9 datset as the earnings basis. This is the gross average weekly earnings (total pay) for the whole economy and includes bonuses. I haven't considered the increases in tax or essentials within the analysis. Including tax probably wouldn't be so difficult however including essentials would be very difficult as I would firstly need to decide what is "essential" and then build an historic dataset. Right now I don't know where I would get that type of data from.

[drbubb]

UK Halifax house price index -0.6% m/m

August 6, 2012 at 07:02 GMT

Pretty close to Reuters median poll of -0.5%.

 

Index -0.6% y/y in 3 months to July, in line with Reuter’s median forecast

 

(2)

Forexpros - The UK.’s Halifax house price index fell more-than-expected last month, industry data showed on Monday.

 

In a report, HBOS said that U.K. Halifax HPI fell to a seasonally adjusted -0.6%, from 1.0% in the preceding month.

 

Analysts had expected U.K. Halifax HPI to fall -0.5% last month.

=== ===

 

Official Report

========

Key facts

 

House prices in the three months to July were unchanged from the preceding three

months. This represented an improvement on the previous month when this measure of the underlying trend reported a fall of -0.3%.

 

House prices decreased by 0.6% in July. The decline in July followed two consecutive rises as prices continue to fluctuate on a monthly basis. So far this year, there have been four monthly rises and three falls.

 

Marginal increase in prices so far this year. The average UK house price in July 2012 was 0.8% higher than in December 2011, at £161,094. Nationally, house prices are at a very similar level to the summer of 2009.

 

 

Now I have to dig a bit, to correct for the spin

[drbubb]

UK Halifax house price index -0.6% m/m

August 6, 2012 at 07:02 GMT

===

Now I have to dig a bit, to correct for the spin

Here they are, the "unspun" numbers : -0.6%, Right in line with the official report,

Albeit the -0.60% is for "Haliwide", the Halifax/Nationwide Average

 

Mo.: Rt'mov : London : Rest of UK %chg / Nt'wide : H-oldSA Halif.SA Hal.NSA: HNindex : mom : DelusIdx

2012

J. : : 224,060 : 438,324 : 146,967 - 0.28% / 162,228 = n/a = 160,907 158,879 : £160,554 : - 0.16% :139.6% :

F. : : 233,252 : 449,252 : 149,658 +1.83% / 162,712 = n/a = 160,118 158,897 : £160,805 :+ 0.16% :145.1% :

M : : 236,939 : 455,159 : 151,853 +1.47% / 163,327 = n/a = 163,803 163,419 : £163,373 :+ 1.60% :145.0% :

A : : 243,737 : 464,944 : 152,815 : +0.63% / 164,134 = n/a = 159,883 161,180 : £162,657 : - 0.44% :149.8% :

M : : 243,759 : 469,314 : 152,803 : - 0.01% / 166,022 = n/a = 160,941 161,785 : £163,904 : +0.77% :148.7% :

J. : : 246,235 : 477,440 : 153,332 : +0.35% / 165,738 = n/a = 162,417 163,240 : £164,489 : +0.36% :149.7% :

Jl : : 242,097 : 460,304 : 151,633 : - 1.11% / 164,389 = n/a = 161,094 162,619 : £163,504 : - 0.60% :148.1% :

======================================

mom:- 1.68% : - 3.59% : Est.DI :: 147.2% / - 0.81% = n/a = :- 0.81% : - 0.38% : - 0.60% :

 

I NOTE THAT:

======

+ The -0.60% takes the trend back inside the Crash Cruise Speed range (again)

+ -0.60% is NSA, and is for July, which is normally a Seasonal peak month

+ Compares with recent July's NSA: 2011: +0.48% / 2010: +0.35% / 2009: +1.37%

 

Overall, I would say "another Falling sequence has begun!"

Strap on those seat belts, and we will see what we get

[drbubb]

PRESS COMMENTS

 

The three-month change, which is regarded as a better indicator of the state of the housing market, showed prices remained flat. Halifax now puts the average value of a UK home at £161,094 – about the same as in the summer of 2009.

 

 

The bank's housing economist, Martin Ellis, said the ongoing stability in prices was a result of a lack of activity in the market. According to the Royal Institution of Chartered Surveyors the ratio of house sales to unsold properties has changed very little over the past 21 months.

 

Ellis said: "Looking forward, we expect little change in prices over the remainder of 2012, so long as the economic climate in the UK does not worsen substantially."

 

However, Howard Archer, chief UK economist at IHS Global Insight, said the latest round of price data heightened his belief that the market would fall further over the remainder of 2012.

 

"With the economy slumping in the second quarter, and the outlook highly uncertain amid worryingly strong domestic and international (mainly eurozone) headwinds, we believe there is a very real and mounting danger that house prices could fall by appreciably more than 3% from current levels."

 

Property website Rightmove said homebuyers and sellers were locked in a stand-off over prices, which could lead to a further fall in sales over the coming months.

=== ===

 

http://www.guardian.co.uk/money/2012/aug/06/house-prices-fall-halifax

 

Archer may be the least-compromised, and I think he is calling it right

[John Doe]

 

Overall, I would say "another Falling sequence has begun!"

Strap on those seat belts, and we will see what we get

 

Yep, going into winter that's what happens in these new austere times.

 

Probably a few percent down by xmas. Hardly crash territory though, so could probably get away without a seatbelt

[drbubb]

Yep, going into winter that's what happens in these new austere times.

 

Probably a few percent down by xmas. Hardly crash territory though, so could probably get away without a seatbelt

June peak, with falls July through Jan., is 7 months:

 

+ at 0.50%, that's : - 3.5%

+ at 0.75%, that's : - 5.3%

+ at 1.00%, that's : - 7.0%

 

More than 1.0% per month would likely suggest some sort of crash is underway, if only a minor one.

But I do not rule out something worse than a 10% drop in the months to come.

[John Doe]

June peak, with falls July through Jan., is 7 months:

 

+ at 0.50%, that's : - 3.5%

+ at 0.75%, that's : - 5.3%

+ at 1.00%, that's : - 7.0%

 

More than 1.0% per month would likely suggest some sort of crash is underway, if only a minor one.

But I do not rule out something worse than a 10% drop in the months to come.

 

Now Van will be on your case for not checking the MoM last year to see what actual falls will be needed for a decent YoY

 

(Besides, I though 20% YoY was the generally accepted benchmark for a proper "crash" (0therwise I believe it's known as a slow motion train wreck )

[John Doe]

Piece on which house price index is the best on Money Week

 

 

http://www.moneyweek.com/investments/property/uk/which-house-price-index-is-the-best-60003

 

And the winner is.............. Land Reg!

 

(As has always been recommended by some here )

 

Also, is that GEI's Van at comment #2?

[Van]

Also, is that GEI's Van at comment #2?

 

Yes.

[drbubb]

Piece on which house price index is the best on Money Week

 

http://www.moneyweek.com/investments/property/uk/which-house-price-index-is-the-best-60003

And the winner is.............. Land Reg!

(As has always been recommended by some here )

Also, is that GEI's Van at comment #2?

The Land Reg. figures come too late to be of much use to anyone but historians.

If you want to use a figure for decision-making, you need something more current. To smooth out "noise", I use an average of the NSA figures posted by Halifax and Nationwide, and call that "new" index Hali-Wide or the H&N Index. You can find a database here: TinyUrl dotcom / GEI-data

 

I have found that the HaliWide Index "charts well". In other words, it tends to establish trends, which when broken often prove meaningful.

 

To get a more up-to-date sense of the market, I also watch the charts of the UK builders, and especially Barratt and Persimmon.

== ==

 

I did like this comment from the article:

"The trouble is house prices are still too high. My colleague Phil Oakley has argued that, although propped up by low interest rates, the housing market is 'rotting from within'. "

 

...and if you go to that article, you will discover some alarming facts, including this one, about interest-only mortgages:

 

"These mortgages are a big problem for lenders. They account for 36% of all mortgages outstanding (43% if you include buy-to-let mortgages). During the next ten years, 1.5 million interest-only mortgages with a value of £120bn (10% of all outstanding mortgages) are due to be repaid. How?"

[John Doe]

Hi JD

 

Apologies for the delay in replying. Your question on SIPP's prompted me to get off my backside and finish a post that I had been working on for a while. It's here http://www.retirementinvestingtoday.com/2012/08/the-cheapest-low-cost-sipp-self.html Hopefully might give some general information.

 

For the UK House Affordability work I use the ONS KAB9 datset as the earnings basis. This is the gross average weekly earnings (total pay) for the whole economy and includes bonuses. I haven't considered the increases in tax or essentials within the analysis. Including tax probably wouldn't be so difficult however including essentials would be very difficult as I would firstly need to decide what is "essential" and then build an historic dataset. Right now I don't know where I would get that type of data from.

 

Hi GK,

 

Thanks for the info, and the SIPPs link.

 

Bit busy myself too at the moment, but will give it the time it deserves later week.

 

Thanks again.

JD

[drbubb]

NOT LOOKING GOOD for the Interest-Only People

 

House price fall hits hopes of remortgaging for millions

 

By Laura Shannon .. 7 August 2012

 

Falling house prices are blocking millions of homeowners from cheaper mortgages as lenders knock off thousands of pounds during a property valuation.

 

A so-called ‘down-valuation’ by a lender can wipe out thousands of pounds of equity at remortgage — and also trap borrowers desperate to move to a bigger home.

 

When you decide to switch lenders for a better mortgage deal, the bank or building society arranges a new valuation on your home to check it’s worth enough to let you borrow the sum you need.

 

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2185126/House-price-fall-hits-hopes-remortgaging-millions.html#ixzz22uOlAx00

 

Anecdote:

Gilly Vines, 36, and her husband Richard planned to sell their two-bedroom flat in Exmouth, Devon, now they have two young children, and buy a house with a garden.

 

But the flat wouldn’t shift, so Mrs Vines applied for a let-to-buy mortgage, which allows homeowners to borrow for a new home while renting out their old property. Yet the valuation on their flat was £10,000 less than expected and they no longer qualified for the deal.

 

‘It’s frustrating,’ says Mrs Vine. ‘Different agents valued it at around the same price, but the surveyor said it was much less’ — weakening their deposit from 22 pc to 15 pc. They are now staying put until they build up more equity.

== ==

 

The bank probably did her a favor in turning her request down.

Else she might have wound up own two homes in a falling market.

In six months, she might be saying: "Thank goodness for the bank's prudence."

 

/source: http://www.dailymail.co.uk/news/article-2184694/House-prices-fallen-20-past-5-years-leaving-millions-homes-worth-paid-them.html

[drbubb]

US based investors are being suggested to...

 

Sell your gold, buy a house

 

FT: Cash out of gold and send kids to college

 

According to the website pricedingold.com, gold is at a 120-year high (at least) relative to US house prices. On the pricedingold.com numbers, you should cash out of gold, buy a nice house, hire some workers, send your kids to college and eat big breakfasts, writes Peter Tasker, a Tokyo-based analyst with Arcus Research

 

/see: http://www.ft.com/cms/s/0/312bf416-d1a7-11e1-bb82-00144feabdc0.html#axzz22nn7B5nh

[drbubb]

Most London home buyers 'think prices are unfair'

 

LLB: 6 August 2012

 

Around two-thirds of people looking to buy a home in London believe prices in the capital are above what is “fair and reasonable”, a survey has found. Some 65% of people living in London believe prices are higher than what is fair. Asking prices in the capital have risen on the back of strong interest from foreign buyers.

. . .

MyLondonHome.com director Andrew Griffith said: “Around 50% of buyers are from overseas and one of the reasons the property market is as healthy as it is in London is because of the number of foreign buyers compared to the rest of the UK.

 

“It pushes prices above what many typical Londoners may be willing to pay.

 

“It is a reflection of the amount of interest in central London, which has always been there but with the Olympics and the Jubilee celebration it is greater than ever.”

 

Griffith noted that other cities which have hosted the Olympic Games had seen property prices fall after the event left town.

 

He said: “If you look at other Olympic cities, such as Beijing, Athens and Sydney, their property markets have taken a dip after the Games. Whether that happens here in London remains to be seen.

 

/more: http://www.londonlovesbusiness.com/property/residential-property/most-london-home-buyers-think-prices-are-unfair/3134.article

[GenghisKhan]

My regular look at UK house sellers attempting to look for the Greater Fool. Key chart:

With the full article here http://www.retiremen...rice-index.html

 

Today sellers still think there houses are worth what they were marketing them for at the peak. Unfortunately, these prices are 40% above what they seem to be selling for.

[TrueNorth]

Great analysis GK.

 

And interesting and useful thoughts from Dr B on the overall trend and the builders as a bell-weather. Thank you.