UK Property - The former HPC addicts' thread

[drbubb]

SOME US markets are still hot...

 

Wenatchee is not the only hot spot bucking the national trend. Markets in the Pacific Northwest, Utah and Colorado still boast annual appreciation rates of 10%-plus, along with a scattering of bright spots in the South and even in the East and the Midwest.

 

How to account for these exceptions?

 

For the most part, the iron laws of supply and demand explain what's going on, with the added element of wild and crazy speculation. If you understand how such factors are playing out in these red-hot markets, you'll be better able to anticipate changes, and develop smart housing strategies, right at home.

 

It's the Demand, Stupid

The basics haven't changed. Job growth and rising incomes boost demand for, and prices of, housing.

 

Take Grand Junction, Colo. (pop. 140,000). The area is home to one of the country's richest natural gas fields, and local energy companies have recruited new employees, ballooning the city's work force by 26% since 2002 to about 63,000. The median price of a house in Grand Junction soared 65% in the past five years and 14.3% in the past year.

 

/see: http://money.cnn.com/2007/11/30/real_estat...oney_topstories

[drbubb]

Has the housing bubble burst?

The number of first-time buyers has fallen to its lowest since 1980, according to figures from the Halifax.

 

The bank says an estimated 300,000 buyers entered the property market in 2007 - 44% less than five years ago.

 

UNQUOTE: http://newsforums.bbc.co.uk/nol/thread.jsp...=20071222150833

 

= =

 

That the expected action for a peak year.

 

At the bottom, I would expect to see much lower prices, better affordability,

and the BTL brigade capitulating and selling out to FTBers

[Steve Netwriter]

This reminds me of something.

 

Patience

 

I'm amazed how many people watch a trend for years, and then think a small correction is a good buying opportunity. Things take time. It requires patience. Economic things take months and years, not the days people tend to live in.

 

Hopefully no one will jump into this housing market thinking they will get a bargain because of the small drop so far.

Steve

[drbubb]

This reminds me of something.

 

Patience

 

I'm amazed how many people watch a trend for years, and then think a small correction is a good buying opportunity. Things take time. It requires patience. Economic things take months and years, not the days people tend to live in.

 

Hopefully no one will jump into this housing market thinking they will get a bargain because of the small drop so far.

Steve

 

You are right.

I remember jumping in and buyings some gold about 1986-7 thinking after six years of correction,

and a big fall, the market was set to head higher again.

 

I talk about a "tradable low" in 2010-13, but a rally from a low then might only be good for

a year or two of gains. It's possible that the full correction may last a decade or longer,

because:

 

+ The Gap between values, and what people can really afford is monumental,

and may take a long time to correct

 

+ The UK's poor demographics (ageing population) will kick in as a negative sometime

after 2010

 

+ The UK is running out of North Sea oil, so if oil goes to $200 or so, then there will be a

fair amount of cost push inflation, this will help to keep interest rates high. I think this

means that "housing share" of people spending will have ton shrink over the next decade.

People will be downsizing, and moving away from certain suburbs that require long and

expensive commuting.

[drbubb]

PLAYING CYCLES... (from GHPC):

 

Voodoo says:

"you LIVE in HK and know the market - its difficult and risky to invest abroad without sufficient knowledge, contacts and scale."

UNQUOTE

 

Sure. But my point was about the power of cycles, not an invitation, or worse yet

a recommendation that a UK based investor should invest here (HK) too. It would be hard

to get a loan, and investing here using 100% equity is not wise, given the weakness

in the dollar. I do suggest that you might want to invest more time in studying

cycles, and learning how to invest in harmony with them. A one view (bullish?)

fits all times approach, will just get you into trouble.

 

Moving from market to market, to catch the sweet spot in each market's cycle is

a great way to multiply your capital fast, if you have developed the expertise to do

that. Moving from the UK to Germany or Japan would have be a smart move.

But so was this:

 

Uk Property >(in 2001)> Gold >(in 2007)> HK & German property.

 

This time, I have made such a cyclical shift, without taking all my money

out of gold mining shares. That is easier to do in 2007 that it was in 2001,

because I have more capital to work with.

 

I wonder what other worthwhile cyclical opportunities are out there?

For instance, when will it make sense to invest in Florida property. I have some

views on this question, but my answer is not well-researched yet.

[HollandPark]

House price forecasts-------- : Predicted : Estimated : Predicted :

==================.: for 2007.. : for 2007. : for 2008. :

Capital Economics............... : .. 5.5% .. : . 6.5% .. : . -5.0% . :

Council of Mortgage Lenders : .. 7.0% .. : .. - - - - .. : .. 1.0% .. :

Halifax/HBOS...................... : .. 4.0% .. : . 5.0% .. : .. 0.0% .. :

Hometrack.......................... : .. 4.0% .. : .. - - - - .. : .. 1.0% .. :

Knight Frank........................ : .. 6.0% .. : . 8.0% .. : .. 3.0% .. :

Lombard Street Research..... : . 10.0% .. : . 6.0% .. : .. 3.0% .. :

Morgan Stanley................... : ... - - - - .. : .. - - - - .. : -10.0% .. :

Nationwide.......................... : .. 7.0% .. : . 6.9% .. : .. 0.0% .. :

Savills................................. : .. 7.0% .. : .. - - - - .. : . 3.0% .. :

- source: The Sunday Times

 

“The housing market has turned,” said Sophie Brodie in The Daily Telegraph.

 

Nationwide has now reported the first slide over two consecutive months for seven years, while the Halifax index,

down 2.4% since August, has fallen for three months in a row for the first time since the end of the last slump. Leading

indicators, such as buyer enquiries, are signalling a larger fall in demand than that seen in 2004-2005, when house-price

growth slowed sharply, while mortgage approvals are 40% down on this time last year, according to the British Bankers’

Association.

 

Halifax and Nationwide both expect prices to stagnate this year – “about as close as anyone with a vested interest

could ever come to predicting a drop”, noted Chris Giles in the FT – while Morgan Stanley foresees a 10% decline.

Why the market is vulnerable Optimists hope that the market will simply level off and then rise again, but

that ignores “the past 60 years of peaks and troughs”, said Lex in the FT. There is certainly scope for an early 1990s-

style adjustment, noted Capital Economics. Mortgage affordability, rental yields and the house price/earnings ratio

collectively show that the market is overvalued by about 25%. And with two key drivers of higher prices in recent

years – easier credit and demand from buy-to-let investors – “likely to be absent for the foreseeable future”, further

falls are on the cards. With scant signs of easing in the credit markets, mortgage credit is henceforth likely to be both

more expensive and in shorter supply, said Capital Economics. Higher risk aversion and falling lenders’ margins owing

to increased funding costs means that we can’t count on rate cuts by the Bank of England being fully passed on, and

lenders are liable to remain picky.

 

What next?

Buy-to-let mortgages are dwindling amid tighter credit, and the proportion of landlords selling properties when

tenants’ leases expire rose to 6.5% from 6.1% in the third quarter, a three-year high. And once capital-gains tax

drops in the spring selling is likely to rise, according to Jeremy Leaf of the Royal Institution of Chartered Surveyors.

Further clouding the housing outlook is the economic slowdown and possible recession as debt-soaked consumers pull

back and higher credit costs hit businesses; unemployment will climb to a ten-year high, reckons the Chartered Institute

of Personnel and Development. Repossessions are already expected to jump to 1990s crash levels next year, as tighter

credit means many borrowers on expiring short-term fixed rates will struggle to remortgage, putting downward pressure

on prices. The property boom, then, is well and truly over.

 

(from MoneyWeek)

[drbubb]

FP and others on:

 

The Biggest House Price Falls ...

 

Falls 1 : Falls 2 : Falls 3 : Recession looming?

 

Tonight with Fiona Foster ITV1 January 2008

[Steve Netwriter]

Who is this "Jonathan Davis" chap anyway

 

Brilliant. Thanks for posting those.

 

Jonathon, is it maybe time to update your website picture?

 

 

I also think this should be mentioned:

 

Bank charges and The OFT - Bank Charges Anthem - "I fought the Lloyds" by Oystar

http://www.charteredfinancialplanner.co.uk...ank_charges.mp3

 

No. 25 in the charts

[Vicarious]

Property prices are falling at rates not seen since the 1990s housing recession

 

The Royal Institution of Chartered Surveyors (Rics) said 49.1% more surveyors saw price falls in December than reported a rise.

 

This was the gloomiest figure since November 1992.

[drbubb]

"This was the gloomiest figure since November 1992."

 

16 years ago.

It's a cycle, yes?

[Haggis]

I just returned from a visit to the rellies in the UK. There has been a remarkable shift in media coverage and private sentiment since my last visit in June. I had 3 people do a volte-face in respect of my views on the the property market being correct: They had solicited my views (I sure didn't offer an opinion!!) about a year ago and caustically dismissed my projections as I was at odds with their rosy view of things.

 

It was clear that there is very little comprehension regarding the fundamentals of the property market, however there is a creeping realization that the good times are well and truly over. Most are clinging to the soft landing scenario, but their ideas about what is driving the market are simplistic nonsense at best. Further, I get the sense that there is an inherent panic in the BTL crowd about to be unleashed when their beloved cash cows prove to be dogs. Monthly rent deficits, declining capital values and withering credit supply will gut this market very quickly. It's not that these people are stupid, I just think they've been lazy investors - none of those I spoke with had read a single book on the subject. They're mostly from the 'slogan-based' school of investment and shockingly ignorant of basic maths.

 

And that's how fools and their money are creatively parted.

[drbubb]

It's not that these people are stupid, I just think they've been lazy investors - none of those I spoke with had read a single book on the subject. They're mostly from the 'slogan-based' school of investment and shockingly ignorant of basic maths.

 

And that's how fools and their money are creatively parted.

 

RIGHT.

It's shocking how little work people do before investing huge sums-

when they banks are so eager to lend !

 

= =

 

(from GHPC):

QUOTE (Beaker @ Jan 17 2008, 08:27 AM)

As painful as it is to say, rents in my area of affluent Hertfordshire are definately on the up, and only in the past 12 months.

UNQUOTE

 

That may be true ... in the UK now.

It was true at the beginning of the slide in the USA too.

 

But now that the more rapid slide has started, houses that were being held for sale,

are being forced into rental. And people are "hunkering down" for the recession.

That means :

+ Rising supply of properties for rent

+ Less demand, as people live together, to save money

 

Give it a year, and we are likely to see the same development in the UK

[Yogi]

"Less demand, as people live together, to save money"

 

This is an important point, rarely made, and never grasped by the VIs. The BTL speculators have it in their heads that if prices drop and the market stagnates, rental demand must rise (and hence rents with it). There is of course no guarantee of this - especially in recessionary times (or simply fear of hard times). Many people have a large degree of flexibility over how much property they "consume" - how many to share with, whether to live with parents, get a lodger etc.

 

I suspect that aggregate demand for property (renting+buying) is much more volatile than many believe - even just due to sentiment shifts. When you add in the direct effects of an increase in unemployment and a small army of East Europeans potentially heading home due to the plummeting pound and stupid cost of living, and there could be a massive shift.

 

Bears will enjoy this from Prime Location... http://media.primelocation.com/content/pri...ndex_200712.pdf

 

Indicates supply of housing for sale and rent both increasing, and prices and rents falling. This includes London and prime South East. Look at the massive rise in stock levels - more price falls surely on the way. You hear alot of nonsense from many bulls about "flight to quality", "London / my area will be immune", "my rents are rising" etc etc. This report clearly pisses all over their lame wishful thinking with a few hard facts about where the market is really going. When we get the usual Spring flood of properties onto the market, things should get really interesting.

[drbubb]

FALLING FAST...

 

Value of a house is plummeting by £120 every day

 

The asking price of a typical home has plunged more than £11,000 since October, research reveals today.

 

Prices are dropping around £120 a day with experts warning that the year ahead looks bleak.

 

The report, by Britain's biggest property website Rightmove, reveals that prices have fallen for the third consecutive month.

 

They have dropped by a total of nearly 5 per cent since October, including a 0.8 per cent decrease this month. It is a cruel blow for anybody who recently stretched themselves to the limit to buy a home.

 

The asking price of an 'average' home was £241,642 in October - but it has since dropped to only £230,428, a loss of £11,214.

 

/see: http://www.housepricecrash.co.uk/forum/ind...showtopic=66264

[frizzers]

Good article here:

 

You need to click on politics on the left then Gordon Brown: The Architect Of Britain's Housing Crisis

 

http://www.vernoncoleman.com/main.htm

[No6]

These two articles go hand in hand.

 

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

 

Home ownership dips to decade low

 

Home ownership in England fell for the second year in a row last year, sliding to its lowest level since 1998, according to government statistics.

 

The number of owner-occupiers dropped by 83,000 to 14.54 million, taking the rate of home ownership down to 69.8%.

 

http://news.bbc.co.uk/1/hi/business/7242492.stm

 

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

 

YOUNG SPEND 35% OF PAY ON MORTGAGE

 

First-time buyers are spending more than a third of their take-home pay on their mortgage, official figures revealed yesterday.

 

In a deeply worrying sign, it is the highest level since the last property crash in 1991. Financial advisers warned that massive mortgages are 'a disaster waiting to happen'.

 

The figures reveal the crippling financial pressure on young buyers. On average, their repayment mortgages swallow up 35% of their disposable monthly income.

 

Rocketing bills for other household expenses such as energy and food - where some prices are rising at their fastest since records began - pile on the pressure.

 

The decade-long house price boom has forced first-time buyers to take out record mortgages. Typically they need to borrow £118,000 compared to just £71,000 five years ago. This is an increase of 66%, far outstripping the typical annual pay rise of 3%.

 

Figures published yesterday by the Council of Mortgage Lenders show that the interest on first time buyers' home loans eats up 20.7% of their gross income. But this is not a true reflection of the total - and often overwhelming - costs which they face.

 

If take-home pay, rather than gross income, and total mortgage repayments, including capital as well as interest, is used, the percentage soars to 35%.

 

http://www.thisiscroydontoday.co.uk/displa...;pNodeId=250189

[drbubb]

In a deeply worrying sign, it is the highest level since the last property crash in 1991.

Financial advisers warned that massive mortgages are 'a disaster waiting to happen'.

 

The "massive mortgages" go hand-in-hand with:

 

+ Overvalued property prices,

+ Massive complacency towards the property market - belief that prices will not fall

[HollandPark]

THe signs are bad

[El Dali]

THe signs are bad

 

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

 

Indeed. I think Harrisons 18 yr cycle will be adhered to and this year will see the sea-change. Even the average 'man on the street' is now admitting there will be falls (....just small ones mind). What most don't realise is the way that years and years of unabated credit expansion have effectively magnified this cycle into craziness.

There's gonna be carnage!

 

One thing i've been wondering about is what effect this will have on rental prices in the UK:

Obviously with prices falling, plenty of people trying to sell, competition between landlords drives rents down, but if the supply of rental properties is dwindling, will this effect be strong enough to keep prices up?

Will London bed different from the rest of the country?

 

What are your opinions?

[drbubb]

One thing i've been wondering about is what effect this will have on rental prices in the UK:

Obviously with prices falling, plenty of people trying to sell, competition between landlords drives rents down, but if the supply of rental properties is dwindling, will this effect be strong enough to keep prices up?

Will London bed different from the rest of the country?

 

What are your opinions?

 

I reckon that RENTS WILL FALL in many markets.

Why? Because demand will shrink faster than supply. Rental demand will shrink as people decide

to economise and share flats, rather than get their own property. Young adults will be slower to move

out on their own, and fewer immigrants will come to the UK. Some wealthy people may flee.

[drbubb]

I work for a high street lender - specializing in Home owner loans. The automated decision tools that the computer uses to decide on loan applications now only approves up to 90% LTV, anything over this needs to be carefully looked at, the irony is that we are supposed to be a subprime lender!

 

Most of the loans that we provide are consolidation loans - consolidating credit cards and other finance into home owner loans.

 

Another interesting fact ..... Home owner loan applications to websites are up by 85%.

 

And yet the number of home owner loans that are going through are FALLING.

 

These people are living on borrowed time ...... no longer able to refinance their irresponsible borrowing on Credit Cards.

 

Very interesting market info,

which I will post to the UK property thread. Thnx, R

[drbubb]

Old, but needs posting here

 

 

Not much sign of a "Spring Bounce" it would seem.

When are all those stale properties going to flood back onto the market?

 

This article suggests it has started already...

 

Press release: 12 March 2008

City high rollers are offloading their property investments as panic selling grips the housing market, according to the latest Asking Price Index Report from Home.co.uk.

 

Pessimism in the City concerning the property market and the wider UK economy has ramped up the number of premium properties entering the market, particularly in Greater London where a staggering 23% of the current housing stock for sale was rushed to market in the last 14 days.

. . .

Many City workers are now expecting redundancies. A recent report by the International Financial Services London research group suggesting 10,000 City jobs may be lost over the course of 2008 due to the credit crunch.

 

As with the rest of the country City property investors have also been hit by higher mortgage costs, with mortgage firms tightening lending criteria and the Bank of England keeping interest rates on hold this month.

 

Shephard says: "They are bracing themselves for a tough year and don't want to risk making painful near-term losses on property. They want out."

 

 

/more: http://www.home.co.uk/company/press/City_W...nic_Selling.htm

[drbubb]

...even the Piggies are talking about the mess in UK property...

 

See above - Marsden House Bolton. Looks nice?

 

This was conceived and built then sold on..then sold on..then sold on..before the amateurs got in on the act and got shafted big time! The brains behind it made millions..no exaggeration..without getting his hands dirty..hes off now!

 

 

I know the guys behind it. all perfectly legal, they researched the market and knew that armchair southern dinner party set investors would buy here. I was contacted many times to give advice pre purchase and I gave my best advice..walk away..and keeping walking

 

I know the place well. they were overpriced by the time they came to the amateurs, in a bad part of town, hardly any parking, not enough rental demand etc etc.

 

The marketing was good though......

 

Result today?

 

A very experienced bolton letting agent tells me it is a disaster..no exageration.

 

There are many dss and asylum seekers in there and people are hanging their washing over the balconies to dry it. Last week there was a knife fight outside with 2 residents..blood ended up on the pavement and in the lobby....hmmm nice.

 

There's blood on the streets there too, hypothetically speaking also...that of the 'investors' who are trapped and cant sell.

 

/see: http://www.singingpig.co.uk/forums/1/441398/ShowThread.aspx

[jerpy]

All this talk of a U.K property crash "American style", not according to the telegraph's Liam Halligan

 

"It's reckless to live one's life on the assumption that house prices will keep spiralling upward. And, as price growth slows, then flatlines, and perhaps goes slightly negative for a while, a few profligate folk will feel financial pain.

 

But - I repeat - there is a world of difference between a lower rate of growth and a 30 per cent drop in house prices themselves. And while headline writers often miss this, a fall in the rate of growth is what we're now seeing".

 

So this is a perfectly noraml correction of over hyped markets? Hmm, but why are we in the U.K so different? Well Mr Halligan argues

 

"while US house prices are dropping fast (by 10 per cent a year on some measures), the market here is very different. For one thing, sub-prime mortgages have recently accounted for around a quarter of new US home loans - a share six times greater than here. In the States some disgraceful loans were extended, with deeply punitive clauses applying after low introductory "teaser" rates.

 

That's one reason mortgage arrears are now rising fast in America - but, again, not in Britain. The US is also suffering from sharply rising unemployment, causing the distressed sales that spark plunging house prices. Unemployment in Britain, in contrast, continues to fall.

 

But the main difference is that the US has recently hosted a massive housebuilding boom. So have Ireland, Spain and other countries experiencing sharp price falls - because home supply exceeds demand.

 

Here, the opposite applies. We need at least 250,000 new houses a year to meet the needs generated by smaller families, immigration and so on. Yet housebuilding slumped to 162,000 in 2001 - the lowest since 1924. And last year the figure was still only 175,000 - with the trend now, once again, pointing down. And that ongoing mismatch between supply and demand is likely to keep house prices relatively firm".

 

Sorted then, we need more homes, so there just can't be a massive drop in price....or can they?

 

See full article for those interested

 

http://www.telegraph.co.uk/money/main.jhtm...3/ccliam123.xml

 

Riggers

[No6]

For one thing, sub-prime mortgages have recently accounted for around a quarter of new US home loans - a share six times greater than here. In the States some disgraceful loans were extended, with deeply punitive clauses applying after low introductory "teaser" rates.

 

That's one reason mortgage arrears are now rising fast in America - but, again, not in Britain. The US is also suffering from sharply rising unemployment, causing the distressed sales that spark plunging house prices. Unemployment in Britain, in contrast, continues to fall.

 

http://www.telegraph.co.uk/money/main.jhtm...3/ccliam123.xml

 

Riggers

I think the writer is in denial because the extent of sub-prime, let's call it loose lending, self cert fraud, lots of "special deals", is really not known in the UK. The VI's in the UK seem to believe that because it is not called sub-prime, the problem therefore does not exist but it does, it just has another name.

 

In his next article - The Maestro of the sub-prime mayhem, he says;

 

Having created the biggest housing bubble in history, it was then Greenspan who failed to clamp down as Wall Street rolled-up the toxic loans and wrapped them in fancy packages, before selling them on – so spreading the sickness elsewhere.

Greenspan played his part in creating it, but it is not in the US. The biggest housing bubble in history is the UK one of the last 10 years, the US bubble is small by comparison.