UK Property - The former HPC addicts' thread

[All Seeing Pie]

Yet housebuilding slumped to 162,000 in 2001 - the lowest since 1924

I don't buy this statistic. I've never seen so much building going on in the UK so how can the number of new buildings be at a all time low? Someone want to tell me what I'm missing? Does an apartment block count as one building or 20, if it counts as one then I may be able to understand the figure.

[Itinerant Wanderer]

I thought this was alarming for UK homeowners such as my sister who has second loans if this were to come to the UK too...

 

http://www.nytimes.com/2008/03/27/business...nted=2&_r=1

 

And I couldn't help laughing at the 100% reversal of a few years ago in this:

 

http://business.timesonline.co.uk/tol/busi...icle3632616.ece

 

Read it and tell me you aren't giggling if you are an STR...

[drbubb]

...from the 16-18 year cycle thread...

 

Good thread.

 

Looking at the market now...he may have c\alled it right...chance or not? So the bottom in 2010??

 

I wonder do credit cycles/supercycles affecr the regularity of these subcycles???

 

YES.

and using my own 16 year cycle, I expected a low in the UK in 2008-2010, and was ridiculed for it!

Now I am more in tune with Harrison's 18 years, and am expecting 2010-13. But a 2010 low,

as I originally mentioned all those years ago on HPC still looks possible.

 

But after the low, do not expect a big upcycle like we saw in 1994-2007

 

Look at the long downtime after the 1948 high

 

Partly what happened then was, incomes got hammered into 1948, which made the ratio look high,

and then the incomes started rising again, I reckon

[Whosthedaddy?]

http://news.bbc.co.uk/1/hi/business/7317303.stm

 

House prices continue to slide, surely the general public must now begin to see what's going on around them.

 

but perhaps sadly not....my boss yesterday was telling me about his nanny and her boyfriend borrowing 4x joint salary to buy their first home, the best interest rate they could obtain was 5.8% on a £220,00 loan. Bonkers!

But then since they are only in their twenties, they've only ever seen house price rises - no concept of a bear market. It's a real shame.

[bobbio]

Bubb, a few years ago in those heady HPC days, you used to talk about crash cruse speed (originally you stated -1%/month) then you later revised it to -0.5%/month and looking at the latest Halifax data (-0.6%) on top of the four falls before. It now looks like that the crash curse speed has now finally kicked in. Coupled with the builders index flat lining on the floor and the BOE approvals dead, the crash cruse speed may pick up in the coming months.

 

Although I wouldn’t be surprised if we get the occasional monthly blip up on the way down.

[bobbio]

I’ve taken the data from CML data and compared the number of repossession actions started and how many completed. As you can see the banks are currently taking it easy on the population currently at 20%. Average of 37%, highest at 59%. Also I know the data set isn’t huge back you can ague that the average is taken over a complete cycle.

 

With the credit crunch starting to bite and the banks hurting how much longer before they start turning nasty again. Returning to the average we would have 50895 repossessions last year.

 

I would say the percentage went so low in the naughties because people where able to re-mortgage easily on the back of rising houses and the overall virtuous (viscous, depends how you look at it) circle this generated within the wider economy.

 

Now that HPI has flat lined (and the wider economy not far behind it), this in turn with the banks hurting IMO will lead to this figure returning to mean and then overshooting, which will reinforce the fall in prices.

 

Column 1 -Year

Column 2 - Properties taken into possession

Column 3 - Possession Actions started

Column 4 - % of orders into possessions

 

1990- 43,900- 91,300- 0.48

1991- 75,500- 186,649- 0.40

1992- 68,600- 142,162- 0.48

1993- 58,600- 116,181- 0.50

1994- 49,200- 87,958- 0.56

1995- 49,400- 84,170- 0.59

1996- 42,600- 79,858- 0.53

1997- 32,800- 67,073- 0.49

1998- 33,900- 84,836 0.40

1999- 30,000- 77,885- 0.39

2000- 22,900- 70,430- 0.33

2001- 18,300- 65,862- 0.28

2002- 12,000- 63,203- 0.19

2003- 8,500- 65,886- 0.13

2004- 8,200- 77,250- 0.11

2005- 14,600- 114,764- 0.13

2006- 22,400- 131,230- 0.17

2007- 27,100- 136,241- 0.20

 

Average 0.37

If average % returns 50895.02

At 50% 65615

 

 

The number of actions started is already in Crash territory, how longs before the banks turn nasty?

[drbubb]

Bubb, a few years ago in those heady HPC days, you used to talk about crash cruse speed (originally you stated -1%/month) then you later revised it to -0.5%/month and looking at the latest Halifax data (-0.6%) on top of the four falls before. It now looks like that the crash curse speed has now finally kicked in. Coupled with the builders index flat lining on the floor and the BOE approvals dead, the crash cruse speed may pick up in the coming months.

 

Although I wouldn’t be surprised if we get the occasional monthly blip up on the way down.

 

CCS. Yes, we are seeing that now.

 

You know, it is funny...

I originally came up with the concept, "Crash Cruise speed" to help people understand that "a crash" in property

was not something that would be over-and-done in the matter of a month or two, but would last for years

(probably 2-3 years), and only in hindsight would be seen as a huge crash.

 

It is underway now in both the US and the UK, and people can see that more clearly. But the sinsters on HPC

twisted my words, and got too much focussed on whether it was 1.0% or 0.5%. It was the concept of month

by montn "gradual" declines that mattered, not the exact speed. I do think that 0.5% falls will morph into falls

as big as 0.75% or 1.0% a month as the slide picks up pace. Bit they may not stay that big for long.

 

[nbarter]

So, tomorrow (Monday) is the long awaited crunch day. Tax changes come into force Monday. Capital gains tax on buy-to-let investments will be levied at a flat rate of 18%, less than the current lowest rate of 24%. So, many have resisted selling......'till now. So we could see a whole load of properties coming on the market tomorrow that puts big downward pressure on prices. Will take a while no doubt for data to come out to see whether this is the case, but fingers crossed.

[nbarter]

Interesting article on the UK housing market..a few quotes:

 

Where did it all end? For Dix - like hundreds of thousands of others - it was under the hammer at her local auctioneers. She thought the flats she bought for a total of £300,000 three years ago, on a 95 per cent mortgage, would be worth £450,000 by now. Instead, the two were sold last month for £250,000....

 

At the Vista development in central London, one flat which was bought for £250,000 in 2005 was put up for sale at £175,000. It got no takers. No one was interested, either, when the price was cut to £150,000, and the property remains unsold...

 

Economists at the London-based consultancy Fathom have conducted the most detailed comparison between the British and US housing markets, using a study by the Boston Federal Reserve that tracked 1.5?million borrowers. They found "obvious parallels" between buy-to-let and sub-prime: both kinds of homeowner paid relatively high rates of interest and both were more likely to default. More worrying, the British housing market, and the buy-to-let sector in particular, is in many ways in a worse state than the US. Britain has witnessed a tripling in house prices over the past decade and has the highest level of personal debt among G7 countries. Our average household debt is more than 160 per cent of disposable income, and we are, according to figures from Experian, spending more of our income servicing our mortgages than ever before.

 

Will buy-to-let rock the property market?

By John Arlidge

Last Updated: 1:21am BST 06/04/2008Page 1 of 2

 

Where did it all begin? For Janie Dix - like hundreds of thousands of others - it was watching too many episodes of Location, Location, Location and Sex and the City. "Buying and renting property seemed so easy and I fancied a bit of glamour," recalls the 32-year-old marketing consultant from Manchester. "So I bought two apartments in Leeds: one for myself and one to let."

 

Financial Crisis in full

Mortgage squeeze: How is it affecting you?

£800 fee as lenders cash in on credit crisis

Where did it all end? For Dix - like hundreds of thousands of others - it was under the hammer at her local auctioneers. She thought the flats she bought for a total of £300,000 three years ago, on a 95 per cent mortgage, would be worth £450,000 by now. Instead, the two were sold last month for £250,000. "The rent didn't cover the mortgage and since the value had gone down I couldn't borrow any more," she says. "Looking back, I should have checked out market rents or prices with local agents. I keep asking myself, 'How could I have been such a moron?'?"

 

Too much supply and too little demand: a glut of buy-to-let properties has sent rents falling

 

They may not use the same vocabulary, but it's a question many of the wannabe property millionaires who dreamt big are now asking themselves. After the years following the millennium, when buy-to-let seemed to be the smartest thing to do and equities and pensions were for wimps, Britain's have-a-go landlords have now got that sinking feeling. With house prices and rental income falling and credit tightening, many are being forced to hand back the keys to the bank.

 

The number of landlords trying to offload properties has jumped to its highest level in two years and Monday's changes to capital gains tax may increase the rush. New figures from the Association of Residential Letting Agents reveal that one in five buy-to-let investors intends to sell some or all of their properties over the coming year, a 31 per cent increase on three months ago. Repossessions are at a 10-year high.

 

Worst affected are new-build flats, the buy-to-letters' favourite property. These have mushroomed, with shiny glass and steel apartment blocks springing up on derelict wharves and docklands across the country, their growth fuelled by generous incentives from developers. Yet prices are plummeting.

 

The Essential Information Group, which monitors UK property auctions, revealed last month that flats are selling at auction for on average one quarter less than the original price paid. In Manchester, reporters found a plaintive sign in one estate agent's window: "Make me an offer - I may say yes."

 

The get-rich-quick crowd were never the most popular kids on the urban block, and it might be tempting to enjoy their discomfort. But the pressures in the buy-to-let sector may herald a far more serious problem. Many observers now see the downturn in this market as the first sign that Britain is heading for its version of America's sub-prime crisis.

 

This week's Spectator magazine uses data from consumer analysts Experian to paint the bleakest picture of the housing market since the early Nineties. It says that 20 per cent of British households are "sub-prime" - where owners have a poor credit rating and borrowings at or close to 100 per cent of the value of the property. Every city is affected, with Sheffield, Manchester, Liverpool, Leeds, Leicester, Nottingham, Norwich and Ipswich the most exposed.

 

In almost every city centre, you can see buildings festooned with "For Sale" signs. At the Vista development in central London, one flat which was bought for £250,000 in 2005 was put up for sale at £175,000. It got no takers. No one was interested, either, when the price was cut to £150,000, and the property remains unsold. "Entire blocks in city centres are being offloaded," says Phil Spencer, the founder of London's leading property finder, Garrington, and who tours the country making Location, Location, Location. "The flats are ready, but the owners are selling up before anyone's moved in. They are the ghosts of the market, their buyers now apparitions."

 

All the experts agree that we are in for a wild ride, but there is disagreement as to whether buy-to-let will drag the rest of the market down. Analysts Capital Economics, for example, argue that most investors will hang on to their portfolios. They point out that even if house prices fall by six per cent over the next 18 months, investors who bought in 2002 would still be sitting on a gain of 50 per cent.

 

Other optimists point out that the withdrawal of mortgages over 75 per cent for first-time buyers means many wannabe homeowners will be forced to rent. Throw in likely interest rate cuts and an endemic housing shortage - the Government estimates that three million new homes will be needed by 2020 - and the buy-to-let market should dip, but not crash.

 

That's the bet Margaret and Barry Simpson from York are making. Over the past three years they have bought three houses, which they let at £67 per room per week, and have just bought a fourth in Nottingham. If they can keep renting the rooms, the properties will return a gross yield on their investment of 11 per cent. "Where else could I get a return of over 10 per cent?" asks Margaret.

 

So far, so reassuring. But many observers take a more alarming view. Economists at the London-based consultancy Fathom have conducted the most detailed comparison between the British and US housing markets, using a study by the Boston Federal Reserve that tracked 1.5?million borrowers. They found "obvious parallels" between buy-to-let and sub-prime: both kinds of homeowner paid relatively high rates of interest and both were more likely to default. More worrying, the British housing market, and the buy-to-let sector in particular, is in many ways in a worse state than the US. Britain has witnessed a tripling in house prices over the past decade and has the highest level of personal debt among G7 countries. Our average household debt is more than 160 per cent of disposable income, and we are, according to figures from Experian, spending more of our income servicing our mortgages than ever before.

 

There are a million outstanding buy-to-let mortgages, worth £122?billion - more than the gross national product of South Africa - and many owners are finding the strain too hard to bear. Allsop, Britain's biggest residential auctioneers, reports that out of 450 lots in a sale in London and Leeds last month, 25 per cent were buy-to-let repossessions.

 

A catalogue for a sale at the auctioneers Andrews Robertson paints an equally bleak picture: about half of the lots, more than 150 houses, are being sold "by order of the mortgagees" - i.e. repossessed. A new-build flat in Colchester sits alongside a snow-covered semi-detached in Great Yarmouth; a few pages on, an open-plan flat in Leicester and a four-bedroom terrace house in Loughborough bear testimony to lives and families whose plans went off the rails.

 

For Janie Dix, the collapse of her buy-to-let dream left her nursing a loss not just of nearly £100,000, but of her boyfriend, too. "The stress and not being able to plan ahead got too much for the relationship," she says ruefully.

 

How many more people suffer could be determined by the tax changes that come into force next week. Analysts agree that these will have a huge bearing on the short-term outlook. From Monday, capital gains tax on buy-to-let investments will be levied at a flat rate of 18 per cent, less than the current lowest rate of 24 per cent. Experts say that as many as 100,000 landlords who have resisted selling may start to dump property.

 

This glut of properties would significantly further depress house prices at a time of weakening demand, and could herald a wider crash that might wipe £50,000 off the value of an average home.

 

Investors who piled into buy-to-let and its various offspring - build-to-let, let-to-buy, fly-to-let - know that nine o'clock on Monday morning could mark high noon for the sector. They will be playing the odds in their heads all weekend. Should they ride out the storm and hope for a recovery next year? Or should they get out now and reinvest when - if - the crash comes? Like it or not, our future is in their hands.

 

[Whosthedaddy?]

I think we can safely say the answer to the thread question is ....YES!

 

The BBC report the recent HBOS figures show the biggest monthly drop (2.5%) since 1992

 

http://news.bbc.co.uk/1/hi/business/7336010.stm

[drbubb]

I think we can safely say the answer to the thread question is ....YES!

 

The BBC report the recent HBOS figures show the biggest monthly drop (2.5%) since 1992

 

http://news.bbc.co.uk/1/hi/business/7336010.stm

2.5% drop is a truly HUGE number.

 

The UK may rapidly catch up with the US slide at this rate

 

 

[nbarter]

The UK may rapidly catch up with the US slide at this rate

 

From Roger Bootle yesterday.. Including quotes such as:

 

In the US, the housing market is in a dire state. House prices are already about 10pc down with no sign of stopping. Over here, prices have started to edge down, but so far the fall has been small. Don't relax, though. We may be behind the US - but we are following. The adjustment in the market which I and other commentators have expected is finally here....

 

These effects hardly come into play in a minor housing adjustment. It simply isn't worth the hassle and before too long house prices start rising again. But this will not be a minor adjustment. In the early 1990s house prices fell for four years. This bubble has been bigger so it is perfectly plausible that prices will fall for longer than that.

 

Tide turns on ludicrous boom in house prices

By Roger Bootle

Last Updated: 1:31am BST 08/04/2008

 

 

In the US, the housing market is in a dire state. House prices are already about 10pc down with no sign of stopping. Over here, prices have started to edge down, but so far the fall has been small. Don't relax, though. We may be behind the US - but we are following. The adjustment in the market which I and other commentators have expected is finally here.

 

There are two major causative factors at work. First, houses have become extraordinarily expensive, to the point where ordinary people can barely afford a shoe box. And second, the ample supply of credit which allowed this to happen is now tightening. The second may be the proximate cause of the coming fall in prices. But don't let anyone fool you into believing that it is the fundamental cause. That prize goes to the ludicrous over-inflation of prices. In order to get on the "ladder" you have either to own property already or mortgage yourself up to the eyeballs. This has been a bubble waiting to be pricked.

 

 

That is the picture given by that tried and trusted indicator of value, the house price to earnings ratio, as shown in our chart. Its message has been uncompromising - this is far and away the biggest distortion in the housing market that we have ever had.

 

That is not quite the message, however, given by the indicator most favoured by professionals in the industry. Funny that. They favour the so-called affordability ratio, which shows the percentage of a person's income which will be taken up by mortgage payments when they first take out a mortgage. Mind you, this hardly gives a bullish message. Unaffordability stands at about the same level that it reached at the end of the late 1970s run-up. But it is way below the peak level reached in the downturn of the early 1990s. So that's all right then.

 

The problem is that in today's circumstances this affordability measure is seriously flawed. Even the word should worry you. Do you hear people talking about the "affordability" of cars or holidays? They talk about the price of these things and of what value they place on them but there is no presumption that people are bound to want as much of them as they can "afford". Or do you hear people speaking of the "affordability" of equities? The word smacks of a world in which house prices are bound to go up forever. In such a world, it makes sense for you to buy as much housing as you can afford. This is the world we have lived in for some time. It is not the world that we are in now.

 

The presumption of the affordability indicator is that if you can afford the mortgage at first then you are bound to be able to afford it later as your earnings will shoot up. Eventually the mortgage which starts out as a dreadful burden becomes nugatory. That is the experience of millions of British people over the last six decades. Meanwhile, the rise of house prices means that even if the worst should come to the worst, and you lose your job or fall ill, you will have made a tidy profit on your purchase. And lenders have come to think in the same way. So they have been happy to lend if initial affordability looked comfortable - and often even if it didn't.

 

advertisementThe switch to a low inflation world has made a mockery of this measure. For without high inflation, the mortgage continues to be a burden for much longer. At Capital Economics we have come up with an estimate of lifetime affordability, which shows not the initial percentage of income taken up by mortgage payments but rather the average percentage over the borrower's lifetime. This measure gives a startling picture - housing has never been as unaffordable as it is now - and that includes the boom of the late 1980s. The message is every bit as stark as the one given by the house price to earnings ratio.

 

Expectations are critical to how the housing market behaves. When prices are expected to fall, the borrower cannot comfort himself with the thought that if the continuing burden proves too much, at least he will have made a capital profit. On the contrary, he will have made a loss. People scrimping to get on the "ladder" will feel that there is no hurry. People sitting on properties much too big for them because they are enjoying the investment return are forced to consider the costs. And divorced and retired people will now more readily contemplate downsizing.

 

These effects hardly come into play in a minor housing adjustment. It simply isn't worth the hassle and before too long house prices start rising again. But this will not be a minor adjustment. In the early 1990s house prices fell for four years. This bubble has been bigger so it is perfectly plausible that prices will fall for longer than that.

 

But can it really be worse than the early 1990s? Some factors are different. Unemployment will not rise as far and the economy will not be as weak. But this time round we have the credit crunch and the downturn will be exacerbated by the flow of buy-to-let properties released on to the market - particularly now that capital gains tax will be only 18pc.

 

Many people still find this difficult to believe. They are mesmerised by the recent experience of constantly rising prices and they find it difficult to believe that prices could fall when there is such a "shortage" of houses and the demand is so great. Most professionals concur. They are all living in cloud cuckoo land. What does it mean to say that there is a shortage of housing? A shortage of houses at what price? Without concern for price there is a shortage of Rolls-Royces. What matters is not what quantity or quality of housing people airily say they want or need but rather what they are able and willing to pay for.

 

The market is held up by its own bootstraps. The history of rapid price increases creates expectations that rising prices will continue, thereby creating a speculative demand for housing, driven by fear as much as greed. This same history of rising prices also creates wealth in the shape of housing equity which can then be geared up into larger properties. And parents, anticipating more of the same, can withdraw some of the equity to support their children. Seeing ever rising prices, lenders increase their income multiples and loosen their lending criteria. And so the bubble inflates further. But the elastic has stretched far enough. Now it is about to snap back.

 

Roger Bootle is managing director of Capital Economics and economic adviser to Deloitte.

[drbubb]

From Roger Bootle yesterday.. Including quotes such as:

 

In the US, the housing market is in a dire state. House prices are already about 10pc down with no sign of stopping. Over here, prices have started to edge down, but so far the fall has been small. Don't relax, though. We may be behind the US - but we are following. The adjustment in the market which I and other commentators have expected is finally here....

 

INDEED it is !!

 

Year-on-Year comparisons are now negative:

 

"Worth noting that Halifax's claim that "House prices in March were 1.1% higher than a year earlier" isn't strictly true.

They calculate annual changes over the average of the trailing quarter, which makes that statement a little misleading."

(says JS Greenspan on GHPC):

 

The unaltered non-seasonally adjusted data:

Jan-07 184,067

Feb-07 189,197

Mar-07 193,180

Apr-07 198,206

May-07 199,264

Jun-07 199,458

Jul-07 200,578

Aug-07 201,081

Sep-07 200,168

Oct-07 197,817

Nov-07 194,258

Dec-07 195,333

Jan-08 191,275

Feb-08 193,448

Mar-08 190,619

 

 

[drbubb]

PIGGY CANNOT UNDERSTAND why anyone would sell - says SP poster

 

http://www.singingpig.co.uk/forums/thread/467589.aspx

Ajay Ahuja, author of the Buy to Let Bible, the Property Cycle, and many others, who is incredibly bullish, is selling up half his portfolio, 57 in fact!

 

http://www.ahuja.co.uk/property-news/ajays-blog/selling/

 

You can view the properties also at rightmove:

 

http://www.rightmove.co.uk/action/publicsi...bmit_dosearch=1

 

Now I for one cant understand why he would do such I thing, sell of half your portfolio to finance real estate abroad? If the deals were really that good abroad, surely a man of his standing could raise the finance for the deals by other means?

 

Is it possible he has overstretched himself too much, or is he preparing for a crash?

 

I've been discussing this down at housepricecrash.co.uk, but I thought i'd bring it to the pigs for their view ..........

 

== ==

 

(piggies specialise in foolish remarks, like this one):

 

"Previously, cycles could be considered in terms of a decade or so. And now? A few years? A few months?

Who knows. But I think one thing is clear - financial institutions can no longer keep pace with the market."

[GTG]

Ajay Ahuja, author of the Buy to Let Bible, the Property Cycle, and many others, who is incredibly bullish, is selling up half his portfolio, 57 in fact!

 

Perhaps he's expecting a lot of other BTL investors to be doing the same considering he's flogging a publication called "Avoiding Hips legally".

 

http://www.ahuja.co.uk/property-services/hips/

 

I found the last paragraph mildly entertaining :-)

 

 

[HollandPark]

I found the last paragraph mildly entertaining :-)

 

"So I am testing the introductory price of £47+VAT for the first 100 copies sold. If they sell too quickly I know there are lots of you that are suffering just like I was two weeks ago and I will be forced to push the price up. So act quick and buy now."

 

LOL

 

[drbubb]

WHAT ? ME WORRY?

=====

 

Worst Postcodes for high LTV

FT.com: UK banks seek more BoE borrowing

 

All pretty standard doom and gloom until the last two paragraphs "Separately, Experian, the personal credit rating group, has identified five postal codes in the UK where the average home loan is 90 per cent or more of the median home price and which are most vulnerable to negative equity in a downturn."

 

( One London postal code is at risk: SE18 in Woolwich, where the loan-to-value ratio is more than 91 per cent )

 

/more: http://www.ft.com/cms/s/0/b84a080e-0698-11...00779fd2ac.html

[nbarter]

A question on behalf of a friend who is selling a house. The property is on the market at above the higher stamp duty threshold mark (250k) and has had offers at £249k. So, what is a reasonable amount for fixtures and fittings to make up some of the shortfall to the asking price, but to avoid the tax man? i.e anyone know how this works legally, presumably the taxman would get funny if they found out and it was for amounts of say 50k, but what would be a reasonable amount?

[nbarter]

Interesting stuff. This should help push house prices lower...

 

Buy-to-let landlords will have to raid their savings and inject extra capital into their homes, under an obscure clause in their mortgage contracts, if house prices continue to fall.

 

Both Bradford & Bingley and HBOS-owned Birmingham Midshires, the two largest buy-to-let mortgage providers, each with 20pc of the market, require customers to top up their initial deposits if falling house prices mean the size of their mortgage rises above 85pc of the value of the home....

 

 

House prices face threat from wave of buy-to-let selling

By Philip Aldrick

Last Updated: 1:08am BST 14/04/2008

 

 

Buy-to-let landlords will have to raid their savings and inject extra capital into their homes, under an obscure clause in their mortgage contracts, if house prices continue to fall.

 

Both Bradford & Bingley and HBOS-owned Birmingham Midshires, the two largest buy-to-let mortgage providers, each with 20pc of the market, require customers to top up their initial deposits if falling house prices mean the size of their mortgage rises above 85pc of the value of the home.

 

In a decade of rising house prices, the clause has been largely irrelevant but analysts are concerned that it may now convince landlords, who are already facing higher mortgage costs, to sell large chunks of their portfolios.

 

Housing experts have long worried that a flood of buy-to-let properties on the market could have a devastating effect on house prices. The International Monetary Fund is already predicting a 10pc fall this year.

 

Under the terms of the contract, if a £100,000 home with an £85,000 mortgage falls in value by 10pc the landlord has to find another £8,500 to maintain the lender's maximum 85pc loan-to-value rate - even though there is still £5,000 of equity in the property.

 

advertisementThe revaluation is done when the borrower remortgages and, unlike the mainstream market, is required even if the landlord does not change lenders.

 

Mike Trippitt, an analyst at Oriel Securities, said: "People right at the edge and highly geared are going to be forced to liquidate."

 

A large number of buy-to-let mortgage deals renew this year and next. Data from the Council of Mortgage Lenders shows 329,100 buy-to-let mortgages were taken in 2006 and 350,900 in 2007.

 

Many are around 85pc loan-to-value. Ray Boulger, of brokers John Charcol, said a popular deal two years ago was a 5.25pc two-year fixed rate. Borrowers are now facing rates of at least 6.5pc.

 

In total, there are over 1m outstanding buy-to-let mortgages in the UK accounting for 11pc of the market, giving buy-to-let a huge influence over prices. Ten years ago, there were just 28,000.

 

Separately, Bradford & Bingley denied reports that it is planning a rights issue to strengthen its balance sheet.

 

"B&B is not intending to issue equity capital by way of a rights issue or otherwise," a spokesman said.

 

"B&B has a strong capital base.... and has funded its activities through 2008 and 2009."

 

 

[tinecu]

Interesting stuff. This should help push house prices lower...

 

Buy-to-let landlords will have to raid their savings and inject extra capital into their homes, under an obscure clause in their mortgage contracts, if house prices continue to fall.

 

Both Bradford & Bingley and HBOS-owned Birmingham Midshires, the two largest buy-to-let mortgage providers, each with 20pc of the market, require customers to top up their initial deposits if falling house prices mean the size of their mortgage rises above 85pc of the value of the home....

 

Asking prices falling across the UK according to Home.co.uk

 

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

 

There's a hole in my market dear gordon, dear gordon...

[Gatesy]

Proving that Tesco are not stupid.

 

Tesco eyes property website sale

 

http://news.bbc.co.uk/1/hi/business/7374721.stm

[Whosthedaddy?]

http://news.bbc.co.uk/1/hi/business/7374730.stm

 

House prices falling now YoY - still some bulls (VIs) trying to talk up the market, nothing unusual there though. Think they're still in the classic denial stage.

 

Seems though that the mainstream press are fully signed up to a falling market now.

[Rosco]

Interesting article in todays FT

 

http://www.ft.com/cms/s/0/edfa4aec-1717-11...00779fd2ac.html

 

A couple of paragraphs ....

 

"I would not like to speculate about where the bid prices could be right now," said Philip Ljubic, a property derivatives banker at ABN Amro. "There is no one actively bidding down the curve. Everyone wants to sell."

 

The mid-prices of derivatives suggest house prices will fall 13 per cent between March 2008 and March 2009, based on the Halifax house price index.

 

[No6]

I think this is fairly important.

 

House prices: 50% falls before fair value

 

Recent house price falls represent just a fraction of the potential 50% downside shown when growth is measured against historical data stretching back almost 60 years.

 

http://www.citywire.co.uk/adviser/-/news/p....aspx?ID=301968

 

And this.

 

Confidential figures cast more housing gloom

 

With the recent falls in mortgage lending and declines in house prices, homebuilders can do without more bad news. So a note this morning from Dresdner Kleinwort is the last thing the sector needs. The bank says it has seen confidential figures showing increased cancellations by potential buyers during the key spring selling season.

 

Dresdner said: "Housebuilders' sales reservations have collapsed by almost two-thirds year on year, according to confidential industry figures we have seen, prices are sliding, land values are down at least 40% and company announcements have highlighted the perilous state of the market. The question for us is not will there be land writedowns, but who will be first and how large.

 

"The Home Builders Federation's weekly survey of net reservations has been running at 60 - 65% down year on year for at least the past two weeks - usually the culmination of the spring selling season. Net reservations are number of buyers agreeing to buy (usually requiring a modest deposit) less cancellations. It is the cancellations rate due to lack of mortgage availability that is the real killer, according to one of several housebuilders that volunteered the information to us. The weekly internal survey is closely guarded but various industry sources have approached us with the figures unsolicited.

 

http://blogs.guardian.co.uk/markets/2008/0...t_falls_in.html

[drbubb]

Merryn speaking sense on Property again, with hopes on Oil:

http://www.moneyweek.com/file/47370/no-oil...mmon-sense.html

 

the best bit of all is the way this seemingly sudden surplus of new houses - houses no one wants to buy - throws light on the nonsense that has been used to rationalise the housing bubble over the past decade. The argument, spouted by everyone, from the founders of now bankrupt buy-to-let "investment" club Inside Track, to the strategists of supposedly respectable international banks went like this: the UK is a small island; there aren't enough houses on it for our growing population; this shortage of supply means house prices will go up for ever.

== == ==

 

The DEMAND was Speculative.

The Boom was a big lie, driven by excessive hype, bullish sentiment, and over-aggressive finance.

 

People have stopped believing the lie, prices are falling... falling. falling... back to the real values that

First Time Buyers can afford using prudent finance, in a world of diminished hype.