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drbubb

The politics of falling UK home prices

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Can someone enlighten me about this?

 

well I can try to enlighten, I have a credit score of only 959, (I checked today) Experian says this is excellent, I have now 3 apartments and 2 farms in a country outside the UK, (latvia) all these bought without credit, I wanted to get a loan of 20000 gbp, to fund the gap to buy an estate in Latvia costing 125000 gbp, I was denied the loan by all major providers and am waiting for someone to get back to me,

 

I thought I would try for a mortgage in the UK to buy My parents place,as they are having difficulites, long story etc.... so I applied with HSBC, for My deposit I said i had 100000gbp, (which is held in a uk bank) thier place is for sale for 325000gbp, I got a straight no, I got refused, I asked the reason why and they said the credit company had refused me, now ive had this problem in the past (i defaulted on a loan in 2004) but with a 100000gbp deposit in cash you would have thought it would have taken more than 15 mins to tell me this, or at least a good explanation offered! but none........

 

it would be nice if they took into consideration my properties in Latvia for security, its an EU country, but they were unwilling to help ... can anyone suggest any ideas, because all overseas mortgage/loans are nearly impossible for me to get at the moment

 

 

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but we do also know that sales are continuing to deteriorate

 

Are they though?

 

According to HMRC I would say they are pretty consistent.

 

Feb 2010 to Oct 2010 each month is in the 70,000's apart from May 69,000 and July 80,000. Last 3 were 73,000, 77,000 and 73,000. Well below sales in the boom but not deteriorating markedly to my eyes.

 

http://www.hmrc.gov.uk/stats/survey_of_pro...00-or-above.pdf

 

As to builder shares picking up. If I were a builder I would take great heart from the recent about turn about mortgage restrictions. These are now postponed again until next year as per my post on the 6th Dec. They could be postponed indefintely based on the Grant Shapp's quote.

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I thought I would try for a mortgage in the UK to buy My parents place,as they are having difficulites, long story etc.... so I applied with HSBC, for My deposit I said i had 100000gbp, (which is held in a uk bank) thier place is for sale for 325000gbp, I got a straight no, I got refused, I asked the reason why and they said the credit company had refused me, now ive had this problem in the past (i defaulted on a loan in 2004)...

 

I am sorry to hear about your situation Phil.

I would have thought you could borrow such a low rate of advance in Latvia.

The banks there must be in desperate shape.

 

In the UK, you want to borrow:

225,000 against a 325,000 property - that's a 69.2% - call it 70%.

 

And with "a default in the past", it is not so surprising to hear you were refused.

 

Maybe you could get a loan for 60%, and pay only 250,000. Perhaps that would work.

 

The calculations on this case, shows how if you reduce the percentage of advance, it can have a huge

impact on property prices. A drop from 325,000 to 250,000 - that's -23% - seems huge. But that

was driven by a mere reduction in LTV from 69.2% to 60.0%.

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Feb 2010 to Oct 2010 each month is in the 70,000's apart from May 69,000 and July 80,000. Last 3 were 73,000, 77,000 and 73,000. Well below sales in the boom but not deteriorating markedly to my eyes.

Okay.

In that case, and increase in days to sell, suggests that SUPPLY is increasing,

if you accept my argument that the calculation is a Ratio and follows the Accounting Standard

 

Using 73,000 sales per month, and a month of 30 days.

If you have 120 "days to sell", supply would be: 4 months of sales, or 73 x 4 : 292,000 homes for sale.

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Does this mean:

+ They cannot get a mortgage at all (even for 50% or 60% LTV), or

+ They cannot get 80% or 90% LTV mortgages?

 

 

It is (theoretically, at least) still possible to get a 100% LTV mortgage.

 

The YoY data has turned negative almost exactly 1 year after the FSA banned self-cert mortgages.

 

Co-incidental? Self-cert mortgages accounted for HALF of all mortgages at the height of the financial crisis.

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It is (theoretically, at least) still possible to get a 100% LTV mortgage.

 

The YoY data has turned negative almost exactly 1 year after the FSA banned self-cert mortgages.

 

Co-incidental? Self-cert mortgages accounted for HALF of all mortgages at the height of the financial crisis.

 

 

I stand corrected, the FSA has not banned self-cert.

All talk it seems, and probably will remain so as I can't see them doing it after these latest HP figures.

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I think the pundits may be over-estimating the Bonus impact somewhat, since maybe 60% or more will be deferred, and tax rates are higher

 

Look how excessive rewards within the financial sector do things like skew Home prices

 

Bankers to spend Pds.1 Billion of Bonus payments on homes - says SCMP

 

+ Some 300,000 financial services employees are expected to be paid bonuses totalling GBP 7 billion*, down 5% from 2009

 

+ They are expected to spend Pds. 1 Billion of their bonus money on homes in London, down 17% from last year

 

"the purchases may not stop prices of London luxury homnes from falling next year, though the drop probably would not exceed 1 per cent, Savills said." The value rise of about 2% in 2009 was helped by Pds 1.2 billion paid in 2009.

 

Bonus-earners typically account for half of the buyers of London luxury homes.

 

"Since April, the tax rate for incomes exceeding Pds.150,000 increased to 50% from 40%."

 

Also, a greater proportion of bonuses will now be paid on a deferred basis.

 

Savills estimates that 60 per cent of prime central London property purchases are made by people from outside the UK, and they have been attracted by falls in the Sterling exchange rate, in times past

 

FXB / The Pound Sterling etf ... update

fxb.gif

 

The big drop in Sterling came in the 2nd half of 2008. And that may have helped to fuel purchases in 2009 or even early 2010, but I doubt that it is much of a factor now, even thought the Estate Agents love talking about it.

 

(Note: a huge part of that bonus income represents a wealth transfer from Savers, who are being robbed by ultra low rates.)

 

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The average price of a home in England and Wales climbed for a seventh month, gaining 0.2 percent, research company Acadametrics Ltd. and LSL Property Services Plc said in an estimate released today. U.K. producer prices increased for a second month in November, the Office for National Statistics said today in London.

 

A heads-up, or a false indicator? Taken together with the rise in the Homebuilder shares, it could be a heads-up.

 

Meantime, the average of the H&NIndex shows we are clearly in a Crash Cruise speed phase, with prices down -0.9% in November

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Two interesting articles in this weekends FT.

This one on the effect of Euro woes;

http://www.ft.com/cms/s/2/360f9ec6-047e-11...8#axzz17p7t4sbg

And this one on RBS property structure product;

http://www.ft.com/cms/s/2/c8df93a4-047f-11...l#axzz17p9oz6Hf

 

Euro woes boost London property

By Lucy Warwick-Ching .. December 10 2010

 

An influx of overseas ­buyers is boosting the prime London property market as they seek to escape the eurozone crisis and acquire assets while exchange rates remain favourable.

 

The number of £10m-plus houses sold in London has risen by more than 500 per cent since July, with ­foreign buyers accounting for 56 per cent of those ­purchases, according to the November Prime Central London Index from Knight Frank.

 

The number of Italian buyers was up 41 per cent compared with a year ago, with Spanish buyers up by 40 per cent and French buyers up 35 per cent. Chinese buyers increased the most – up 52 per cent on last year.

 

“Feedback from the ­market confirms that the safe haven role played by central London property is still being recognised by international purchasers,” said Liam Bailey, head of residential research at Knight Frank.

 

/more: http://www.ft.com/cms/s/2/360f9ec6-047e-11...8#axzz17p7t4sbg

 

"safe haven role" played by central London property ?

 

I have to laugh!

How is putting your money into OVER-PRICED London property a "safe haven"?

It might be safer to buy a bargain farm in Ireland- that's more of a true safe haven IMHO

 

He pointed out that the view taken by many new entrants to the market is that London property is a strong defensive option. Concerns have grown over the weakness of many eurozone economies, while the pound has not strengthened significantly against the euro.

== ==

 

RBS:

 

the forward curve for residential derivatives – the nearest thing to a property futures market – is pricing in a 10 per cent price drop to house prices in 2011.

 

...either a four-year or an eight-year lifespan....

 

The eight-year buy-to-let capital protected note is designed “to replicate an investment in residential property” without the hassle of property maintenance or finding a large deposit. Instead of the traditional rental yield, investors will receive a fixed annual coupon of less than 3 per cent through the eight-year term, plus capital growth linked to the house price index upon maturity.

 

The four-year product offers a separate zero coupon note, issued at a discount of about 10 per cent to the December 2009 house price index, and any positive growth from this point is paid out after four years.

 

...these notes are capital protected, meaning investors will get their initial investment back at the end of the term, with any house price growth on top...

 

/more: http://www.ft.com/cms/s/2/c8df93a4-047f-11...l#ixzz17rDU6tGx

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A heads-up, or a false indicator? Taken together with the rise in the Homebuilder shares, it could be a heads-up.

 

Meantime, the average of the H&NIndex shows we are clearly in a Crash Cruise speed phase, with prices down -0.9% in November

I would guess a false indicator, not sure of their data correlation methods. Saying that, I believe H&N now only account for a small percentage of approvals/sales data etc.

 

There was a list of the indexes and how they were collated. Don't know if anyone remembers where they were posted? (Maybe Spline?)

 

AFAIK Land registry is most inclusive, but lags by a few months.

 

Interesting to see London as a hedge against euro collapse. I'm sure there would be easier/better/safer trade plays.

 

Personally hoping for Euro to fall to ~55p over the next 2 years, so I can get a nice little place in France ;)

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I would guess a false indicator, not sure of their data correlation methods. Saying that, I believe H&N now only account for a small percentage of approvals/sales data etc.

 

There was a list of the indexes and how they were collated. Don't know if anyone remembers where they were posted? (Maybe Spline?)

 

AFAIK Land registry is most inclusive, but lags by a few months.

 

Interesting to see London as a hedge against euro collapse. I'm sure there would be easier/better/safer trade plays.

 

Personally hoping for Euro to fall to ~55p over the next 2 years, so I can get a nice little place in France ;)

 

This HP index guide is handy

http://www.home.co.uk/guides/house_prices_indices/

 

London would be a disaster in my mind as a 'safe haven' of any sort. Its already a quite dangerous place to live unless you are in super rich enclave. I see the place as a credit junkie, now on methadone (printy printy ;) ).

 

Better to live where there is some kind of sustainable economy. In Europe that will be agriculture and some manufacturing.

If I was YFS I would head to Shanhai and make my fortune.

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Ah, so Academetrics is essentially the Land Registry figures. That could explain why they aren't seeing falls yet, as, although they have the largest sample (based on actual sold prices), their data is delayed a few months.

 

Also, it seems the Land Registry data represents nearly 4 times that of the Halifax and Nationwide combined!

 

Thanks for the link. I have regularly read the Home.co.uk report (missed that section though) to get a picture of the market (National and local), as they always seemed the most honest in their summations and assessment.

 

Unfortunately, however, I don't like using their site for actually looking at properties as it seems cluttered. I hate to say it but rightmove has a much nicer and easier to use format.

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The land reg doesn't include repo's though. Nationwide & Halifax would if they provide the mortgage.

 

When an index is selective it doesn't reflect the true market.

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The land reg doesn't include repo's though. Nationwide & Halifax would if they provide the mortgage.

 

When an index is selective it doesn't reflect the true market.

That is true (they also exclude properties below and above a set price limit, IIRC <£20k and >£1M), but repos are only a small percentage of the market.

 

All the reports are selective, but apparently the LR is considered the most accurate (biggest sample by far and actual sold prices).

 

Also, I'm not sure if Halifax and Nationwide now give mortgages for auctions? It used to be that the buyer had to have finance in place either before bidding or guaranteed within a couple or few weeks of winning an auction, otherwise you lost your deposit (~10%)

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Euro woes boost London property

By Lucy Warwick-Ching .. December 10 2010

 

An influx of overseas ­buyers is boosting the prime London property market as they seek to escape the eurozone crisis and acquire assets while exchange rates remain favourable.

 

The number of £10m-plus houses sold in London has risen by more than 500 per cent since July, with ­foreign buyers accounting for 56 per cent of those ­purchases, according to the November Prime Central London Index from Knight Frank.

 

The number of Italian buyers was up 41 per cent compared with a year ago, with Spanish buyers up by 40 per cent and French buyers up 35 per cent. Chinese buyers increased the most – up 52 per cent on last year.

 

“Feedback from the ­market confirms that the safe haven role played by central London property is still being recognised by international purchasers,” said Liam Bailey, head of residential research at Knight Frank.

 

/more: http://www.ft.com/cms/s/2/360f9ec6-047e-11...8#axzz17p7t4sbg

 

"safe haven role" played by central London property ?

 

I have to laugh!

How is putting your money into OVER-PRICED London property a "safe haven"?

It might be safer to buy a bargain farm in Ireland- that's more of a true safe haven IMHO

 

He pointed out that the view taken by many new entrants to the market is that London property is a strong defensive option. Concerns have grown over the weakness of many eurozone economies, while the pound has not strengthened significantly against the euro.

== ==

 

RBS:

 

the forward curve for residential derivatives – the nearest thing to a property futures market – is pricing in a 10 per cent price drop to house prices in 2011.

 

...either a four-year or an eight-year lifespan....

 

The eight-year buy-to-let capital protected note is designed “to replicate an investment in residential property” without the hassle of property maintenance or finding a large deposit. Instead of the traditional rental yield, investors will receive a fixed annual coupon of less than 3 per cent through the eight-year term, plus capital growth linked to the house price index upon maturity.

 

The four-year product offers a separate zero coupon note, issued at a discount of about 10 per cent to the December 2009 house price index, and any positive growth from this point is paid out after four years.

 

...these notes are capital protected, meaning investors will get their initial investment back at the end of the term, with any house price growth on top...

 

/more: http://www.ft.com/cms/s/2/c8df93a4-047f-11...l#ixzz17rDU6tGx

 

 

I know people who live in 10 mil + houses. These are people who 10 mil is a small part of their wealth, and they are worried about inflation and bank collapses. These houses are being viewed in the same way as they would a Picasso or Van Gough.

 

Imagine you had 500 mil in the bank, and you were worried about banks going tits up, spending 10 mil on a very nice house in a nice city isn't that bad.

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That is true (they also exclude properties below and above a set price limit, IIRC <£20k and >£1M), but repos are only a small percentage of the market.

 

All the reports are selective, but apparently the LR is considered the most accurate (biggest sample by far and actual sold prices).

 

Also, I'm not sure if Halifax and Nationwide now give mortgages for auctions? It used to be that the buyer had to have finance in place either before bidding or guaranteed within a couple or few weeks of winning an auction, otherwise you lost your deposit (~10%)

 

Halifax and Nationwide will lend for auction property, the problem's arise through time scale which is normally not enough to get everything sorted, survey etc.

 

RBS was massive at the auction's 2003-2006 they had a rep at every auction in Birmingham and was chucking money around, they lent large amounts for auction purchases. No wonder they needed bailing.

 

Repo's are a big part of the market in my search area of north Birmingham. With a steady stream of them coming to agents and selling at big reductions. All repo's in my area sell through agents. Auctions sell property that needs various degrees of work, tenanted/investment and people trying their luck.

 

Auction property is entered into the land reg figure i think, after the brief search on google i done on it anyway.

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Estimated 40,000 repossessions this year

 

http://www.bbc.co.uk/news/business-10950327

 

Not sure of total number of sales, maybe LR has it?

 

You'll be looking for this from HMRC based on stamp duty forms (which need to be completed even if you're below thresholds);

 

http://www.hmrc.gov.uk/stats/survey_of_pro...00-or-above.pdf

 

Looking like ~750,000 transactions for 2010.

 

Great guide on the other useful data series here;

 

http://www.houseprices.uk.net/articles/pro...y_transactions/

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I know people who live in 10 mil + houses. These are people who 10 mil is a small part of their wealth, and they are worried about inflation and bank collapses. These houses are being viewed in the same way as they would a Picasso or Van Gough.

 

Imagine you had 500 mil in the bank, and you were worried about banks going tits up, spending 10 mil on a very nice house in a nice city isn't that bad.

Yes.

But are there enough such buyers to prevent a fall in Greater London property prices?

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Rightmove asking prices -3% Dec (after a >3% drop in Nov!)

 

http://www.rightmove.co.uk/news/files/2010...cember-2010.pdf

EXCERPT:

- Transaction levels of around 600,000, continuing to run at circa 50% below historic norms for the second consecutive year. The proportion of transactions that are repossession sales is currently running at around 1 in 15. There is evidence of growing pent-up buyer demand and an increased number of forced sellers would give them more bargain hunting opportunities. However growth in transaction numbers will continue to be thwarted in 2011 by a continuation of elitist mortgage lending criteria. Rightmove expect to see a slight lowering of hurdles in the second half of the year if lenders are falling short of their 2011 lending targets.

 

- National average asking prices are forecast to fall by up to 5% during 2011 if repossessions increase

substantially. Should lender forbearance continue to limit repossessions then prices could end the

year closer to the price standstill Rightmove has recorded in 2010. Lower prices will further assist the

affordability of deposit rich first-time buyers and yields of active buy-to-let landlords. (Repossession numbers are expected to be under 40,000 this year, well below original estimates of 53,000.)

 

TRANSLATION into "GEI Truth language": (facts not changed, only emotive language)

 

- Transaction levels of around 600,000, continuing to run at circa 50% below bubble peak levels for the second consecutive year. The proportion of transactions that are repossession sales is currently running at around 1 in 15. There is evidence of growing interest in finding "bargains" and an increased number of forced sellers would give them more bargain hunting opportunities. However growth in transaction numbers will continue to be thwarted in 2011 by a recently restored more-prudent mortgage lending criteria. Rightmove hopes to see a slight lowering of hurdles in the second half of the year on the basis that lenders will find they are falling short of their 2011 lending targets. But this will only happen if credit concerns fail to grow.

 

- Rightove hopes that National average asking prices are forecast to fall by as little as 5% during 2011 in the face of repossessions increasing substantially. Should lender "kicking the can down the road" efforts succeed in limiting repossessions then prices might end the year closer to the price standstill Rightmove has recorded in 2010. Lower prices will further assist the affordability of deposit rich first-time buyers and yields of active buy-to-let landlords, so long as rents do not follow prices lower, thanks to the imposition of caps on Housing Benefits.

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FOGGY THINKING on House prices, is becoming a speciality over at HPC

 

/see: http://www.housepricecrash.co.uk/forum/ind...howtopic=156067

 

First RB "goes Bullish" just after the market crosses over into the Crash Cruise Speed phase.

 

Then ngn comes up with a title worthy of the best bullish-spinning headline writer at the BBC:

"House Prices drop less than last month" (on Rightmove's 3.04% drop)

 

The Crash is underway, as predicted at the beginning of the Dead Cat bounce.

Everything is on schedule, and working "as it says on the can."

 

Why do they HPC-ers keep going "wobbly" on this predicted and predictable process?

 

I reckong, they are just too impatient to let it play out in the customary way, and so don't

want to take onboard how the cycle really works.

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