UK House prices: News & Views

[Bosworth]

Halifax shows UK house prices up >1% in June. But >3% down year on year.

 

Surprisingly the media are broadly still gloomy - even the BBC is downplaying the significance of the rise.

[John Doe]

Halifax shows UK house prices up >1% in June. But >3% down year on year.

 

Surprisingly the media are broadly still gloomy - even the BBC is downplaying the significance of the rise.

Looks like the bottom may be close

[TrueNorth]

The Scotsman weighs in -- op=ed piece from today's paper

 

http://business.scotsman.com/business/Only-when-property-prices-become.6796506.jp?articlepage=1

 

Only when property prices become genuinely affordable will the market get moving again

 

Published Date: 06 July 2011

By Ken Taylor

MILLIONS of us have exposure to property so we're bound to have a vested interest in believing that house prices will rise.

The British are unquestionably a property owning democracy, which sets us apart from many of our continental neighbours. Much of our previous government's economic policy was based on the simple premise that property prices will continue to rise, hence the consumer-fed debt crisis that we are now coming to terms with. Those who felt comfortable in the knowledge that their home was worth more than it was a year ago were also happy to take on additional debt in the form of credit card expenditure, additional borrowing against their property or simply a more affluent lifestyle.

 

The most widely held justification for house prices continuing to rise from current levels is the shortage of housing supply. However, I believe that there is plenty of evidence supporting an opposite view on property prices that is well worth considering.

 

The first point is that we are enduring a long period of abnormally low interest rates. Historically, the base rate has hovered marginally above inflation, but clearly the present picture is far removed from that.

 

This situation has contributed to a lack of forced sellers in the market, and hence prices have remained relatively stable. But at some future point what might be termed a return to "normalisation" is likely to occur. It's not possible to predict with any certainty when or indeed in what form such a change of circumstances might come, but it seems likely that such a shift will occur. If this is true, then we are likely to witness a glut of sellers in the market, which can only result in falling valuations.

 

In the mid to late 1990s, yields on rented property were about 9 per cent, while inflation was roughly 1.5 per cent. This represented a handsome real return for those renting out property, and simply explains why this form of investment became so popular. The gross yield now is a more modest 7 per cent which, after inflation at about 5 per cent, is a significantly less attractive proposition. Add in low rental income and maintenance costs and it becomes difficult to achieve a real return on your capital in this form.

 

So I would conclude that the issue with property is not to do with a shortage of supply, but rather a shortage of credit. Despite artificially low interest rates, it is still mighty challenging to borrow at a rate of, say, 5 per cent on an interest-only basis. We now exist in an era characterised by a return to sensible, prudent lending, in stark contrast to the previous decade of almost unlimited borrowing multiples at very low rates of interest. In other words, we are witnessing a return to good old fashioned affordability.

 

The average age of a first-time buyer in the UK has now risen to the late thirties and the average purchase price represents a multiple of 4.3 times annual average income. This remains simply unsustainable and needs to correct before the whole property system can once again begin to function. The only way this can occur is for average prices to fall significantly from current levels.

 

I am sure I will not win any friends with this argument, but it might be a valid counter to the widely pronounced insistence that house prices are set to soar. Let's be realistic for a change.

 

• Ken Taylor is managing director of Mackenzie Taylor Wealth Management www.mtwm.co.uk

[TrueNorth]

And this from BBC

 

6 July 2011 Last updated at 09:11

 

UK housing market 'facing headwinds', says Halifax

 

The housing market is facing "significant headwinds" despite prices rising slightly in June, according to the Halifax.

 

The lender, which is now part of Lloyds Banking Group, said that low pay rises, higher taxes and inflation were all constraining demand from buyers.

 

But it said low interest rates had maintained housing market stability.

 

The average home rose in price by 1.2% in June compared with May, but was 3.5% cheaper than a year earlier.

 

The annual change is based on average prices during the three months to the end of June, compared with the same three-month period of the previous year.

 

When comparing prices in the three months to the end of June with the previous three months, there was a fall of 0.5% - the smallest quarterly drop since the second quarter of last year.

 

"Low interest rates, an increase in the number of people in employment and some tightening in market conditions earlier in the year are likely to have been the main factors behind the recent improvement in price trends," said Halifax's housing economist Martin Ellis.

 

Typical mortgage payments for a new borrower had fallen from a peak of 48% of average disposable earnings in mid-2007 to 28% in the second quarter of 2011, Halifax figures showed.

 

"A slowly improving economy and sustained low interest rates should help to support broad stability in the market over the coming months," Mr Ellis said.

 

"The market is, however, likely to continue to face significant headwinds which are expected to constrain housing demand."

 

It said the average home cost £163,049.

 

Comparison

 

The data and analysis, based on Halifax's own lending, is broadly similar to that of the Nationwide Building Society.

 

A week ago, the Nationwide said that the property market had "moved sideways" in the last six months.

 

Its figures showed that the value of the typical home was the same in June as in the previous month, but 1.1% lower than in June 2010.

 

The Land Registry, which produces relatively comprehensive figures that lag behind other surveys, said that prices in England and Wales dropped by 0.4% in May, to push them 2.2% lower than a year earlier.

 

However, it said that prices in London were bucking the trend.

 

http://www.bbc.co.uk/news/business-14042621

 

Together, these seem to pour cold water on the property bulls' talk. Is the tide turning?

[John Doe]

And this from BBC

 

6 July 2011 Last updated at 09:11

 

 

 

http://www.bbc.co.uk/news/business-14042621

 

Together, these seem to pour cold water on the property bulls' talk. Is the tide turning?

When the last bull.....

[Van]

Halifax +1.2% in June.

 

The 3m YoY figure has moderated to -3.5%.

 

The actual 1m YoY figure is now just -1.6%.

 

 

Now.. what was that I was saying about a nominal low being close?

[DoctorSolar]

I viewed a number of nice old main door with garden tenement flats in some very nice areas of Edinburgh a few weeks back. The English old money was out in force viewing these places at the same time. I thought I wouldn't stand a chance of getting any of them so I didn't even bother bidding. Now I see these places are still on the market with prices dropped by 10%. All this talk that we are an island nation with a housing supply issue is certainly not helping prop up prices here. I thought all the cash rich buyers were meant to swoop in and pick up all these "bargains" now. Hmmm that turns out to be complete fantasy.

 

As I posted a few weeks back we are in the process of buying a place just now. Fortunately for us the seller had realised that the housing bubble party was over and cut us an OK deal. We can afford it but I am not daft enough to think I have bought an absolute bargain or that we have reached the bottom.

 

JD I await your rolling eyes emoticon with baited breath...

[DoctorSolar]

Here's a good example showing how desperate people are getting to sell... A friend has been unable to sell their lovely stone built victorian house for well over a year. They have dropped the price 20% but still no one will buy. They now have one note of interest but they have yet to put in an offer. To try and force their hand the sellers have now got another friend to get a solicitor to put in a note of interest too so they can go to a closing date. A complete shill bidder put there directly by the sellers in an effort to force someone in to bidding on a property.

 

Giving the potential buyer a false sense that other people are interested when in fact no one else is.

 

Completely outrageous behaviour and shows how desperate people are to keep the housing bubble fantasy prices alive.

 

Hmmm where exactly are all these cash rich buyers that are meant to be swooping in to buy these "bargains"?

 

Roll on the rolling eyes...

[John Doe]

I viewed a number of nice old main door with garden tenement flats in some very nice areas of Edinburgh a few weeks back. The English old money was out in force viewing these places at the same time. I thought I wouldn't stand a chance of getting any of them so I didn't even bother bidding. Now I see these places are still on the market with prices dropped by 10%. All this talk that we are an island nation with a housing supply issue is certainly not helping prop up prices here. I thought all the cash rich buyers were meant to swoop in and pick up all these "bargains" now. Hmmm that turns out to be complete fantasy.

 

As I posted a few weeks back we are in the process of buying a place just now. Fortunately for us the seller had realised that the housing bubble party was over and cut us an OK deal. We can afford it but I am not daft enough to think I have bought an absolute bargain or that we have reached the bottom.

 

JD I await your rolling eyes emoticon with baited breath...

Moi? I don't know what you mean

 

But really, I think the housing issue is one reason they are not falling faster, nothing else. I am (and always have been) bearish, just not doomsday bearish and think we could see the nominal bottom this winter/ early spring.

 

If you can get a place now with a good discount, then that might actually be near to where they nominally bottom out.

 

To try and force their hand the sellers have now got another friend to get a solicitor to put in a note of interest too so they can go to a closing date.

 

That's nothing new, it's been going on for years. We know several people that were doing this back in 2003 in the W.End Glasgow, and it was a buying frenzy back then. They even got friends to all come around during the old "block viewings" when several potential buyers would be shown around at the same time!

 

(Jees, I hated those type of group viewings and out of principle would - at the top of my voice - tut and complain and then tell the agent it was bad practice to treat potential buyers this way, then walk out. Even had a couple of other do the same and follow me out on one or two occasions).

 

AFAIR, all I have ever said about cash buyers is that they account for about half the market now, and I asked if that was historically the case?

[DoctorSolar]

Moi? I don't know what you mean

 

 

 

If you can get a place now with a good discount, then that might actually be near to where they nominally bottom out.

 

Part of me hopes this is true as I have just bought a place. But a larger part of me hopes we see deeper falls so we have fewer people being wage slaves to the banksters. I have kids to think about and hope they don't have to go through the madness of a housing bubble.

 

 

That's nothing new, it's been going on for years. We know several people that were doing this back in 2003 in the W.End Glasgow, and it was a buying frenzy back then.

 

Is it legal? Can anything be done to stop this kind of thing?

 

I guess there is no way for me to forewarn the potential buyers as I have no way of finding out who they are...

[tallim]

...Is it legal? Can anything be done to stop this kind of thing?...

I can't imagine it would sit well with the solictor's code of ethics, I know some solicitors are meant to be involved in odd dealings, but I can't imagine that many would put their reputation on the line for a 300 quid fee would they?

 

This is my own version of dodgy dealings that I saw in the property section of the local free paper. Basically telling sellers to 'gift' cash to potential buyers rather than drop the price as it will help people meet LTV requirements:

 

 

Key quote from the last few paragraphs:

 

...Currently only one of the major lenders is backing the scheme and only a handful of agents are aware of it.

 

Simon Balderfon, head of Financial Services with Edward Mellor, said "Say the purchase price is £100,000, the buyer offers £95,000 which is accepted, but the bank allows us to log the price as £100,000 and count the reduction as part of the deposit contributed by the buyer. The seller does not have to physically pass over the money - it is all done on paper, and they get the £95,000 they had agreed.

 

"The only stipulation is that the surveyor instructed by the bank has to agree that the property is worth the higher value."

 

I can't find any firm evidence, but I think that major lender is HBOS.

[John Doe]

I can't imagine it would sit well with the solictor's code of ethics, I know some solicitors are meant to be involved in odd dealings, but I can't imagine that many would put their reputation on the line for a 300 quid fee would they?

 

Sorry, I should have explained the agents/solicitors were the ones who invited several potential buyers around at the same (or very near same) time -without telling any of them it was a block viewing - so that the "competition" for the property would ensue, whereas it was the sellers that were also asking their friends around at the same time (and asking them to make positive comments) to increase the numbers.

 

It was hilarious going to see “do-em-upers” with all the “wanabe pwoperdy-developers” tapping walls, measuring rooms and all getting in each others way This was the crazy time when they were going for 40-50 and even 60% over the offers-over.

 

I can't find any firm evidence, but I think that major lender is HBOS.

 

This is also happening in the major estate agents here. Cheaper properties in the agents window have a big "5% deposit paid" sticker on them.

[drbubb]

The rises continue as the spring season fades

 

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

2011

J. : : 223,122 : 413,259 : 154,300 - 0.5% / 161,211 = n/a = 164,173 161,470 : £161,341 :- 0.33% :138.3% :

F. : : 230,030 : 430,680 : 154,000 - 0.2% / 161,183 = n/a = 162,657 161,680 : £161,432 :+ 0.06% :142.5% :

M : : 231,790 : 424,307 : 153,850 - 0.1% / 164,751 = n/a = 162,912 162,151 : £163,451 :+ 1.25% :141.8% :

A : : 235,822 : 431,013 : 153,850 +0.0% / 165,609 = n/a = 160,395 162,303 : £163,956 :+ 0.31% :143.8% :

M : : 238,874 : 430,936 : 153,700 - 0.1% / 167,208 = n/a = 160,519 162,344 : £164,776 :+ 0.50% :145.0% :

J. : : 240,394 : 438,622 : 153,550 - 0.1% / 168,205 = n/a = 163,049 163,642 : £165,924 :+ 0.70%

Jl : : 2xx

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

mom: +0.64% : +1.78% : Est.DI: 145.9% / +0.60% := n/a = :+1.58% :+0.80% : + 0.70%

 

Meantime...

 

Barratt seems to be putting in a "right shoulder" : BDEV-chart

[John Doe]

The rises continue as the spring season fades

 

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

2011

J. : : 223,122 : 413,259 : 154,300 - 0.5% / 161,211 = n/a = 164,173 161,470 : £161,341 :- 0.33% :138.3% :

F. : : 230,030 : 430,680 : 154,000 - 0.2% / 161,183 = n/a = 162,657 161,680 : £161,432 :+ 0.06% :142.5% :

M : : 231,790 : 424,307 : 153,850 - 0.1% / 164,751 = n/a = 162,912 162,151 : £163,451 :+ 1.25% :141.8% :

A : : 235,822 : 431,013 : 153,850 +0.0% / 165,609 = n/a = 160,395 162,303 : £163,956 :+ 0.31% :143.8% :

M : : 238,874 : 430,936 : 153,700 - 0.1% / 167,208 = n/a = 160,519 162,344 : £164,776 :+ 0.50% :145.0% :

J. : : 240,394 : 438,622 : 153,550 - 0.1% / 168,205 = n/a = 163,049 163,642 : £165,924 :+ 0.70%

Jl : : 2xx

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

mom: +0.64% : +1.78% : Est.DI: 145.9% / +0.60% := n/a = :+1.58% :+0.80% : + 0.70%

 

Meantime...

 

Barratt seems to be putting in a "right shoulder" : BDEV-chart

Hmm, so I'm sure you have to agree now that it's not exactly "crash cruise speed" is it?

[John Doe]

Barratt seems to be putting in a "right shoulder" : BDEV-chart

Nice call.

 

BDEV down 5% as we speak!

[borassic]

I am an ex EPC surveyor but still get alerts to submit prices for EPCs.

 

After a dead quiet Apr,May and Jun my inbox has been very busy with request for EPCs. Is there stress out there? Too right. I hear petrol receipts are down 10%.

 

I live in South Bucks.

 

My view is we are in recession near as damn it. My local EA has sent me the same properties 3 or 4 times now in the vain hope of getting viewings (it must be sooo dull to be an EA now) I am a FTB at 44 yrs old!!

[LauraB]

My local EA has sent me the same properties 3 or 4 times now in the vain hope of getting viewings

 

Thus we are not to believe the tales of BTL 'professionals'* out on their saintly lender-encouraged spending sprees outbidding FTBs, purely in an effort to put a roof over the heads of the less fortunate?

 

*No-one it seems has a suitable nausea bag - not even THIS GUY. This gap in the market needs to be filled.

[TrueNorth]

PWC announces house prices will return to their 2007 peak by -- wait for it -- 2020.

 

Story here from the Independent, but a mass of coverage of this this morning

 

 

 

House prices in the red until 2020, warns PwC

By Simon Read, Personal Finance Editor

 

Tuesday, 12 July 2011

 

Housing prices are unlikely to recover to their peak levels until 2020, according to PricewaterhouseCoopers' latest UK Economic Outlook.

 

 

Even then, the analysis suggests there is just a 50 per cent chance of a real house price rise relative to 2007, when prices reached their peak.

 

Over the next four years there is only a 12 per cent chance that real house prices will have risen back above their 2007 peak, according to PwC's analysis. In fact the median projection over the period until 2015 is for a 12 per cent real decline.

 

There is further depressing property news in the Rics June 2011 UK Housing Market Survey published today. It reports that the housing market faced a stalemate during June, as demand failed to pick up and supply of new property fell back.

 

Rics' housing spokesman Alan Collett said: "The housing market was pretty flat during June. Buyer interest in purchasing property remains relatively low across much of the UK while the volume of new stock which is coming to the market has slackened. With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue."

 

The picture is going to get worse before it shows any sign of recovery, warned John Hawksworth, the chief economist at PwC. "We expect average UK house prices to drift down further over the next year and then enjoy only a modest recovery over the next few years," he said.

 

"This reflects the dampening impact of declining real income levels and continued tight credit conditions for first-time buyers in particular." Mr Hawksworth added that there would be a "long, slow road to recovery".

 

"Later in the decade, we expect stronger house price growth as supply shortages reassert themselves and credit availability gradually returns to more normal levels," he said.

 

The Rics figures for June show that the property market in London continues to buck the downward trend.

 

"London remains a market apart with both sales and prices showing a greater degree of resilience," Mr Collett said.

 

The capital and the South-east will lead the economic recovery, according to PwC. "The UK as a whole faces a slow climb to recovery given the continued squeeze on consumer and government spending," Mr Hawksworth said. "But we see a distinct regional pattern to growth with the public spending cuts acting as a drag on recovery in Northern Ireland, Scotland, Wales and the North-east in particular."

 

He said London and the South-east is not be immune to the cuts, but growth there is less dependent on the public sector and more on the international financial and business services sector, in which growth is likely to remain relatively strong.

 

However, there was some relatively positive news for the property sector yesterday as new data from the Council of Mortgage Lenders showed a rise in loans for house purchase and remortgaging. Figures for May showed more signs of stabilisation in the mortgage market, according to the CML.

 

Michael Coogan, the CML's director general, said: "There is no evidence of any drastic changes or significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.

 

"Recent securitisation deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. This is a positive influence on mortgage market conditions," Mr Coogan said.

[TrueNorth]

PWC announces house prices will return to their 2007 peak by -- wait for it -- 2020.

 

Story here from the Independent, but a mass of coverage of this this morning

 

 

 

House prices in the red until 2020, warns PwC

By Simon Read, Personal Finance Editor

 

Tuesday, 12 July 2011

 

Housing prices are unlikely to recover to their peak levels until 2020, according to PricewaterhouseCoopers' latest UK Economic Outlook.

 

 

Even then, the analysis suggests there is just a 50 per cent chance of a real house price rise relative to 2007, when prices reached their peak.

 

Over the next four years there is only a 12 per cent chance that real house prices will have risen back above their 2007 peak, according to PwC's analysis. In fact the median projection over the period until 2015 is for a 12 per cent real decline.

 

There is further depressing property news in the Rics June 2011 UK Housing Market Survey published today. It reports that the housing market faced a stalemate during June, as demand failed to pick up and supply of new property fell back.

 

Rics' housing spokesman Alan Collett said: "The housing market was pretty flat during June. Buyer interest in purchasing property remains relatively low across much of the UK while the volume of new stock which is coming to the market has slackened. With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue."

 

The picture is going to get worse before it shows any sign of recovery, warned John Hawksworth, the chief economist at PwC. "We expect average UK house prices to drift down further over the next year and then enjoy only a modest recovery over the next few years," he said.

 

"This reflects the dampening impact of declining real income levels and continued tight credit conditions for first-time buyers in particular." Mr Hawksworth added that there would be a "long, slow road to recovery".

 

"Later in the decade, we expect stronger house price growth as supply shortages reassert themselves and credit availability gradually returns to more normal levels," he said.

 

The Rics figures for June show that the property market in London continues to buck the downward trend.

 

"London remains a market apart with both sales and prices showing a greater degree of resilience," Mr Collett said.

 

The capital and the South-east will lead the economic recovery, according to PwC. "The UK as a whole faces a slow climb to recovery given the continued squeeze on consumer and government spending," Mr Hawksworth said. "But we see a distinct regional pattern to growth with the public spending cuts acting as a drag on recovery in Northern Ireland, Scotland, Wales and the North-east in particular."

 

He said London and the South-east is not be immune to the cuts, but growth there is less dependent on the public sector and more on the international financial and business services sector, in which growth is likely to remain relatively strong.

 

However, there was some relatively positive news for the property sector yesterday as new data from the Council of Mortgage Lenders showed a rise in loans for house purchase and remortgaging. Figures for May showed more signs of stabilisation in the mortgage market, according to the CML.

 

Michael Coogan, the CML's director general, said: "There is no evidence of any drastic changes or significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.

 

"Recent securitisation deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. This is a positive influence on mortgage market conditions," Mr Coogan said.

[tinecu]

By the looks of it UK house prices will be headed south for a while before the grand recovery (in nominal terms!) by 2020

See:

 

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

http://www.home.co.uk/guides/time_on_market_report.htm?location=london&all=1

[TrueNorth]

apologies for double post -- the forum has been playing up for me recently, not loading pages, etc.

[John Doe]

By the looks of it UK house prices will be headed south for a while before the grand recovery (in nominal terms!) by 2020

See:

 

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

http://www.home.co.uk/guides/time_on_market_report.htm?location=london&all=1

Except in Scotland that is

 

TBH, I think they are flat at best compared to this time last year up here.

 

I like the Home reports, they are usually quite honest.

[Meralti]

y/y m/m forcast actual

----- ----------- ------

DCLG HPI -1.6% -0.2% -0.3%

 

released today

by the forex factory

 

The trend is from the chart and has broken into the negative.

[drbubb]

Hmm, so I'm sure you have to agree now that it's not exactly "crash cruise speed" is it?

I haven't been talking "crash cruise speed" for months.

 

BDEV told us late 2010 and early 2011, that we could expect a "pause", and that is what we have been in for some months.

I reckon BDEV will signal with a sharp fall below 100p if/when the pause is going to be ending.

 

BDEV-chart

 

The fall through 100p may have begun from that recent "right shoulder", and the volume on the way down should give us an idea whether a sustained drop has begun

[tallim]

PWC announces house prices will return to their 2007 peak by -- wait for it -- 2020.

 

Story here from the Independent, but a mass of coverage of this this morning

I'm unsure as to how we would get much bigger real prices than 2007. I can understand why we've had real price rises as we've had transitions to double income households, falling mortgage interest rates, bigger risk appetites for investors, etc...

 

I'm not sure what the next transition would be that would allow even higher real prices than 2007, the peak of silly multiples, liar loans and tiny mortgage interest rate spreads.

 

Off the top of my head I'm thinking triple or quadruple income loans, double income with state subsidy loans, double income with lodger revenue loans. I'm not sure these will ever become mainstream products though?