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UK House prices: News & Views

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'The latest figures from the Bank of England revealed that net lending – which strips out redemptions and repayments – dropped to just £86 million in July, a steep fall from June’s £518 million.'

 

86 million sounds like a very small amount of lending. How many homes would that buy, a few hundred?

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'The latest figures from the Bank of England revealed that net lending – which strips out redemptions and repayments – dropped to just £86 million in July, a steep fall from June’s £518 million.'

 

86 million sounds like a very small amount of lending. How many homes would that buy, a few hundred?

This is net lending so doesn't translate directly into house purchases. It does seem pretty small though.

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WILL WE SEE A SEA CHANGE in how EA's talk to clients?

 

Significant fall on Nationwide Index.......

Average Price £166,507 *

MINUS 0.9% MoM

Combined with the very sharp drop in transactions, this means that Housing Demand is disappearing fast.

If EA's want to stay alive, they are going to have to get VERY AGGRESSIVE at talking down selling prices !

 

I have a simple theory:

+ In a bullish market, the job of the agent is to talk the buyers up to/near the Seller's price, and

+ In a bearish market, the job of the agent is to talk the sellers down to/near the Buyer's price.

 

I am sure that all agents know this, whether consciously, or unconsciously.

 

Anyway, I think you are about to see a DRAMATIC CHANGE in how EA's describe the market, especially to sellers, compared with how they approached it 2-3 months ago, when some still though the market was rising.

 

== == ==

 

*somebody must be smoking good stuff, and it isn't me:

Minus 0.9% - is not right ! / If you compare £166,507, with July's £169,347, that's down 1.68% in just one month !

That's a rather MASSIVE DROP- almost -2% mom, if you forget about those so-called "seasonal" adjustments.

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It's the EA's responsibility to get the best price for their customer (seller). Of course the best price may well be 15% off todays asking price (if that is 15% more than they would get in 12 months time). It's just a matter of interpfretation.

I get your point, of course.

But you could also they, their real job is to get the sale done.

And in a FALLING market such as the UK now, where Buyers gain by waiting, it means:

 

+ Get the Buyer to bid firm, and stay firm (at a "reasonable" price not too far below last done), and

+ Talking the Seller down to hit the "reasonable" bid

 

ALL ELSE, is basically a waste of time and energy, and a denial of the realities of the current market.

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You are both right DrB and CamperVanMan.

 

There is also however a significant part of the market where vendors can't drop the price because they are only have a wafer thin slice of equity left (having been on a spending spree for 10 years). I see a nasty deadlock ahead, then some shocking falls - the capitulation phase.

 

An EA in High Wycombe told me yesterday July was a record month for them (and they are a new business only 2 years established).

 

 

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An EA in High Wycombe told me yesterday July was a record month for them (and they are a new business only 2 years established).

 

Not difficult considering they started trading in 2008 which was slap bang in the middle of the recent downwave.

 

If this really is the start of the next leg down that record may be in place for some time to come.

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There is also however a significant part of the market where vendors can't drop the price because they are only have a wafer thin slice of equity left (having been on a spending spree for 10 years). I see a nasty deadlock ahead, then some shocking falls - the capitulation phase.

 

An EA in High Wycombe told me yesterday July was a record month for them (and they are a new business only 2 years established).

The market is weak, and it may not accommodate their selling price expectations !

Perhaps that EA was good at "talking buyers up" until Q1-2010, and is now good at talking the sellers down

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Perhaps EAs (especially ones for whom this is their first recession) will now see that sales turnover is a better way to meet their sales targets, rather than giving large valuations on prospective clients (in order to win the instruction).

 

Of course, I suspect they know this already, but fight the tsunami of VI and media-ramping that spouts property only ever goes up, plateaus for a bit, then resumes upwards...

 

Once the people realise that QE/Brown's last gamble hasn't worked then we may see a market with more activity. Low borrowing costs are presently a God-send for the indebted - does anyone know how, or what will bring IRs to a real level?

 

 

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Low borrowing costs are presently a God-send for the indebted - does anyone know how, or what will bring IRs to a real level?

When the fear of a depression leaves, people will bail out of Gov. bonds (Gilts / Treasuries) and the yields will rise.

This is rather inconvenient for TPTB - they need to raise lots of dosh to cover deficits for the next few years.

 

Of course, we could have a currency crisis which will also cause rates to rise.

 

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Right on cue Dr B, the Agents are changing their tune:

 

I noticed today the prominently sited local (Norfolk area) branch of WH Brown had withdrawn all the property details from it's window displays and replaced them with 'SALE NOW ON' and 'COMMITTED SELLERS'.

 

Could be a marketing gimmick but it sounds like the Agents are overtly starting to talk the sellers back down!!

 

Anyone else notice if their local branch of WH Brown was similarly adorned? Just wondering if it's a local or national campaign.

Good find !

 

"No sales without price cuts", should be the new mantra of EA's everywhere.

 

This change in attitude WILL bring prices down. In fact, I think you will find the press covering the new attitude of Agents soon too,

since the EA's will want to get the word out, to make their price cutting-efforts easier.

 

In fact, the whole thing now will be to "create value" in the minds of the buyers, and they will want to see a "lower than last done"

price as an incentive to buy. Remember: this month's price cuts (to below market) creates a new lower market level which

must be beat, to attract next month's round of buyers.

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I told him I was prepared to buy today at 20% off asking price of numerous properties in S'sea. Not prepared to pay a penny more.

 

Alas, as he commented, the sellers think they are going to get their full asking prices so denial just goes on and on.

 

I was talking to some Doctors tonight about some of the things going on in hospitals near me and their advice was not to get ill or old in this country. Emmigrating was advised.

The attitude ("I want full asking price") will get chipped away:

 

1/ Properties will not sell, and EA's will lose interest in helping those vendors with "unrealistic" prices

 

2/ EA's will begin talking prices down (in conversations with vendors)

 

3/ More and more bearish headlines will show up in the press

 

The Market will seek the level that permits the most business activity (ie property sales), and that means LOWER prices

== ==

 

Tell him:

"Someone on my website said: The Job of the Estate Agent in a falling market is to talk the sellers down.

Are you willing to do your job? If not, I will find a agent who is." (you might put the point more politely.)

 

Finally, BE PATIENT.

It takes time to turn the Titanic. It is turning, but is not yet full speed ahead for falling prices.

Crash Cruise speed is coming. and it will take many months to whack off 20%, if the market

slides at 1-2% per month.

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Seeing a lot more price drops in the areas I have been looking over the past month. Sellers seem a lot quicker to cut the price after initial market at 'opening' level.

 

Obviously most are still quite optimistic in their valuations however EA's are a lot less condesending when I give them my opinion on the property current market value.

 

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Our landlady has put our place on the market. She is asking x290 our current rent. There hasn't been a single view since it went on 3 months ago. I don't think there's any danger of us having to move out before out lease is up next July.

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Our landlady has put our place on the market. She is asking x290 our current rent. There hasn't been a single view since it went on 3 months ago. I don't think there's any danger of us having to move out before out lease is up next July.

 

 

Interesting. My rent is one 413th of the asking price our landlady couldn't sell her house for until we rented it this August. Can anyone beat that?

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Interesting. My rent is one 413th of the asking price our landlady couldn't sell her house for until we rented it this August. Can anyone beat that?

 

I imagine ours would be a similar mutliple where we are renting now

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Our rent is 1/824th the price of the house I live in. its much cheaper than just the interest if I had an interest only mortgage thingy.

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Our rent is 1/824th the price of the house I live in. its much cheaper than just the interest if I had an interest only mortgage thingy.

 

 

Wow, Azazel, that is quite amazing. Where in SW England are you roughly? Renting is a no-brainer for you...

 

We were doing the maths the other day and of course it is even more in our benefit than the figures suggest AS LONG AS HOUSE PRICES STAY STATIC OR FALL. We pay no buildings insurance, we pay no maintenance costs (and in a 400 year old house these are several!) and we have a couple of hours of gardener a week provided. We're happy! (though we hope they'll fix the few little roof leaks soon... :-) )

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Yes, Amazing.

 

If a 5% gross yield is a sort of breakeven proposition (that's a rent = 1/240th of the property valuation), it is astonishing that people would accept only half of that and tie up their property, instead of selling.

 

This is like a collective fantasy : So certain are people that "property prices will rise in the long term", that they will subsidise tenants to an extraordinary degree to hold onto a property.

 

The reality from here may be that prices resume their slide, and valuations fall progressively, month by month for 2-3 years or longer. It is a great time to have your capital somewhere else, even just in cash, but out of a falling asset. Many people would happily pay a rent equal to more than a 5% yield, in order to sidestep the prices falls. In effect, the rent is not only the price of living, but also an insurance premium you pay, to have someone else hold onto the asset that is losing value. As more landlords see that, they will sell down their properties, to escape the losses.

 

By the time the slide is done, LLs will want a premium to the fair running yield, to compensate for the risk that property prices will fall.

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This looks like a brief Calm before the storm.

 

UK Halifax index showed August prices up 0.2%, seasonally adjusted.

It's taking some time to turn...

I observe that Halifax index is already off its high of April (NSA) and January (SA),

and I believe that it may be slower to show an impulse move at the Turns, and

that is why I use the average of Halifax & Nationwide in my work.

 

The H&N Index was...

 

Mon.: Rt'move: Na'wide H.old.SA Hali.SA Hali.nsa: H&Nindex : mom :DelusIdx

2010

J. : : 222,261 : 163,481 169,777 169,484 165,514 : £164,497 :- 0.11% :135.1% : HFsa HIGH

F : : 229,398 : 161,320 166,857 166,703 165,997 : £163,659 :- 0.51% :140.2%

M : : 229,614 : 164,519 168,521 168,433 167,808 : £166,164 :+1.53% :138.2%

A : : 235,512 : 167,802 168,202 168,212 170,772 : £169,287 :+1.88% :139.1% : H&N HIGH

M : : 237,134 : 169,162 167,570 167,287 169,204 : £169,183 :- 0.06% :140.2%

J. : : 237,767 : 170,111 166,203 166,351 166,395 : £168,253 :- 0.55% :140.5%

Jl : : 236,332 : 169,347 167,425 167,536 168,331 : £168,839 :+0.35% :140.0%

A. : : 232,241 : 166,507 = n/a = 167,953 168,889 : £167,698 :- 0.68% :138.5%

mom: -1.73%: -1.68% : = n/a = :+0.25% +0.33%

 

/source: http://tinyurl.com/UKtrap

 

That's down: -0.68% in August.

 

The falling Rightmove & Delusion Index is also signalling a possible turn

 

My homebuilder bellwether, Barratt / BDEV.L, has paused ... update

zzz1.gif

 

But I note that the recent big volume days have been to the downside.

A confirmation that a bigger slide is underway might be if BDEV slides thru support near BDEV-92p

with rising volume. On the other hand, an upside breakout with volume, would signal that the

topping process will take longer.

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Finally, BE PATIENT.

It takes time to turn the Titanic. It is turning, but is not yet full speed ahead for falling prices.

Crash Cruise speed is coming. and it will take many months to whack off 20%, if the market

slides at 1-2% per month.

 

Agreed. But a great majority of people who move house do so because there are reasons other than financial. Schools, elderly down sizing, jobs, divorce, etc etc. Not all these movers want to go into rented, particularly elderly, as they rent as a waste of money.

 

My partner's parents have got the bug to move somewhere with less maintenance and with decent public transport, nearby shop/s and health clinics. They just want to get on with it. House prices going up and down is neither here nor there for them. There is no mortgage involved and they'll buy for what they sell for - or thereabouts.

 

I'm trying to gently educate them a little on the housing market as these people are just canon fodder for estate agents. So, they've seen a suitable house which started out at £275K in July, its now £270k and a very similar house sold for £246k in May 2008. The agents have had no offers.

 

Below £250k the stamp duty drops from 3% to 1%, so, clearly this house won't sell above £250K.

 

Bearing in mind I've hauled them back a bit and this isn't the "one and only" house for them, what suggestions ( realistic advice) would any property watchers be prepared to offer ? For what its worth, I've told them if the agent calls them, to say they are considering an offer in the £230 - £235K area and they are happy to keep looking.

 

So, instead of waiting months and months for a 20% drop, why not try and get an immediate 12 - 15% drop ?

 

 

 

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Bearing in mind I've hauled them back a bit and this isn't the "one and only" house for them, what suggestions ( realistic advice) would any property watchers be prepared to offer ? For what its worth, I've told them if the agent calls them, to say they are considering an offer in the £230 - £235K area and they are happy to keep looking.

 

So, instead of waiting months and months for a 20% drop, why not try and get an immediate 12 - 15% drop ?

I just read a mainstream report by the Bank of New Zealand on the NZ property market. Very sensible stuff calling for a "long slog to property sensibility". The advice given was to offer your own valuation based on fundamentals; offer the pre-bubble price, which in NZ's case is something like the 2003 price [perhaps a "cap" you wouldn't go above while going for lower].

 

Of course, markets always over-correct, but I thought it was interesting to see this coming from such a mainstream source.

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The advice given was to offer your own valuation based on fundamentals

 

Thanks for that Romans. Interesting advice. I suppose one set of fundamentals may be a typical family with two young kids, one full time earner and one part time. So, 1.5 x say £30 k per year = £45k pa household salary. x 4 for a mortgage = £180k. Say a loan to value of 80% gives a buying price of £225,000. This is workable at current interest rates but if mortgage rates hit 8% then this family would be in real trouble.

 

Umm, so, a £230k offer from my in-laws would be pretty good. Food for thought.

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...

So, instead of waiting months and months for a 20% drop, why not try and get an immediate 12 - 15% drop ?

Given that they are selling one for a similar price, it makes sense to put in an offer just below stamp duty and allow theirs to sell at the same price.

 

Waiting for a 20% drop will mean theirs will drop 20% too so they’ve not got anything to gain by waiting.

 

Get it over and done with.

 

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