UK House prices: News & Views

[John Doe]

My forecast of 12 months ago was negative (I think: -3 to -5%), so I missed by as much as they did.

Not if you include inflation

 

Hometrack and Home indices are better IMO

 

I think Home are definitely one of the best (seem to be honest in their appraisal too).

[drbubb]

Not if you include inflation

I do not.

I forecast nominal prices.

Inflation is not very meaningful in the house price inflation (in my way of thinking.)

Changes in income are more important

[BoldAsBrass]

Why would a builder pay for your son, the labourer to do a degree when he can take his pick for free of already trained + experienced people?

 

I must admit it surprised me - and I was equally dubious about it when my son told me about it. My son has proved himself to be a reliable and trustworthy employee - and his boss seems to have taken a shine to him. The deal is unwritten - my son has agreed to pay him back if he leaves within 2 years of completing his course. The cheque his boss gave him to pay for the first year of the course looked pretty real to me.

 

My son - 'the labourer' - has other skills too. As well as overhauling the web site, he's also refining the way the busine

 

 

Being my profession, I frequent a forum for bricklayers, which covers the whole of the UK.

I left the industry 20 years ago. I'm trying to visualise the sort of blokes I knew who were bricklayers - sat at a computer - adding posts to a forum. No, it just won't come. You sure you're not in a forum of one?

 

Maybe you live in a parallel universe though.

 

No, just a different part of the country. Had a plumber my son knows around a month before Christmas - wanted a radiator moved (and changed for a bigger one) in one of the bedrooms. Wanted £300 to do the job and 'no chance this side of Christmas' - haven't heard from him since.

 

2 big 5 bed new builds the other side of the golf course - going up at a very fast rate. Lads working all over Christmas I noticed. Attic conversion on the go on a house about 10 away from mine. Big estate (1500 homes in total) - a few miles from me - 4 or 5 of the big builders building steadily there. Another development in a local market town - visited the show home one Saturday before Christmas (bored and happened to be passing). 1st phase all sold - 2nd phase under construction. Unbelievably (given the amount of empty office space) - couple of big new office developments on the go a few miles away too.

 

Son's friend is a trainee QS - company he works for is very busy.

[neil324]

I must admit it surprised me - and I was equally dubious about it when my son told me about it. My son has proved himself to be a reliable and trustworthy employee - and his boss seems to have taken a shine to him. The deal is unwritten - my son has agreed to pay him back if he leaves within 2 years of completing his course. The cheque his boss gave him to pay for the first year of the course looked pretty real to me.

 

My son - 'the labourer' - has other skills too. As well as overhauling the web site, he's also refining the way the busine

 

 

 

I left the industry 20 years ago. I'm trying to visualise the sort of blokes I knew who were bricklayers - sat at a computer - adding posts to a forum. No, it just won't come. You sure you're not in a forum of one?

 

 

 

No, just a different part of the country. Had a plumber my son knows around a month before Christmas - wanted a radiator moved (and changed for a bigger one) in one of the bedrooms. Wanted £300 to do the job and 'no chance this side of Christmas' - haven't heard from him since.

 

2 big 5 bed new builds the other side of the golf course - going up at a very fast rate. Lads working all over Christmas I noticed. Attic conversion on the go on a house about 10 away from mine. Big estate (1500 homes in total) - a few miles from me - 4 or 5 of the big builders building steadily there. Another development in a local market town - visited the show home one Saturday before Christmas (bored and happened to be passing). 1st phase all sold - 2nd phase under construction. Unbelievably (given the amount of empty office space) - couple of big new office developments on the go a few miles away too.

 

Son's friend is a trainee QS - company he works for is very busy.

 

I shouldn't feed the troll but i'm bored.

 

Here's the forum, i use the same user name as here.

 

http://londonbricklayers.co.uk/phpBB-3.0/phpBB3/index.php

 

So which part of the country you from then, maybe i can post a thread on there asking if it's booming there and when i get conformation i can jump on the train with my bags packed and earn a fortune.

[harvipark]

I am tracking the halifax index and this seems a bit optimistic to me...we are already at 2004 levels!

 

House prices to fall to 2004 levels

House prices this year will plunge as much as 10pc to their lowest level since 2004 after suffering a far sharper decline than expected last month, economists have warned.

 

http://www.telegraph.co.uk/finance/newsbys...004-levels.html

[drbubb]

I am tracking the halifax index and this seems a bit optimistic to me...we are already at 2004 levels!

http://www.telegraph.co.uk/finance/newsbys...004-levels.html

EXCERPTS

Such sharp declines would outstrip the official forecast for a 2.7pc decline in 2011, and roughly match forecasts by National Institute of Economic and Social Research (NIESR) that "real" house prices, after accounting for inflation, would still be at 2003 levels in 2015.

(The fall in Jan. could be a shocker. Thanks to the cold weather, few buyers will have done viewing leading up to purchase.)

 

Homeowners problems could be compounded by an interest rate rise. Mr Archer said: "Current mounting speculation that the Bank of England could be forced into an early raising of interest rates by rising inflation adds to the downward pressure on house prices." About two-thirds of households are on variable rate mortgages, exposing them to higher costs if rates rise and potentially increasing the number of forced sellers.

(A real risk. Let's see what happens if/when sovereign debt worries spread to the UK in 2011.)

 

However, Martin Ellis, Halifax's housing economist, said falling prices may deter sellers from putting their homes on the market, helping to "reverse the imbalance between buyers and sellers".

(The reverse may be true. At some point, falls lead to panic, with more people wanting to sell, and "save themselves.)

 

[harvipark]

However, Martin Ellis, Halifax's housing economist, said falling prices may deter sellers from putting their homes on the market, helping to "reverse the imbalance between buyers and sellers".

(The reverse may be true. At some point, falls lead to panic, with more people wanting to sell, and "save themselves.)

 

I tend to switch off when i read Martin Ellis' comments!

 

I was house hunting in 1994 and the biggest problem at that time was negative equity. I put realistic offers in on two properties and the vendors rejected them as they had a minimum selling price.

 

I was a little early in that HPC so the vendors actually did me a favour as the house prices dropped even further over the next few years

[bobbyald141]

However, Martin Ellis, Halifax's housing economist, said falling prices may deter sellers from putting their homes on the market, helping to "reverse the imbalance between buyers and sellers".

 

I addressed this quote on HPC as follows:

 

Implying what?

You are expected to imply: Less sellers = less supply = upward pressure on prices i.e. when buyers=sellers we have equilibrium and prices will stop going down.

 

Actual answer for anyone who has got past Economics 101 (probably doesn't include Mr Ellis):

Price is set by supply and demand. Sellers (or buyers) that stay out of the market do NOT contribute to supply (or demand) and therefore have no effect on price. For those buyers and sellers actually in the market setting the price: the price is not in equilibrium when buyers = sellers as buyers ALWAYS equals sellers (how could they not?).

 

It's a long way down from here.

[BoldAsBrass]

So which part of the country you from then, maybe i can post a thread on there asking if it's booming there and when i get conformation i can jump on the train with my bags packed and earn a fortune.

 

You are deliberately misreading what I said. I didn't say anything about making a fortune. I did say people are busy, but not so busy they are turning work down. Rates have gone down - no doubt about that. I'm in Surrey - Guildford is probably the nearest town you will know of. I wouldn't have thought there was enough work around here for people to start moving from other parts of the country to do it. As ever in the building game, it seems to be who you know.

 

The point I was trying to make was that, like house prices, 'the economy' varies by a huge amount regionally.

 

I went for a meal on Saturday night with my wife in our local town. I keep reading about this slow down, the problems, the debt etc. - yet you go into my local town on a Saturday night and the pubs and restaurants are heaving.

 

I read somewhere this morning that house prices are at 2004 levels. Not a surprise to me. They have flat lined around here for years. Which is one of my basic points - the boom happened here best part of 10 years ago. Over the last 10 years a huge number of people have bought houses at, roughly, current market levels. There is a lot of money lent into the housing market now. This 'boom' has been going on for a decade now - certainly in the South and South West of the country.

 

I am not a troll. I'd like to see house prices halve - to give my kids, and yours, a chance of a decent life spent without massive debts making bankers rich.

 

However, I'm not under any illusion that they can halve - without taking the banking system and economy with them. I'm not sure that that is a price worth paying. Maybe it is. Just as the current house price 'correction' is now mainstream as far as the media is concerned - the idea of moderate inflation being highly desirable is also getting aired more and more often.

 

Which is more likely? 10 years of moderate (global) inflation - or a 50% house price correction that will take the banking system and economy down with it?

[John Doe]

Which is more likely? 10 years of moderate (global) inflation - or a 50% house price correction that will take the banking system and economy down with it?

I'd go for the first anytime.

 

PS not to worry, we are saved!

 

http://www.lovemoney.com/news/make-good-pr...?source=1000578

[drbubb]

I'd go for the first anytime.

If only... we could make it so, by just choosing.

Unfortunately, governments see to do everything they can to DELAY the problems in a way

that just makes to risk of a Global Depression higher.

 

Delaying is not the same as Averting a crisis... unfortunately

 

Just look at the last decade, to see how the problems were worsened by almost every decision

== == ==

 

Hmm. JUICY NEW PRODUCT - Or a TRAP for unwary FTBers ? :

The deal is a two-year fixed rate at 5.79%, for borrowers with a deposit of only 10%. However, what really sets this mortgage apart is the fees – or rather, the lack of them.

 

Buying your first house is a big step, but many first-time buyers make these classic mistakes

There are no product fees, no conveyancing fees, no mortgage application fees. Indeed, the lender will even refund the valuation fee. According to Halifax, the average first-time buyer typically faces fees of just shy of £2,000 when buying a property. That’s £2,000 in the buyer’s pocket, instead of going to the lender with this mortgage, something that I know would have appealed to me when I bought back in February 2009.

 

This is a stupid deal for the lender.

Chances are. many of these loans, if made as described, will wind up as problem loans.

 

You cannot appeal the "law of gravity", just be offering a 90% LTV loan.

If prices fall 10%, then almost all your 90% borrowers will be trapped in negative equity - What then?

 

BTW, 5.79% is not cheap, and for HOW LONG is the rate fixed ?? Two years?

When Rates rise after 2 years, what then?

[John Doe]

If only... we could make it so, by just choosing.

 

As I have said before, I think that’s what they are trying to do, and so far they are succeeding.

 

You cannot appeal the "law of gravity", just be offering a 90% LTV loan.

If prices fall 10%, then almost all your 90% borrowers will be trapped in negative equity - What then?

 

BTW, 5.79% is not cheap, and for HOW LONG is the rate fixed ?? Two years?

When Rates rise after 2 years, what then?

 

It's 4.99% with a £99 fee, and beside, 5.79% is fairly cheap compared to the old days.

 

But don't worry; they’re not handed them out to just anyone (like before), the credit score you would need to actually get one of these would imply you (or your guarantor) were good for the loss.

 

Like the old days, when banks only lent to those who didn't actually need it

[drbubb]

As I have said before, I think that’s what they are trying to do, and so far they are succeeding.

 

It's 4.99% with a £99 fee, and beside, 5.79% is fairly cheap compared to the old days.

After 2 years, it is what % over base?

[Jake]

This may have been answered before but...

 

When do the bears and any bulls see uk house prices ever returning past 2007 peak? Is it 18 years, never, 5, 25? For comparison here in japan it is 22 years so far and no return in sight yet.

[drbubb]

This may have been answered before but...

When do the bears and any bulls see uk house prices ever returning past 2007 peak? Is it 18 years, never, 5, 25? For comparison here in japan it is 22 years so far and no return in sight yet.

It could easily be that long.

However, I am reluctant to forecast a number of years, since there are inflationary scenarios of reasonable likelihood that could cause a forecast to "miss" by miles. I think it is better to stay alert than gamble on a forecast.

 

So long as we stay in the range of "crash cruise speed", with UK builders weak, I think I know what path we are in, and where that leads. If prices meander off the path, than I will be alert to the alternatives.

[Jake]

It could easily be that long.

However, I am reluctant to forecast a number of years, since there are inflationary scenarios of reasonable likelihood that could cause a forecast to "miss" by miles. I think it is better to stay alert than gamble on a forecast.

 

So long as we stay in the range of "crash cruise speed", with UK builders weak, I think I know what path we are in, and where that leads. If prices meander off the path, than I will be alert to the alternatives.

Dr B, what is your worse case for the uk btw? You alluded to that the other day but didn't follow through. I am perplexed by your interest in UK property when thinking about your rising waters and ice age thoughts. Are you, one day thinking of a move back to the UK? Or a property to rent out? Why the massive interest if you think the UK is headed down the tubes?

I've taken my eyes off UK property for the time being, until it gets real a bit. Still I watch those av prices in gold with interest...

[John Doe]

After 2 years, it is what % over base?

People don't plan that far ahead

[John Doe]

This may have been answered before but...

 

When do the bears and any bulls see uk house prices ever returning past 2007 peak? Is it 18 years, never, 5, 25? For comparison here in japan it is 22 years so far and no return in sight yet.

I think some people see me as a bit of a bull now, but in fact I have said many times that I think prices will fall, but slower and less than many here believe (Until / if IR's go wild, then all bets off).

 

Time for recovery is difficult and I think will depend on many factors, such as, IR's inflation/deflation and assuming these are mild (of which there is no guarantee) then property type and location will also have effects.

 

So, bearing that in mind, I haven’t a clue.

[G0ldfinger]

http://gold.approximity.com/since1999/UK_H...es_in_Gold.html

[drbubb]

Dr B, what is your worse case for the uk btw? You alluded to that the other day but didn't follow through. I am perplexed by your interest in UK property when thinking about your rising waters and ice age thoughts. Are you, one day thinking of a move back to the UK? Or a property to rent out? Why the massive interest if you think the UK is headed down the tubes?

I've taken my eyes off UK property for the time being, until it gets real a bit. Still I watch those av prices in gold with interest...

To be honest, I have studied it long and hard.

So my interest has morphed into a true curiousity, like trying to take apart a clock and understand what makes it tick.

 

I want to observe it right through to the low, and see how predictable it is.

 

Understanding the long property cycle in the UK helps me to understand it everywhere. Though I think the Uk is somewhat unique in the way that the government was so determined to avoid a crash, and by taking so many actions to delay it, has created the conditions for such a painful disaster.

 

Also, the characters are larger than life. Can you find bigger or more deserving villains than Gordon Brown and the UK banks ?

[drbubb]

People don't plan that far ahead

Hmm.

But they will still be mired in massive mortgage debts

[John Doe]

Hmm.

But they will still be mired in massive mortgage debts

I was being a little tongue in cheek. I would guess it reverts to the SVR, and prob neg equity to boot.

 

However, as likely as it is, there is absolutely no guarantee that rates will be high in two years. As you have stated, the UK is unique in trying to avoid a crash because we are totally screwed if there is a big one. As such, everything will be done to avoid a big crash. The most likely course being moderate inflation for a long period (assuming the markets allow it).

 

In fact, if rates do rise soon and cause the s**t to hit the fan, as it inevitably would, then the more likely rates will be lower again by the time the fixed rate ends.

[wee Jinky]

http://www.ros.gov.uk/public/news/latest_house_prices.html

 

good report for Scottish stats

as alluded to earlier regional variations are big

 

 

Current Previous Change in

28 Day Report Average Price.. Sales Volume.. Average Price... Sales Volume..avg price month.........avg sales vol month

Scotland........ £160,190....... ..5,488 ................£158,454............ 6,265............. 1.1%................ .......-12.4%

Western Isles.. £82,402........... 22................. £114,773................. 22....... -28.2%............................. 0.0%

 

thats a 28% drop in 1 month in sold prices from the month before on exactly the same volume

 

The Western Isles was one of the last places to be affected by the bubble

so in the last up first down world it looks to me like we are on our way

holiday homes make up a good percentage of property there as well

which may be an indicator to affordability elsewhere

 

prices elsewhere in Scotland are all over the place with some still rising

but on lower volumes which may indicate top of the range propertys selling

and skewing the average upwards

Scotland never experienced the last crash in the 90s

thankfully Thatcher made us all unemployed and we failed the credit test

Will be interesting to see how it reacts

I expect the denial phase to be oversubscribed

 

 

 

 

[drbubb]

... as likely as it is, there is absolutely no guarantee that rates will be high in two years.

As you have stated, the UK is unique in trying to avoid a crash because we are totally screwed if there is a big one. As such, everything will be done to avoid a big crash. The most likely course being moderate inflation for a long period (assuming the markets allow it).

 

In fact, if rates do rise soon and cause the s**t to hit the fan, as it inevitably would, then the more likely rates will be lower again by the time the fixed rate ends.

I think you need to reverse that:

"there is absolutely no guarantee that rates will STILL BE ULTRA-LOW in two years."

 

Here's why:

The homebuyer gets "business as usual" if rates stay low, and probably a negative equity disaster if rates jump.

He/she takes a huge risk of financial disaster, against the opportunity to buy an overpriced home today.

 

In effect, he is betting on continued financial recklessnes by banks and the country, at a time when other

over-geared countries are 'getting found out" and suffering a sudden jump in their borrowing costs.

 

The risk/reward is all wrong for prudent investing.

 

I know, some will say, " But if rates jump, many people will be in a mess, and the government will not allow that

to happen." Can he not see that the decision is no longer with the BofE? The UK's fate is in th hands of the market.

And there are many examples around the world of how disaster visits countries in such circumstances.

[drbubb]

This post from Meralti on another thread

... puts into perspective the risk that a FTBer taking that 90% LTV deal is taking:

Are the UK public are being actively primed for higher mortgage interest rates.

 

After reading the following in the Daily Mail I think that they are.

 

There's a good Alphaville post from yesterday about the current falling trend in house prices (complete with ironic title), that rubbishes the spin cacked out by Halifax.

 

There is also an interesting comment by Ando, shown below:

 

Worth noting that the "expensive" new debt remains relatively cheap(ish) by historic standards and that the last decade has been the aberration, not the norm. It is very likely that in 2-3 years the idea that a new buyer could get a mortgage under 6% will look laughable. The effect on house prices depends on what happens to the base rate in this time as increases are the only way to "bail-in" the bailed-out still benefiting from 2.5% SVRs and lifetime trackers and the like. Banks need to make more money out of existing borrowers and soon.

 

All this comes down to the fact that banks can't fund the mortgage they grant at base rate (that's why the number of mortgage has halved since 2007). Banks must fund their mortgage lending via the bond market. At the moment, it's asking circa 6%. And this level is being held low by the QE.

 

What price would UK mortgage bond debt be without QE?- 8%, 9%. What spread would the banks put on top of the bond yield to produce profits large enough to continue recapitalising; 2%, 3%, 4%?. And when will the banks have to start 'bailing in' the bailed out borrowers?

 

Shame on the bank that creates such a trap. (I hope the management winds up canned.)

It reminds me of the deals being offered in the US a few years ago, with low "introductory" interest rates in years 1 and 2.