Jump to content

UK House prices: News & Views


Recommended Posts

IMO it's not about inflation, but the amount of return a bank / mortagagor can realistically achieve for the level of risk etc. of the loan for the loan period (average 11 years for a home before someone moves) vs the spread with the rate it borrows from the BoE. Obviously over time the balancing point is 5% - too much over and no one borrows, too much under and the banks don't make enough. 5% is the figure for mortgages (I hope your not confusing this with Central Bank rates- sorry if I wasn't clear.)

 

Interest rates have only been used as a method to control inflation since monetarism appeared in the late 70s-early 80s.

No no, I meant mortgage rates. I know that during the 70's and 80's mortgage rates were way way higher than 5%.

 

In fact, even in 2001 a 6% capped was thought of as a very good rate

Link to comment
Share on other sites

  • Replies 5.3k
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Posted Images

I think people's attitudes in this country have been distorted by interest rates that were way too high for decades. Why on earth should someone get (for example) 10% risk free return on their savings?

 

Maybe people who want good returns on their savings should invest their money and take a bit of risk.

 

It is your view that is distorted. Base rates are too low and rising cost push inflation is now becoming a real risk in the UK. Rising rates a bit and allowing the pound to strengthen would suppress inflation. A strengthened pound (but not too much) would make imports cheaper - it is cost push inflation that we're seeing after all.

 

We should be looking at this question in terms of political interference in the credit/debit cycle with the aim of making electoral gains. When an administration of any hue is elected, it is in it's interest to initially adopt a policy of contraction in order to reduce inflation and gain a reputation for economic competence (or even prudence - remember that). It then adopts an expansionary policy in the lead up to a subsequent election, hoping to achieve simultaneously low inflation and unemployment by election day. This is what Brown attempted and actually had considerable success - labour rose from the low 20s to 33% of the vote. Commensurate tightening after the huge expansion Brown and the BoE unleashed is necessary - rates will rise, its only a question a when. The people are being actively primed for it. I watched John Redwood discussing the necessity of this only yesterday on Newsnight.

 

Link to comment
Share on other sites

Bold,

 

If savers cannot earn a real rate of interest on their savings, they will shift their money elsewhere...

 

I would have thought that was clearly not the case. Of course some savers will move their money elsewhere. I would suggest the vast majority do not. They just leave the money in the bank muttering darkly about deserving much higher (risk-free) returns on their 'investment'.

Link to comment
Share on other sites

I would have thought that was clearly not the case. Of course some savers will move their money elsewhere. I would suggest the vast majority do not. They just leave the money in the bank muttering darkly about deserving much higher (risk-free) returns on their 'investment'.

That would tend to be the case for the vast majority of Brits.

 

I even see the BoE warning people not to go chasing higher returns in emerging markets (I suppose they would be daft not to say that at present though)

Link to comment
Share on other sites

That would tend to be the case for the vast majority of Brits.

 

I even see the BoE warning people not to go chasing higher returns in emerging markets (I suppose they would be daft not to say that at present though)

 

Yes, Brazil is into double figures now. But would it be risk-free saving your money in a Brazilian bank?

 

I just looked at Persimmon's web site. Maybe there is scope for a 50% fall in prices.

 

The site I looked at is in Sidmouth. I have to say I was almost shocked at what was on offer. A 3 bed semi is offered at just under a quarter of a million pounds. It's internal floor area is about 750 square feet. It is TINY. I think this house could fall by 50% without affecting property prices in my part of Surrey one jot.

 

I'm close to London, motorways, industry, beautiful countryside etc etc - and my house is about 3 times the size - detached, 4 big beds, double detached garage and a half decent garden. Yet my house is only worth about 60% more than that sardine tin in Devon.

 

When the crash comes - if it does - it's going to affect some places a lot more than others.

Link to comment
Share on other sites

Yes, Brazil is into double figures now. But would it be risk-free saving your money in a Brazilian bank?

 

Could be OK for a while as long as you hedged the currecny risk (although in the UK you would probably gain from the movement :lol: ).

 

I would have thought there would be enough of a warning to get your cash out if things looked like going down the spout bigtime.

 

There were some flats in London shown on SKY last night going for £6000 per sq. ft (yes, square foot). The presenter mentioned that the average wage in UK would buy just enough space to put the coffee vending machine!

 

PS Sidmouth is an old peoples home from what I remember, but it is by the sea, and nice and sunny. Maybe they are the only ones left with money ;)

 

Link to comment
Share on other sites

MSM starting to change its reporting propoganda.

 

http://www.bbc.co.uk/news/uk-politics-12239562 video here

 

Falling house prices could help market and UK economy

 

Homeowners are gloomily anticipating higher interest rates, but are the British obsessed with house prices regardless of their effect on the wider economy?

 

Susana Mendonça reports on whether a drop in prices could actually make most people better off. She spoke to Economist Roger Bootle, author Shiv Malik and Lucian Cook form Savills Estate Agents

 

BUT £3.3 million for what is a terace in wandsworth is taking the PI**

RUDE AWAKENING HURTLING FORWARD.

Link to comment
Share on other sites

Couple of news stories today

 

 

http://www.cih.org/news/view.php?id=1346

 

Deposits hit 40-year high as 100,000 first-time buyers kept off property ladder

 

At least 100,000 first-time buyers who have no help from the ‘bank of mum and dad’ were unable to enter the housing market last year, as the number of low deposit mortgages slumped to a record low.

 

In 2009 there were only 28,000 loans to first-time buyers at 90 per cent or more - where buyers had to find a 10 per cent deposit or less - down from 245,000 in 2006¹. And numbers of younger first-time buyers able to buy a home without help with a deposit fell by 100,000 per year between 2006 and 2009².

 

The UK Housing Review published by the Chartered Institute of Housing (CIH) has been collating and analysing UK housing market data for nearly twenty years, tracking market trends over decades. The new edition, published on 21 January, highlights the jump in the size of deposit needed to get on the housing ladder. First-time buyers needed a 30 per cent deposit on average in 2009 in order to purchase a home, higher than at any time since 1970³. According to co-author Professor Steve Wilcox this makes the collapse in the availability of low-deposit mortgages the largest single barrier to home ownership.

 

Richard Capie, CIH Deputy Chief Executive, said: “Deposits are now at a 40 year high and prospects for first time buyers look bleak. The deposit barrier has become a mountain that more and more potential home owners simply can’t climb without help from mum and dad. While we don’t want to return to the days of 110% mortgages and irresponsible lending, it is clear that the pendulum has swung too far in the other direction. This report shows that more work needs to be done to set out new rules which will enable responsible lending to households who can afford to sustain a mortgage. It also shows that we need to make sure that other tenures, such as the private rented sector, provide a better alternative for the increasing numbers of people who will simply be unable to buy a home in future.”

 

 

AND

 

 

http://www.bloomberg.com/news/2011-01-21/u...et-weakens.html

 

U.K. Mortgage Approvals Decline to 21-Month Low as Housing Market Weakens

 

U.K. mortgage approvals fell to the lowest level since March 2009 last month as the housing market weakened amid the prospect of the government’s fiscal squeeze.

 

The number of home loans fell to 40,000 from 45,000 in November, the Bank of England said today in London, based on data from six banks. The value of loans fell to 8.9 billion pounds ($14.2 billion), with net lending dropping to 800 million pounds, the lowest since records began in January 2009.

 

Recent data have shown a mixed picture of the U.K. housing market as the prospect of the biggest government budget squeeze since World War II and tight lending conditions hurt demand. Mortgage approvals are at less than half the level seen at the peak of the market in 2007.

 

“Major U.K. lenders reported that housing market activity remained subdued, partly reflecting a weakening of house prices and potential impacts on incomes from fiscal consolidation,” the central bank said in a quarterly report. “The major U.K. lenders expected both housing market activity and gross lending for house purchase to be broadly flat in 2011.”

 

A U.K. housing-market gauge stayed close to an 18-month low in December as cold weather saw demand for homes wane and fewer people put their properties on the market, the Royal Institution of Chartered Surveyors said on Jan. 18. Hometrack Ltd. said on Jan. 12 banks won’t increase mortgage lending this year as tougher regulation and a lack of funds curb access to credit.

 

The Bank of England held its benchmark interest rate at a record low of 0.5 percent this month and its bond-purchase program at 200 billion pounds as policy makers assessed signs the economic recovery is slowing.

 

Subdued Demand

 

The mortgage-approvals data published today is based on reports from Banco Santander SA, Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Nationwide Building Society and Royal Bank of Scotland Group Plc.

 

The Bank of England said the stock the loans to U.K. businesses fell in the three months through November, and net consumer credit turned negative at the end of the period.

 

Competition put downward pressure on mortgage prices, while overall demand for credit from business and households remained subdued in the fourth quarter, the central bank said.

 

 

The pressure increases

Link to comment
Share on other sites

...

When the crash comes - if it does - it's going to affect some places a lot more than others.

 

It already has in some places, I posted this in the Property forum this morning.

 

Browsing through unsold residential auction lots and I spotted this one;

 

15 Bevan Court, Dunlop Street, Warrington

 

2mcbl82.jpg

 

http://www.houseprices.co.uk/e.php?q=15%2C...ngton&n=100

 

Bought new on 27/09/2006 for £205,000

 

Bought on 30/10/2008 for £155,000

 

Available as unsold at Auction with a guide-price of £65,000-£75,000

 

http://www.auction.co.uk/residential/LotDe...amp;S=L&O=A

 

Maybe landlords can't sell?

Link to comment
Share on other sites

It already has in some places, I posted this in the Property forum this morning.

 

I think you're right, the crash has happened in some parts of the country.

 

I'm not sure if people (generally) really appreciate the differences across the country.

 

10 years ago I had a holiday in Budleigh Salterton (nice town on East Devon coast, rather full of middle class oldies). The town has quite a few roads filled with 2 up, 2 down Victorian terraced cottages (12' front garden, 100' back garden). The sort of cottages that were built to house labourers but which have mostly been tarted up. At that time they were selling for £60k.

 

Now, even today, they are on the market for 300k.

 

At about the same time I remember there was a rash of adverts in the national press - you handed someone some money and they would buy terraces in places like Newcastle, Sunderland etc for about 14k - renovate them (new kitchen, bathroom and lick of paint) - and manage the letting of the properties to DSS tenants at £395 a month. You bunged them 20k per property and they made a bit of profit on the renovation and took a slice of the rent.

 

Those same 2 up 2 down terraces sold for 100k (and more) in 2007. I'm sure they are not that price now.

 

So, in many parts of the country, property increased by a factor of 5 or more and, in some parts of the country, has already fallen back a considerable amount.

 

I bought a house last year in a nice part of Surrey. Looking at the various documents that were presented to me during the sale, it seems that I paid exactly TWICE what it sold for in 1988.

 

I'm sure that in parts of the country where there is little work and no-one (apart from the people that already live there) wants to move there - prices will (or have) tumble - maybe by the 50% widely predicted - maybe more in the places where they want up 6 fold.

 

If my house fell by 50% (I couldn't care less, it would make life a lot easier for my kids) - it would be back to its 1988 price. I can't see that happening myself. With interest rates a fraction what they were in 1988 and the inflation of the intervening 23 years, it would be a massive and serious deflation if prices here went back to 1988 levels.

 

This crash will be very regional and, unless you happen to want to live somewhere with low salaries and/or little work, prices will not go down by much.

 

I wouldn't be daft enough to suggest that property around here is cheap - but it is certainly good value compared to other places - like London and the West Country.

Link to comment
Share on other sites

Nice area Vs grotty area.

 

I don't think I have ever seen such agreement on HPC.

 

As some of us have been seeing / saying, the good areas really do seem to be holding up well, the grotty are falling like bricks.

 

 

http://www.housepricecrash.co.uk/forum/ind...158114&st=0

 

As my first landlord told me many years ago, buy in the crap areas in the dip, then sell them in the boom. The percentage gains in the grotty areas far exceed those in nice areas in booms, and the reverse is true in recessions.

 

Link to comment
Share on other sites

When the truth comes out, or that project even goes tango-uniform, it could be quite detrimental to the average British BTLer's psyche.

Also, whatever happened to the Wilsons? Has the Russian knight in white armor ever shown up?

 

One Hyde Park:

Two fully sold (to the owners and developers)... Just 84 to go! Truth about the most hyped luxury flats in the world

...

Our analysis of the Land Registry figures suggests that contracts were exchanged on a mere 15 units in 2007, when the marketing drive began.

 

The following year, contracts were exchanged on a further eight, including Christian Candy and Sheik Hamad’s penthouses.

 

None at all were sold in 2009, when the banking crisis was at its height. And contracts were exchanged on a further five in 2010.

 

...

Read more: http://www.dailymail.co.uk/news/article-13...l#ixzz1BwFhExTE

Link to comment
Share on other sites

"At least 100,000 first-time buyers who have no help from the ‘bank of mum and dad’ were unable to enter the housing market last year, as the number of low deposit mortgages slumped to a record low."

 

Alternatively,

 

FTBers "got real" and worked out that it no longer makes sense to waste their money, chasing overvalued property.

 

Seeing reality more clearly than some reckless buyers, they have decided to wait.

Link to comment
Share on other sites

"At least 100,000 first-time buyers who have no help from the ‘bank of mum and dad’ were unable to enter the housing market last year, as the number of low deposit mortgages slumped to a record low."

 

Alternatively,

 

FTBers "got real" and worked out that it no longer makes sense to waste their money, chasing overvalued property.

 

Seeing reality more clearly than some reckless buyers, they have decided to wait.

I'm afraid the first option was most likely the real story.

Link to comment
Share on other sites

Nice area Vs grotty area.

 

I don't think I have ever seen such agreement on HPC.

 

As some of us have been seeing / saying, the good areas really do seem to be holding up well, the grotty are falling like bricks.

 

 

http://www.housepricecrash.co.uk/forum/ind...158114&st=0

 

As my first landlord told me many years ago, buy in the crap areas in the dip, then sell them in the boom. The percentage gains in the grotty areas far exceed those in nice areas in booms, and the reverse is true in recessions.

yes, I agree with this ...

 

UK housing fell by 50% vs US$ (since bounced) ; it has fallen by 75% vs honest money ; crap areas have fallen by 35% vs pound ;

 

But London SW , and presumably other nice areas too, mid-sized family homes are trading at or above 2007 levels, though they fell back in 2008 -9 . People in such areas have money/equity and good jobs so lending not a great problem. There is a lot of competition for homes when they come on the market as people want to live here. Same goes for higher end stuff.

 

So if rates rise, we may see a pullback of 10 or even 20% , but a crash ... ain't going to happen imo. And if you're buying home who gives a toss about 10% correction?

Link to comment
Share on other sites

John Doe's:

Nice area Vs grotty area.

I don't think I have ever seen such agreement on HPC.

As some of us have been seeing / saying, the good areas really do seem to be holding up well, the grotty are falling like bricks.

http://www.housepricecrash.co.uk/forum/ind...howtopic=158114

 

As my first landlord told me many years ago, buy in the crap areas in the dip, then sell them in the boom. The percentage gains in the grotty areas far exceed those in nice areas in booms, and the reverse is true in recessions.

 

But London SW , and presumably other nice areas too, mid-sized family homes are trading at or above 2007 levels, though they fell back in 2008 -9 . People in such areas have money/equity and good jobs so lending not a great problem. There is a lot of competition for homes when they come on the market as people want to live here. Same goes for higher end stuff.

 

003xsd.gif:002lb.gif

Since the "2007 peak", London has benefitted from:

 

+ Out of control housing benefits, with "rents rising with the market"

+ The "stability" afforded by sector jobs in the Capitol city (quangos included)

+ The rescue of too-big-to-fail financial institutions based in London

+ Foreigners attracted to London as a "safe and low-tax" city

 

Now "the bullsh/te needs sweeping away", and with it may go some of those once-protected sectors. And I wonder how much longer wealthy foreigners will be allowed to treat London and the UK as a tax haven.

 

I think it will be "tapped hard by the hammer" in the years to come, and London will soon outperform on the downside.

In a deep recession / depression (as we are headed into IMHO) even the rich suffer.

 

Just look what is happening to the "best addresses" in Dublin

Link to comment
Share on other sites

What happened in Dublin is not coming to London to anything like the same degree. The currency will go first.

 

Yep. Also, if £ the continues to appreciate, this may take the edge off the foreign buyers' market in London.

 

Anyone heard or read Fred Harrison's views recently?

Link to comment
Share on other sites

...if £ the continues to appreciate, this may take the edge off the foreign buyers' market in London...

No danger of that now.

Q4 GDP -0.5%!

http://www.bbc.co.uk/news/business-12272717

Bang goes the interest rate rise.

_50934970_gdp_growth_jan_464.gif

 

Dip, dippery.

Dip, dippery.

Dip, dip, de-roo.

A double-dip is coming.

and it's good for you !

 

"The UK's economy suffered a shock contraction of 0.5% in the last three months of 2010, figures have shown.

 

The severe weather hit activity in the quarter, but the Office for National Statistics (ONS) said even if the weather impact had been excluded, activity would have been "flattish".

 

The Chancellor, George Osborne, said the numbers were disappointing.

But he added the government would not be "blown off course" from its austerity programme.

 

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year.

 

The BBC's economics editor Stephanie Flanders said people were right to worry about where the UK's growth would come from in 2011, especially as higher-than-expected inflation had dealt a further blow to household budgets.

. . .

'Horrendous'

The contraction took economists by surprise, as forecasts had been for growth of between 0.2% and 0.6%.

The construction industry was a large contributor to the fall, with activity decreasing by 3.3% in the quarter."

 

A surprise ? I think not.

This post anticipated the dip:

FALLING EMPLOYMENT - suggest falling incomes may lead to pressure to cut Rents

Some relevant charts

(2)

12.gif.

The employment rate for those aged from 16 to 64 for the three months to October 2010 was 70.6 per cent, down 0.1 on the quarter. This is the first quarterly fall in the employment rate since the three months to April 2010. The number of people in employment aged 16 and over fell by 33,000 on the quarter to reach 29.13 million. The number of people employed in the public sector fell by 33,000 on the quarter to reach 6.01 million while the number of people employed in the private sector was unchanged on the quarter at 23.11 million. The number of people working full-time fell by 58,000 on the quarter to reach 21.17 million.

/source: http://www.statistics.gov.uk/cci/nugget.asp?id=12

 

(3)

UK has big risk of double-dip in employment and wage rates

UK-jobs-oct062010.jpg

/source: http://www.finfacts.ie/irishfinancenews/ar...e_1019481.shtml

Link to comment
Share on other sites

What happened in Dublin is not coming to London to anything like the same degree. The currency will go first.

The drop is not finished in Dublin.

Nor is it finished in the UK, where it is just beginning.

 

Where are this "wealthy foreigners" going to come from (with many countries headed into economic slowdowns) ?

And why should they choose the UK, if the tax regime begins to change?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...