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A chart that should keep every UK homeowner and UK Prime Minister awake at night !

 

hpfalls.gif

 

The UK is truly bankrupt if incomes fail to rise alot, and/or property does the "normal" overshoot to the downside.

 

This is based on the following statistics on historical Price-to-Income ratios / attachment=1049:housepriceratios.pdf

What if it overshoots, and falls back to the 24% discount seen after the last crash?

 

Also discussed on this GEI thread: The UK's HPC will be much, much worse than 1990

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Resentment stirs on suburban estates

 

Caught in the property crash, housebuilders have been offloading unsold private homes to housing associations funded by the taxpayer. Some owner-occupiers are furious and want compensation – they did not expect to live cheek by jowl with so many tenants of social housing.

 

http://www.ft.com/cms/s/0/3cfca034-3bef-11...?nclick_check=1

 

 

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(I also posted this on HPC's April Warning thread):

 

(I had the following message in a PM here):

QUOTE

Bubb, could you comment on

1/

your dead cat bounce thread about the effects of the Option ARM crisis as well as the Alt-A crisis looming this Christmas?

2/

Do you think that because the dead-cat bounce is aenimic, the subsequent down-wave is going to be even more harsh than expected?

UNQUOTE = = = = = = = =

 

1/

Those are mainly US problems. Funnily enough, the US builder stocks have shown LESS of a bounce than the UK builders. My overall feeling is that the US property market is now grinding towards a low in 2010 or 2011, when the jump in rates will bring about the low. There were more second and third homes (per capita) in the US, than in the UK, but valuations are already near sensible levels. Rising rates, and sentiment will cause an overshoot. And that is what I think we will see in the US in 2010-11, the overshoot. And it could even spill over into 2012 there.

 

2/

The UK market looks FAR MORE TREACHEROUS. The extent of the drop still need in the UK is much bigger: maybe 35-50% more coming in the UK, versus only half of that, or less, still needed in the US. Too many Brits are still in denial, with UK home buyers still thinking "they should buy the dip", and UK BTL speculators thinking that "the drops are okay, so long as my cash flow remains positive."

 

The drop that is coming in the UK will be sharper than most can now believe. It will DESTROY HOPE in a way that the 20% dip so far has not done. And I think it will get most banks into thinking that 75-80% loans are far too high. I think you will see a movement towards a maximum of 60-65% for BTL loans, as problems in that sector escalate during the coming hope-crushing downturn.

 

And yes, you are right,

"because the dead-cat bounce is aenimic, the subsequent down-wave is going to be even more harsh than expected". That's how it tends to work. If hope can be brought back to life, with such a small rally, then the move needed to crush them is likely to be something rather monstrous. And it may be underway as the summer is ending, like the 2007 peak died with the summer.

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  • 1 month later...

Property market: buyers regain enthusiasm for auctions

 

The proportion of properties successfully sold at auction soared by nearly two-thirds during the past month as buyers began to return to the property market, new figures show.

 

http://www.telegraph.co.uk/finance/persona...r-auctions.html

 

About 79pc of all properties that went under the hammer with Countrywide Property Auctions between May 28 and June 12 sold, compared with only 49pc during the same period of 2008.

 

At the same time, 40pc of properties sold for more than their guide price, compared with an average of only 7pc during the first half of 2009 taken as a whole. In one case, a flat in London sold for 20pc above its guide price, while the group also reported a rising number of properties that were sold ahead of the auction.

 

Hold on tight.....

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The average HPC poster is pretty massively and blissfully unaware of how Hyperinflation

impacts upon housing prices

 

Mean Guess - Current Tally, so far

========

50% : x 08 = 400

42% : x 04 = 168

30% : x 02 = 060

20% : x 02 = 040

10% : x 02 = 020

05% : x 02 = 010 / 698

02% : x 05 = 010

01% : x 03 = 003

=== : x 28 = 711 / average: 25.4% - that's 10x the actual figure, wow!

 

It seems that the average HPC poster is rather massively wrong about the impact of hyperinflation on housing !

 

Either they havent read my explanations about the impact o high inflation on house prices, or they don't believe them.

 

In any case, it seems that the average HPC-er is a sitting duck for story-telling, and unknowledgeable estate agents, who will make up any reason to try to offload property at excessive prices.

 

Now, at least, people will have some facts to counter the lies and spin.

 

Read more, and have a chuckle, or shake you head:

http://www.housepricecrash.co.uk/forum/ind...howtopic=119091

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CRISIS IN COMMERCIAL PROPERTY LOANS

Much of the debt is of the 2006-2007 “vintage,” when the property bubble was at its most inflated and lending terms at their most excessive, typically at 80-90% loan-to-value (LTV) ratios.

 

The trouble is that with more than half the debt maturing in the next three years, and new lending terms requiring LTV ratios of around 60%, there is not enough money in the system to refinance the loans. “You need around GBP 40bn annually,” JLL’s Osilaja said. “Even at the peak of the property market, that would be difficult to achieve.”

 

/more: http://www.ft.com/cms/s/2/5ef2e4ca-6a37-11...0b5df10621.html

 

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TIMELY?

Housebuilding guru says bottom of the property market has been reached

 

By Mark Leftly / Sunday, 15 March 2009

 

Tony Pidgley, the great sage of the housebuilding industry, has called the bottom of the market.

 

Mr Pidgley, who made a fortune and his reputation for calling the 1990s housing crash correctly, told The Independent on Sunday: "We all accept that, give or take 5 per cent, the market is somewhere along the bottom [of its economic cycle]."

 

Not sure if this has been seconded here yet? Persimmon's trading update today.

 

Revenue up, but selling prices down though stabilising and cancellations not too bad. Clearly mortgage approvals concerns tempering caution. Hardly surprising given the debt levels, even though reduced, you just have to wonder about that 7 year land bank.

 

Market gone slightly bullish on news.

 

During the six months ended 30 June 2009 we legally completed 4,006 homes with total sales revenue of c. £625 million (June 2008: £998 million). Borrowings at 30 June 2009 were lower than originally anticipated at c. £495 million (June 2008: £906 million), representing a gearing level of c. 32%. This places the business in a strong position to deliver the £450 million year end borrowings previously indicated.

 

At 23 April 2009 we stated that sales for the first 16 weeks of the year were ahead of our expectations. Since then sales volumes have consistently been ahead of the same period of 2008. More recently, both volume and revenues have shown increasing improvement on the comparative weeks of the previous year.

 

Forward sales revenue into the second half of 2009 is c. £700 million. This compares with forward sales revenue of c. £458 million at 1 January 2009 and c. £650 million at the same time last year.

 

We expect this improving trend to continue against the weak conditions experienced throughout the second half of 2008. House prices have continued to decline throughout the six month period with an underlying reduction of c. 4% for the Group. The rate of decline has however reduced and our recent experience is that prices are now stabilising in some locations.

 

Further indications of an improved housing market are evidenced by the historically low level of cancellations of c. 16% we are currently experiencing and the significant reduction in our part exchange stock to c. £17 million (June 2008: £120 million).

 

Whilst we continue to monitor work in progress levels very closely, we have invested where we can realise good sales and cash flow. During the first half of this year we opened 45 new developments and plan to commence work on a further c. 50 sites during the second half. Currently we have c. 390 operating sales outlets (January 2009: c. 420) (June 2008: c. 460).

 

Our landbank consists of c. 64,500 plots (June 2008: 76,159 plots). This represents a very healthy c. 7 years' supply at current rates of sale. Given the good geographic spread and focus on more traditional house types within our landbank, currently we do not need to acquire more land to sustain our business. However, we are identifying a small number of opportunities where we are able to agree terms to purchase new land on favourable terms. Despite this we have not experienced any noticeable increase in the availability of good quality land at attractive prices.

 

At the end of 2008 we carried out a prudent review of our landbank in the light of market conditions which we anticipated would lead to further market weakness. Unless there is a substantial change in current market conditions, we do not expect any requirement for further provisions.

 

We are encouraged by the improvement in sales rates when compared to last year, but will remain cautious until mortgage availability improves further and employment prospects stabilise. In the meantime, we will continue to focus on cash generation and the reduction of debt levels in our business to ensure that Persimmon remains in a strong position.

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Email below from Allsops regarding the latest property auction has the smell of desperation about it!

 

Dear Bidder,

 

Residential Auction Sale - 14 and 16 July 2009

 

In advance of our two day sale residential auction sale next week, please note that we have received clients' instructions to reduce a number of guide prices. These are as follows:

 

Lot 13 £65,000 - £75,000

Lot 30 £65,000 - £75,000

Lot 69 £200,000 - £225,000

Lot 122 £40,000 - £50,000

Lot 123 £25,000 - £35,000

Lot 124 £65,000- £75,000

Lot 129 £35,000 - £40,000

Lot 130 £40,000 - £45,000

Lot 143 £70,000 - £80,000

Lot 144 £30,000 - £35,000

Lot 145 £75,000+

Lot 147 £80,000+

Lot 148 £30,000+

Lot 149 £60,000 - £70,000

Lot 161 £25,000 - £30,000

Lot 162 £45,000 - £50,000

Lot 163 £50,000 - £60,000

Lot 164 £45,000 - £50,000

Lot 175 £25,000 - £30,000

Lot 180 £55,000 - £60,000

Lot 194 £45,000 - £50,000

Lot 195 £70,000 - £80,000

Lot 196 £65,000 - £75,000

Lot 201 £85,000 - £95,000

Lot 211 £20,000 - £25,000

Lot 213 £30,000 - £40,000

Lot 221 £45,000 - £50,000

Lot 254 £210,000+

Lot 256 £75,000 - £85,000

Lot 268 £55,000 - £65,000

Lot 282 £50,000 - £60,000

Lot 283 £60,000+

Lot 284 £50,000 - £60,000

Lot 298 £110,000 - £120,000

Lot 299 £25,000 - £35,000

Lot 311 £60,000+

Lot 314 £70,000 - £80,000

Lot 329 £35,000 - £45,000

Lot 330 £110,000 - £120,000

Lot 331 £70,000 - £80,000

Lot 347 £50,000 - £55,000

Lot 348 £60,000 - £65,000

Lot 357 £130,000 - £140,000

Lot 358 £60,000 - £70,000

Lot 359 £50,000 - £55,000

Lot 366 £60,000 - £65,000

Lot 367 £45,000 - £50,000

Lot 377 £10,000+

Lot 379 £35,000 - £45,000

Lot 380 £10,000+

Lot 386 £50,000 - £55,000

Lot 387 £15,000+

Lot 389 £30,000 - £35,000

Lot 393 £90,000 - £95,000

Lot 394 £30,000 - £40,000

Lot 395 £40,000 - £45,000

Lot 398 £50,000 - £55,000

Lot 399 £100,000+

Lot 400 £60,000 - £65,000

Lot 401 £50,000 - £55,000

Lot 403 £40,000 - £45,000

 

 

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Email below from Allsops regarding the latest property auction has the smell of desperation about it!

 

The results email usually has some info on the percentage of lots offered by particular banks. It will be interesting to see if we are able to determine who is reducing the guide prices.

 

 

 

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Bovis scraps dividend to fund land purchases

 

http://business.timesonline.co.uk/tol/busi...icle6680806.ece

 

Bovis Homes, one of Britain's biggest housebuilders, announced that it would scrap its interim dividend in 2009 amid more challenging trading conditions.

 

Bovis said that instead it would use the funds to take advantage of cheaper residential land by buying sites.

 

 

 

 

Doesnt sound ideal

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  • 1 month later...

http://property.timesonline.co.uk/tol/life...icle6820974.ece

Return of the bonus boys in the home market

Politicians may not like it, but the City is paying bonuses again — which are driving the market

 

A trickle of e-mails with the suffix “gs.com” is beginning to show up in the inboxes of the estate agents who deal with London’s more expensive homes. It seems that employees of the American bank Goldman Sachs, which announced bumper profits this summer, are feeling much more optimistic about their financial futures.

 

While the world’s politicians struggle to agree a way of curbing bankers’ pay, the bonuses already paid out this year — coupled with the expectation of more to come — are beginning to have an impact on the top end of the property market in the capital and beyond.

 

...................

 

This is sure to cheer people up

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  • 2 weeks later...

im still officially on a BULLISH reading (for UK property)

 

But am very alert for signs of the confirmation of a top in BDEV in the next few days to come

 

That brief move over 290p last week may have been it. ... BDEV update

 

aa2g.gif

 

If so a confirmation of a top by certain indicators, may be pointing the way that UK property prices

are set to top also

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im still officially on a BULLISH reading (for UK property)

 

But am very alert for signs of the confirmation of a top in BDEV in the next few days to come

 

That brief move over 290p last week may have been it. ... BDEV update

 

aa2g.gif

 

If so a confirmation of a top by certain indicators, may be pointing the way that UK property prices

are set to top also

 

I'm lookig forward to it, being a bear is a lonely job....

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I'm lookig forward to it, being a bear is a lonely job....

NP Chazza, group hug :)

 

Look along the river and you will see plenty of other bears like us, we just all concentrating on our own little spot of water waiting for the Salmon to start running :lol:

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  • 1 month later...

Increasing desperation of the government through the FSA is encouraging more moral hazard in an attempt to prop up the housing market.

 

One of the big BTL investors sees this as being positive:

 

There are some benefits to the FSA regs

 

I have read something very interesting. The FSA is going to stop mortgage lenders profiting from arrears. So I am going to put 2 and 2 together and hopefully come up with 4!:

 

 

 

1. Lenders cannot profit from arrears

2. Lenders cannot reposses within 6 months

 

 

 

I call that a free overdraft!

 

 

 

It will mean you can get in arrears up to 6 months and there is nothing the lender can do. Yes they can:

 

 

 

1. Send you arrears letters

2. Damage your credit file

3. Call you in for a meeting

 

 

 

But they cannot charge you heavy arrears charges or take the property off you. Not unless you get in to 6 months in arrears.

 

 

 

Now this should not be your intention! However what the FSA will do if the regulation goes ahead will mean there is a cushion for us investors. So on one hand the regulation will slow us down on the other hand we will be more protected. NICE!

 

 

 

So if you possess some buy to let mortgages HOLD ON TO THEM! i.e. do not sell. You will soon have a regulated mortgage where pretty much all the problems fall on to the lender. The lender has to deal with the regulation not you.

 

 

 

It will change the buy to let products we will get as the innovation will soon disappear from these products because of the restraints put on to the lender. We may go back to the good old battle of rates. i.e. not gimmicks, just a battle of who can offer the lowest rates.

 

 

 

Also protection is growing for tenants against landlords who are at the mercy of lenders. This pressure being applied ultimately puts us landlords in a better position. Lenders should help landlords who in turn keep the tenant’s tenancy secure and certain.

 

 

 

So it is not all bad news. In fact, on the whole, its GREAT news!

 

 

 

 

Ajay

 

http://www.ahuja.co.uk/property-news/prope.../#ixzz0UgAcwkxO

 

 

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  • 4 weeks later...

Just been to a presentation by LBG on the mortgage market/housebuilders. Well I only got their for the last couple of speakers as one of which was Tony pidgely.

 

First half was general bank economist view of markets - the usual: low inflation, low rates, reached a floor.

 

Tony was good to listen to if not just for his honest method of speaking. Basic premise was the protection of assets. Other points I picked up on:

 

* He believes the better housebuilders are in a decent position and should be able to weather the storms.

* London market is 2 tier. Seeing demand in the 1st tier (zone 1 & 2 central london), weak sterling helping.

* Seeing value buyers appearing.

* Low inflation and soft Pound will help the sector.

* He described three scenarios (good, middle and bad). He is hoping for the middle. (Though he didnt convince me that was his stance - maybe thats my bearish spectacles)

* VI commentators are not factoring future tax rises into predictions.

* I'm sure he said the 20% fall in prices had help reach some sort of floor (didn't manage to question him on that)

* He think land prices will go lower (leading me to question his opinion on houseprices)

 

I spoke to another guy on the way out, think he was an independant housebuilder (Me - Who do you work for?, Him - Myself. Oh...). He was talking about it being all about the blue line and not the green. (think he was refering to a graph on housing demand vs affordability?!). I asked him on his opinion on the market, his reply: " Well prices are going up". Me: " What about the biggest credit boom off all time we have just seen (implode)". Him: "Well, that was last year. It's all about family creation vs housing creation. There is a housing shortage crisis"

 

I left.

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  • 3 weeks later...
  • 4 weeks later...

I have made a 2010 property forecast on HPC

 

For UK Property in 2010 ...

 

Currently, I expect that:

 

+ The 0.4% drop (Non-Seasonally adjusted) that Nationwide reported for December will carry over into 2010, and the monthly price falls might average around that level in the first half, with very little sign of a "Spring Bounce."

 

+ In the second half, the UK will be caught in a squeeze between weaker Sterling, and the possible need to raise rates. I would expect prices to be falling at 1% per month (on average) and maybe more than that.

 

This gives me an expected fall of 7-8% for the year, with prices weaker in the second half. If 1% month falls arrive in the first half, then the drop could be bigger than that.

 

Time will tell whether it is "brave" or "foolish"

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I have made a 2010 property forecast on HPC

 

 

 

Time will tell whether it is "brave" or "foolish"

I think that the Spring Bounce may be a big larger than you have suggested but as the majority of indicators lag it will be based on existing the 'let's get in before winter' sales. The continuation of the bounce could happen if Labour call a late election but as soon as they do the Tories and LibDems will bring out the financial horror stories and that will un-ease a lot of possible purchasers, it may even affect foreign buying even though high priced properties still seem cheap to them there is a chance that they may become cheaper.

 

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  • 1 month later...
Sentiment is a bitch in the UK property market because it is really all that people have. This is the real tragedy.

They feel good... as the boat glides towards a huge iceberg.

 

All those who were afraid of missing the boat, jumped on it. They didnt know they were getting on the Titanic.

And when you warn them, they get irritated and angry, because you are "messing with their dreams."

 

Reality ... is a bitch sometimes.

 

Titanic_sinks_lifeboat.jpg

 

GEI is a lifeboat. But only for the minority that are interested in facing harsh truths, as others dream away.

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  • 2 weeks later...

http://blogs.telegraph.co.uk/finance/ianmc...ung-homebuyers/

 

Ian Cowie, personal finance editor of the Telegrpah.

 

Dismal figures from the housing market demonstrate that it is no exception to the iron law that there is no problem so bad that Government intervention cannot make it worse. Mortgage lending hit an eight-year low last month, according to the British Bankers’ Association - but the trade body was too polite to point out that this was the inevitable effect of increased taxation and regulation.

 

......

 

Worse still, the Financial Services Authority (FSA) is slamming stable doors by leaning heavily on lenders to deter them from advancing the sort of loans which first time buyers relied on to get a foot on the housing ladder. This is an understandable reaction to the credit crisis but not a helpful one. Even if – as I expect – house prices fall further when interest rates rise after the General Election, making it wise for prospective buyers today to delay, regulators should not remove individuals’ freedom to decide what is best for them.

 

As I pointed out when the FSA announced its new ‘get tough’ approach last year, there is a lot to be said for ‘irresponsible lending’. So long as borrowers understand the risks they are taking with, say, 100pc mortgages, there is no reason why regulators should intervene to prevent people seeking the rewards these loans generated for many during recent decades.

 

Restricting access to credit, where willing lenders serviced demand from willing borrowers in a free market, means that young people who start the property game with nothing are condemned to end it with nothing. Increased regulation, however well intentioned, is yet another example of how Britain is leaping backwards into a re-run of the dreary 1950s with social mobility falling towards zero.

 

Never mind the macro-economics. Self-interest is the one motivation you can always rely on and my personal experience of the property ladder was shared by many others in my generation. One of the best financial decisions I ever took was a 100pc mortgage for about five times my salary 25 years ago. No such loans are available today. Without such ‘irresponsible lending’, I might still be renting a bedsit in Kilburn rather than owning a home in Highgate.

 

That’s not intended to sound like bragging but to demonstrate why people who fail to understand the importance of credit – and, dare I say it, house price inflation – in the creation of wealth are either very naive or perhaps living under hedges on a diet of roots and berries. They have certainly missed one of the simplest ways to accumulate tax-free gains available in our lifetime – at least until now.

 

Will today’s bedsit tenants thank the regulators for freezing them out of home ownership and condemning them to years of throwing cash away on rent? I doubt it. The Government should call off the FSA, slash Stamp Duty and give young homebuyers a fighting chance.

 

I was going to cut it down but its all just priceless

 

What unbelievable rubbish. This is why this country has got the problems it has. Give the people the choice, but when it goes wrong we'll blame the VI's as it certainly wasnt our fault.

 

And he is the personal finance editor, says it all.

 

 

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