[quote]

Effectively, the BTL brigade have stuck an enormous cork into the bottom end of the housing market, which has all but killed off the housing market, not only for buyers who want to enter at the bottom, but also for buyers on the first or second rung who want to move on to another property.

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Good post fraggle. I had never thought about it in this way but it makes perfect sense. Whether they sell and jump onto the next bandwagon - the stock market supposedly, but I think its close to the top - or take the hit of depressed yields due to oversupply ( ' I'm in it for the long term, innit ' ), prices will drop.

The UK economy is more closely linked to the property market than Merv is willing to admit and on this basis a recession seems inevitable, with all the associated hubris.

OK heres the million dollar question for those of you who say theres going to be big falls in house prices.

How far do you think prices will fall ?

Just to add to that : over what time period ?

and : do you think % falls will be fairly uniform across the UK or will some areas be hit harder than others ?

quote:

moonietoon
Posted 24-08-05 10:38
OK heres the million dollar question for those of you who say theres going to be big falls in house prices.

How far do you think prices will fall ?

Just to add to that : over what time period ?

and : do you think % falls will be fairly uniform across the UK or will some areas be hit harder than others ?

Impossible to tell. If interest rates rise quickly, then BTL stops making sense ( doesnt now, but that would become very apparent very quickly ) , and they bail out = a quick correction over 2 years. If interest rates fall or stay where they are, a slower decline over anything up to a decade, similar to the Japanese experience, ' death by a thousand cuts ' as I heard this scenario described.

Areas that have experienced the biggest bubbles will suffer the biggest falls. Towns in the North of England or Wales with average salaries of 10K or 12K cannot support prices at 75K for a terraced house, be that thru ownership or BTL. People there will not be able to buy, and the yields dont stack up for the heavily over-supplied rental market.

I would say that the prices will fall back to the trend price, or just below, markets naturally over and under shoot. However I'm not economist. You tell me what do you think?

quote:

Originally posted by paulio:
.......You tell me what do you think?

I recently came to this site, perhaps naively, believing that houses would soon strongly resume their upward momentum having had a bit of a 'breather'.

Having read some of the posts on here and looked elsewhere for info I now have to admit that I havent really got a clue where prices are going though the arguments for some level of falls sound fairly convincing.

The short/medium term scenario (4/6 years) for prices may be negative but in the long term I remain convinced that they will recover and reach new heights.

Of course they will. Its a cyclical market. No-one knows how deep each individual cycle will go, this is true. However, there are a number of market indicators which point to this downturn not being pretty.

At the end of the day, believe what you want. Dont let anyone tell you what to think; form your own conclusions. The most important point I feel is this; before you make a financial decision that is going to last a third of your life, surely YOU want to make the right decision for YOU! It certainly will mean that lingering worries down the line should not be so severe.
Please understand as well, that there are a large number of individuals out there whose livelihoods are based and simply rely on pumping the UK housing market, estate agents to an extent, although ths relationship is becoming less true as transactions fall,mortgage lenders/brokers definately, (jsut imagine what happens when only 5% of their loans default; seen any of those remortgage companies lately on 5?) and of course not least the current government, who PROMISED no more boom and bust, retail spending relies on consumer confidence.

Try and study what is written, and see if it makes sense. For example, why are most of the house price surveys still stating year-on year figures, even house prices have been in moderate decline since last year. HPC website is ok, but please take it with a pinch of salt. A lot of data is available over there and it does put the state of the market into perspective.

Remember - You dont get owt for free in life, furthermore, if something sounds too good to be true, then it probably is.

Hope that helps.

Except rents are dropping... and so are yields. There is a massive oversupply of property, with huge estates being built continuously on the outskirts of most major towns. If property is in such short supply, how come the big builders, without exception are all broadcasting profits warnings of late? Same with building materials manufacturers and white goods suppliers. Back to yeild, You can get high interest accounts paying out more than the typical current yield, which is now approaching sub-inflationary year on year figures.

Many BTLs have mortgaged themselves to the eyeballs, as soon as rates go up (yes, it can and probably will happen, seen the price of petrol recently)? there is going to be big problems. There are currently whole streets being marketed on rightmove as amateur BTLs go under, pretty pathetic really, not being able to keep up payments with IRs at 4.5%.... And remember, the BOE is independent, its sole job is to hold inflation at 2.0%... well, its up 0.3% to 2.3% in a month, and most of the fuel price rises havent even been priced in yet.

Or, failure mode 2, house prices drop and BTL summed equity dissapears. House prices only have to drop 15% and the BTLs have lost their initial investment. Thats if they havent Mortgage equity withdrawn to buy their second, third,fourth homes as prices went up. with 3 homes, prices only need to drop 5% now and they are in serious do-doo. Now, those idiots with 12 properties with only one initial outlay of 15% for one property better start worrying. And if you doubt these figures, I suggest you go and research what is happening to the one and two bedroom flat market in Bristol and Swindon currently. I am glad I anit a buy to letter at the moment there, thats for sure. Im not gloating, its sad. But these people really should start to understand the danger of debt when it starts to exceed these levels.

Brilliant stuff. Well done to all.

House price data from ODPM up to 2005/Q2 - mean prices and volumes volumes [Land Registry, odpm tables 581 and 584].

The volumes are interesting - obviously seasonal, but clearly down after late 2004 and matching people's experiences of trying to sell and seeing fewer 'sales' going through. The latest volume figure is provisional (some late registrations yet to be added).

hi folks I'm new here.been lurking for a while and I find the posts interesting.

there does not seem to be any coherent evidence for either a boom again or a crash,yes there are extreme views either way,so would not the middle ground be the soft landing that has been predicted for some time?

This is the historical long-term view – house prices 1930 to 2004 [odpm table 502, various surveys, with a B.Soc mix-adjusted index from 1969].

quote:

Originally posted by moonietoon:

quote:

Originally posted by Foxtons EA:
Yes I can verify that the lack of FTB's is prominent and there is nothing to indicate that they will return anytime soon, in fact we are seeing 5% FTB's

But havent the FTBs been replaced to a large extent by BTL investors ? I would think they probably have access to more cash for deposits than FTBs aswell as specialist BTL mortgages.

I remember reading about some BTLers from the south buying up whole terraced streets in grim northern towns like Burnley and parts of Liverpool.

I also feel that property developers have also contributed to the demise of the FTB, when we bought our first house 30 years ago, I was a nurse my husband an electrician low wages and the only property we could afford were the ones that needed a lot of work doing to them.
Our first house we spent 10 years doing it to the way we wanted it, we then sold and moved here to our second house, where we started again and it has just been completed to how we finaly wanted it after another 20 years.

quote:

hi folks I'm new here.been lurking for a while and I find the posts interesting.

there does not seem to be any coherent evidence for either a boom again or a crash,yes there are extreme views either way,so would not the middle ground be the soft landing that has been predicted for some time?

can you please guide me to some substantial financial data please that is indicating another boom? Or in fact point me towards data that shows a previous levelling off of prices? Funny old thing, its never happened. The housing market is cyclical. It goes up, it goes down. It never ever levels for 11 years. Simple fact is, FTB numbers have dropped to their lowest levels in memory, unless prices drop significantly, people wont be able to get onto the bottom rung of the ladder. Me and my partner have a joint income of 50k and we still cannot afford anything other than a poxy 2 bed terrace in swindon for less than 3.5X salary. 4 years ago, we could have bought 2 houses for that. The biggest pressure on the housing market will be the 50k homeowners that are currently 3 months or more behind payments and have to sell.

quote:

Originally posted by Pflusk:

can you please guide me to some substantial financial data please that is indicating another boom? Or in fact point me towards data that shows a previous levelling off of prices? Funny old thing, its never happened. The housing market is cyclical. It goes up, it goes down. It never ever levels for 11 years. Simple fact is, FTB numbers have dropped to their lowest levels in memory, unless prices drop significantly, people wont be able to get onto the bottom rung of the ladder. Me and my partner have a joint income of 50k and we still cannot afford anything other than a poxy 2 bed terrace in swindon for less than 3.5X salary. 4 years ago, we could have bought 2 houses for that. The biggest pressure on the housing market will be the 50k homeowners that are currently 3 months or more behind payments and have to sell.

If you have a joint income of 50k , which is more than the average income then im sure you could find a decent property for 175k (3.5x salary)

Not one that deserves 175 thousand of my hard-earned pounds spent on it...

Besides, we get pasted by the treasury so see very little of that cash.

Yes, there are decent properties around, about 20% out of my price range, but tell me, why would I buy when house prices are going down 0.5%-1% a month in my area? thats a grand saving extra a month. Latest mortgage lending figures show it aint easing up. So, for now, thnk I am going to save up a nice wadge and live a simpler life whilst house prices undenyably are coming down.

Not one that deserves 175 thousand of my hard-earned pounds spent on it... you admit 50K joint income is an above average wage, so tell me, why should I have to live in at best a below average property in my area, to then give the bank 80p for every pound I lend? The only areas I could potentially live in with the size of property I am looking for the cash are occupied by troublemakers.

Yes, there are decent properties around, about 20-30% out of my price range, but tell me, why would I buy when house prices are going down 0.5%-1% a month in my area? thats at least a grand saving extra a month, 1.8 grand accounting for mortgage payments over 25 years in a "low" inflationary environment. Latest mortgage lending figures show it aint easing up, a la housing market confidence declining, as amply demonstrated time and time again on this forum. So, for now, thnk I am going to save up a nice wadge and live a simpler life whilst house prices undenyably are coming down. You say they are not crashing. Well, maybe not. But im still seeing huge drops around the country right now.

quote:

Originally posted by Pflusk:
.......But im still seeing huge drops around the country right now.

Ive noticed a lot of houses for sale advertised as "Price Reduced" and this seems to be on the increase. Reductions are only usually 5 to 10% although Ive heard off some reducing by around 15%. Maybe they were over-priced to begin with though.

Ive also seen quite a lot go under offer in the last 2 or 3 months but many of these seem to be falling through and are back for sale again. I read somewhere that over a third of sales are failing. Why do you think more chains are breaking down recently ?

Pflusk - I've seen a few reasonable houses for less than 175K in the Swindon area (where I'm looking too). Not to say waiting isn't a good idea.

Which areas are you looking to buy out of interest?

On the subject of house prices, and the way programmes such as Location, Location, Location and it's presenters have talked up house prices over the last few years.
I find it highly suspicious when presenters, who also have property businesses and so obviously benefit from house price inflation give these comments. Channel 4 need to be very careful when choosing presenters to ensure there is no a conflict of interest.

I pay £550 per month to rent my house which is a three bed semi in Gloucester. The value of the house is £165K. For me to buy it I would need a £140K mortgage. That would cost me £810 per month. So I save £260 per month and still benifit by living in that house. Ok I'm not buying it and paying off my loan. But the house has been falling in value over the last year. Probably by as much as £500 - £1000 per month. So I am in fact saving as much as £760 - £1260 per month at the moment.
The sad thing I guess is some people are losing money hand over fist as their house value drops some just on paper which is money they never really had. Others who have bought in the past few years are the ones which will suffer. Such is life I guess, the value of your property can go up as well as down.
There is a lot of sharks out there encouraging you to buy buy buy or you will miss out. They have an interest in keeping the market up to line there own pockets. And worst of all, some of them manage to get on TV shows and preach to the masses.

quote:

Originally posted by SplendiferousII:
The sad thing I guess is some people are losing money hand over fist as their house value drops some just on paper which is money they never really had. Others who have bought in the past few years are the ones which will suffer

You are right but it's worth bearing in mind that this is the short term view. The value may well rise to far above the purchase in the medium or long term - just as many who owned homes lived through the early 90's negative equity found.

If I was thinking of buying now, I'd certainly wait if I was in an area that's seen big rises.

quote:

Originally posted by Kev_Skipton:
I find it highly suspicious when presenters, who also have property businesses and so obviously benefit from house price inflation give these comments. Channel 4 need to be very careful when choosing presenters to ensure there is no a conflict of interest.

You are bang on there Kev. I've just done a course on conflicts of interest and it can cause serious loss of business or sponsership if they are not careful!

quote:

Pflusk - I've seen a few reasonable houses for less than 175K in the Swindon area (where I'm looking too). Not to say waiting isn't a good idea.

Looking round Cricklade, Lechlade and Cirencester rather than central Swindon. House prices have "only" gone up around 50-60% in this area compared to 2001, but its still bl**dy rediculous. Problem is, there are no house indicies for small villages such as these. But, Swindon is dropping like a stone, especially amongst the FTB 1-2 bed flat area, especially by the retail outlet. Vis-a-vis, price drops in the surrounding area should be following suit, even if drops are not as dramatic. I currently rent a 4-bed house for 350 quid (dont ask how, to do with work bonuses, includes council tax) so am in no rush to buy right now.

Quite pleasant to see price drops, quite a few round old town where I was considering buying when prices were rocketing. Now mrs is working, going to hold out for a small village.

Thanks for the graphs, phugoid.

quote:

Originally posted by phugoid:
The volumes are interesting - obviously seasonal, but clearly down after late 2004 and matching people's experiences of trying to sell and seeing fewer 'sales' going through.

Yes, you can easily see why seasonal adjustment is useful and that for the land registry figures comparing quarter on quarter as many people do can be very misleading - it really needs to be compared year on year.

As for the volumes clearly down it looks pretty much back to where we were in 1996 which was just starting to come out of the last trough. What a shame the figures don't go back to the last peak so we can see how that compares to now.

As I already said it's the volume of sales that get hit first and only later do the prices follow down. The properties that didn't sell obviously don't show up in the data and it takes some time before their vendors reduce the price enough to sell them.