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MrWallace

I Think House Prices Are Crashing...

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From where I'm sitting it looks like house prices are crashing, just slowly. In other words the bubble seems to be deflating as quickly as it inflated, or not to far from it.

I had a look on aspc.co.uk and it looks like many homes are now fixed priced at under the valuation on the home report, it used to be offers over the valuation on the home report with 10% - 30% over the valuation price not being uncommon.

So what do people think? How long did the bubble take to inflate and don't some bubbles, particularly bubbles in pretty illiquid assets, take as long to deflate as they took to inflate?

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'Nice' homes still have a long way to go. Unfortunately flats like my girlfriends' are dropping at a much faster rate.

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People always compare us to the US and wonder why its happening much slower here - not sure myself it is. Overall scotland has fallen perhaps 15% from peak ? In the US it is about 30% - remember - their falls started a full 2 years before ours. And the bottom in scotland has fallen about 30% in many places already.

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[quote name='MrWallace' timestamp='1325026931' post='3217469']
From where I'm sitting it looks like house prices are crashing, just slowly. In other words the bubble seems to be deflating as quickly as it inflated, or not to far from it.

I had a look on aspc.co.uk and it looks like many homes are now fixed priced at under the valuation on the home report, it used to be offers over the valuation on the home report with 10% - 30% over the valuation price not being uncommon.

So what do people think? How long did the bubble take to inflate and don't some bubbles, particularly bubbles in pretty illiquid assets, take as long to deflate as they took to inflate?
[/quote]
Did the tulip bubble ever fully recover? ;)

No doubt the housing market WILL recover, but it needs the correction first.

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The top two 'developments' in the UK housing market this year, IMO, have been the crash in prices in north England and the change in media sentiment towards house price rises being a good thing. The fact that Manchester's prices were down over 10% YoY at one stage in 2011 and Hartlepool is down over 20% this year (Land Reg numbers) is very significant.

Am in the Mids, where a correction rather than a crash is taking place. A recent report suggested Shropshire (where I am) still has the highest prices in the region though :(. Average salary £20K, average house price just under £160K. The falls are gathering momentum though. Edited by rantnrave

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[quote name='ccc' timestamp='1325066766' post='3217598']


People always compare us to the US and wonder why its happening much slower here - not sure myself it is. Overall scotland has fallen perhaps 15% from peak ? In the US it is about 30% - remember - their falls started a full 2 years before ours. And the bottom in scotland has fallen about 30% in many places already.
[/quote]


This is one thing I think we can envy the US of. They accept that prices were ridiculous, and have allowed market forces to implement the correction, however brutal. Pure, unadulterated, capitalism. In Adam Smiths view, they will recover fastest.

The UK however has attempted to engineer a soft landing, manipulated interest rates, discouraged repos, in fact everything it can to avoid reality. We all know what that means. :(

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[quote name='wurdoomed' timestamp='1325069231' post='3217637']
This is one thing I think we can envy the US of. They accept that prices were ridiculous, and have allowed market forces to implement the correction, however brutal. Pure, unadulterated, capitalism. In Adam Smiths view, they will recover fastest.

The UK however has attempted to engineer a soft landing, manipulated interest rates, discouraged repos, in fact everything it can to avoid reality. We all know what that means. :(
[/quote]


+1, totally spot on.

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Depends on where you're looking to buy?
So... anybody willing to say? I suspect most of the nice areas haven't moved by much at all.

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Regarding the home valuation reports, here's a little anectode which to me shows that some surveyors really have no idea of the market.
House on for around 320k, listed as 40k below house valuation report. It sits on the market for a year with no interest and no price changes.
The vendor gets a new home report done (not sure why - it's only valid for 6 months but doesn't actually need to be renewed until there is a purchases trying to get a mortgage, which is of course a possibility).
New home report has exactly the same valuation!!

How can the valuer not take into consideration that it hasn't sold at a lower price for a year?

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I know to two cases recently, both flats, one offers over 83k, went fixed at 80k then 75k eventually sold for 70k against a home valuation report of 81k, the other a nice Rosemount flat sold by a mates son at 5k over the valuation.

With houses, a friends sold in a week at valuation however I hear of many others sticking.

In summary, feck knows...........but at the end of the day, the surveyors are part of the "housing" industry and a valuation is pretty meaningless given that the actual value is what someone is actually willing to pay rather than someones opinion of what they think someone will pay.

I think overall, the upper aspiration homes are selling at pretty much peak prices with flats sticking but peaople are still willing to pay for the right place.

Wether this continues who knows however given the cash around in Aberdeen at the moment and a strong rental market I can't see a 86 esque crash as such coming.

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[quote name='MrWallace' timestamp='1325026931' post='3217469']

I had a look on aspc.co.uk and it looks like many homes are now fixed priced at under the valuation on the home report, it used to be offers over the valuation on the home report with 10% - 30% over the valuation price not being uncommon.
[/quote]


Dont confuse the pre-Home Reports world with todays situation. In the old days, the typical Aberdeen lawyer convinced their client to price artificially low, to draw them in and get a closing date, hence the nonsense of regular 35% over asking prices. There was never any intention of selling at the O/O asking price.

With Home Reports, prospective buyers have the valuation to hand before they start forming their view on what its worth, hence there is a lot more reality involved. That said there are still some surveyors appointed on how high they will value, rather than valuing at the crucial point i.e. what someone is willing to pay (and able to get a mortgage for). Until surveyors are appointed for this then we have this slow downward grind.

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Well, I hope the original poster is right and we are in a crash, albeit a slow one.

The comparison with the US is interesting because, IIRC, our market was at least as overpriced (based on 'averages' for whatever that's worth). But an important difference is that in the US I think it's normal practice to take out a long-term fixed-rate mortgage so the government does not have the same option of reducing everyone's mortgage payments. Hence more forced sales. Also, I believe it is easier to walk away from a mortgage in the US than in the UK.

So my concern is that in the UK prices can be held 'articifically' high through interest rate policy and an agreement amongst banks+government to avoid an uncontrolled crash by exhibiting greater forbearance. Polictically expedient for the government and financially important for banks with large mortgage books that they can't afford to have collapse completely.... for the time being at least.

That said, I think we are in a slow period of decline. Trouble is, it's so slow that the economics of renting may not add up - if you have to rent for 5 years you may well have spent the reduction in house price you get at the end of it :( And you've had the inconvenience of renting to boot!

Can someone give me reasons to be more optimistic!!?

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[quote name='wurdoomed' timestamp='1325069231' post='3217637']
This is one thing I think we can envy the US of. They accept that prices were ridiculous, and have allowed market forces to implement the correction, however brutal. Pure, unadulterated, capitalism. In Adam Smiths view, they will recover fastest.
[b]
The UK however has attempted to engineer a soft landing,[/b] manipulated interest rates, discouraged repos, in fact everything it can to avoid reality. We all know what that means. :(
[/quote]


True - but look at the facts. UK house prices are sitting at not much different than the US in terms of drops from peak - yet the difference in effort is immense. I remember a lot of chat when I first logged onto this place in 2006 - all I heard was that no matter how hard they tried - they can't beat the market.

The last 5 years are backing this up - patience is key. :D

[quote name='edinburgh-fred' timestamp='1325093766' post='3217882']
Well, I hope the original poster is right and we are in a crash, albeit a slow one.

The comparison with the US is interesting because, IIRC, our market was at least as overpriced (based on 'averages' for whatever that's worth). But an important difference is that in the US I think it's normal practice to take out a long-term fixed-rate mortgage so the government does not have the same option of reducing everyone's mortgage payments. Hence more forced sales. Also, I believe it is easier to walk away from a mortgage in the US than in the UK.

So my concern is that in the UK prices can be held 'articifically' high through interest rate policy and an agreement amongst banks+government to avoid an uncontrolled crash by exhibiting greater forbearance. Polictically expedient for the government and financially important for banks with large mortgage books that they can't afford to have collapse completely.... for the time being at least.

That said, I think we are in a slow period of decline. Trouble is, it's so slow that the economics of renting may not add up - if you have to rent for 5 years you may well have spent the reduction in house price you get at the end of it :( And you've had the inconvenience of renting to boot!

[b]Can someone give me reasons to be more optimistic!!?[/b]
[/quote]

They can't beat the market. Some of the first chat I heard hear back years ago. I think they may have had a point.

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Yes ccc...

...but to (mis-)quote an old agage... "the market can remain irrational longer than you can remain solvent".

I think we all largely agree on the end point - prices have to fall. My difficutly is that if they don't fall fast enough then the case for renting becomes uneconomic (the details depend on the sort of place you rent and the sort of place you buy, but you get the point).

Can anyone give us reason to believe the correction we think is inevitable will happen within the next (say) 2 years, rather than taking 5 years??

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Well yes if it takes too long then money spent on rent may add up - but as already noted on this forum in another thread - just a 5k fall in price of an ftb flat covers about 2 years rent (inc interest) - never mind maintenance and fees and the rest - so the 30k + falls within 3 years covers 12 years rent easily - more than worth waiting for most ftb's. For larger houses it may be different - you have to do the sums though

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[quote name='edinburgh-fred' timestamp='1325093766' post='3217882']

So my concern is that in the UK prices can be held 'articifically' high through interest rate policy and an agreement amongst banks+government to avoid an uncontrolled crash by exhibiting greater forbearance. Polictically expedient for the government and financially important for banks with large mortgage books that they can't afford to have collapse completely.... for the time being at least.

That said, I think we are in a slow period of decline. Trouble is, it's so slow that the economics of renting may not add up - if you have to rent for 5 years you may well have spent the reduction in house price you get at the end of it :( And you've had the inconvenience of renting to boot!

Can someone give me reasons to be more optimistic!!?
[/quote]


Not really, and thats why I have recently purchased. There were a number of factors, in no particular order :

[list]

[*]the prices in the nice areas we were interested in are not crashing, indeed in some niches are actually increasing;
[*]We are buying for the long haul , so fluctuations over the next 5 year are not really an issue
[*]the risk of those areas accelerating forever out of reach outweighed the benefit of the slow grind down
[*]getting on with our lives, as opposed to it being on hold, whilst everyone from HMG down sought to prop up prices
[*]not having a big wedge in a bank that could fold overnight is a big weight off the mind
[*]sometimes you just have to make a decision and get on with it, rather than wait for years just to prove a point
[*]it was good to buy in a soft market, and avoid the usual frenzy of boom times
[/list]

That was our view, maybe not relevant for everyone, but on the whole it still feels like the right move for us.

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