Monday, Aug 13, 2007
HOW is this possible?!?!?!?!?!?!?!?!?!?!?!?!
BBC: House prices accelerate in June
UK house prices were 12.1% higher in June from a year earlier, according to the latest government figures.
The rate of growth was higher than May's revised figure of 10.8%.
Posted by tyrellcorporation @ 10:19 AM (178 views) Add Comment
26 Comments
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1. japanese uncle said...
This undoubtedly makes the inevitable slump even steeper. Now price correction by 80% is probable in some areas, as was actually the case in 1992 in some part of Tokyo. Be prepared. One million pound property will be sold at 200K.!!
2. maddison said...
There is a huge time lag in the figures. Completions in June were probably under offer in Feb/March. Then is not now! We were looking for a property then and sealed bids were common. Err not anymore
3. planning4acrash said...
Godness, Mr Jap Uncle, I hope you are right, Primrose Hill here I come!
4. uncle chris said...
How come the Land Registry figures are so at odds with the DCLG figures? Surely the land registry figures represents the true picture.
5. Red Kharma said...
Land Registry figures are fact. One wonders where the Govt. figures come from. Also, don't forget interest rate rises only impact about 12 months later due to lag. Couple this with the large numbers on short-term fixes and it will be the coming 12 months when rates start to bite. Only last year my ex-gfriend was thinking about "investing" in a BTL as several of her well-paid friends had made money in them. Takes a while for people's perceptions to change.
6. Davros said...
This isn't a picture of the housing market today, I can assure you.
7. dohousescrashinthewoods said...
I wonder if there are any anecdotal stories we could pick up from e.g. ex-bloggers who might occasionally pop in but made a decision to give up and buy?
8. planning4acrash said...
These are the notes to the stats. They say that recent figures are based on for sale prices, so they will not necessarily square with completions. See http://www.communities.gov.uk/index.asp?id=1002882&PressNoticeID=2457
http://www.communities.gov.uk/index.asp?id=1156181
Notes to Editors
1. The mix-adjusted house price series are produced by Communities and Local Government and are being published on an experimental basis. Development of the methodology underpinning the indices has been undertaken in conjunction with the Office for National Statistics. The index will undergo a quality audit during 2007 with a view to gaining accreditation as a 'National Statistic'.
2. Since September 2005 the new mix-adjusted house price index is based on an enlarged sample of completions data (about 50,000 per month) from about 50 mortgage lenders who supply data through the Regulated Mortgage Survey (RMS) of the Council of Mortgage Lenders (CML)/BankSearch. Prior to this date the index was based on the Survey of Mortgage Lenders (SML) (about 25,000 completions per month). The number of cases received will also be affected by the total number of mortgages that have been completed.
3. In January of each year the index weights are revised to reflect the pattern of property transactions during the previous 3 years. The mix-adjusted average prices for the rest of the year are then determined using these new weights. Consequently whilst house prices within the year are comparable - they are all based on the same weights - house prices between years cannot be compared because last year’s weights and this year’s weights are different. The index itself is constructed on a chain-linked basis, which enables year-on-year comparisons to be made. This means that the year-on-year change in the index for April, say, is effectively the change in the average price from April 2006 to January 2007 (using the weights for 2006) combined with the change in the average price from January 2007 to April 2007 using the weights for 2007. Therefore, the year-on-year change in the index is not the same as the year-on-year change in the mix-adjusted average price.
4. The Communities and Local Government index is currently showing similar year-on-year inflation to other indices available from commercial sources. The slight difference will be affected by differences in weighting. The Communities and Local Government index uses expenditure weights, whereas other indices use transaction weights. Consequently, the Communities and Local Government index is influenced by house price inflation rates in the higher priced areas (which are currently in the South) where house prices - and therefore total expenditure on house buying - is highest. Similarly, regional inflation determined by the Communities and Local Government is more influenced by the market for the higher priced properties (i.e. the demand for detached houses).
5. Note that the Communities and Local Government house price index figures released in this issue are based on completions during the month of May. Other recent indicators have been based on asking prices in June or prices based on mortgages approved during May. Therefore the Communities and Local Government figures are not directly comparable with these other indicators.
6. A month on month comparison of the Communities and Local Government index and price is not advised, as the series are not seasonally adjusted and comparisons over periods of less than a year will be affected by seasonal fluctuations. The series will not be seasonally adjusted until a sufficiently long monthly series exists.
7. Further details on the methodology of the index can be found in the Publications section of Housing Statistics website, at www.communities.gov.uk/housingstatistics.
8. Further quarterly and annual house price data can be found on the Communities and Local Government web site in Live tables - Housing Market section, tables 507 and 508 and tables 590 to 594.
9. The next three release dates are:
Monday 13 August 2007
Monday 10 September 2007
Monday 15 October 2007
9. Benstar said...
That's gotta hurt for all you HPC'ers who sold years ago thinking you'd cash in on doom and gloom. Even if prices do come down 20-30%, they'll just be where they were a year or two ago! I was one of you lot but decided last year that I was wrong.
10. japanese uncle said...
Eating beans on toast in a shabby house fits this nation much better rather than champaign and caviar in luxurious flats. That modest lifestyle will soon be back to your town, where people can be happier. HPC is a process needed for such 'correction'. It should be severer the better.
11. Woodyman said...
How is it possible? Because they are government figures. Can't have people thinking their houses won't cover their pension can we, can't kill off that 'feel good' factor. I think it will be interesting to see what happens as we head into autumn / winter. Where I live in Gloucestershire there are hundreds of properties in the 300k - 500k bracket simply not shifting, reason being the market has bottomed out. There are lies, damned lies, statistics, then government statistics.
I had somebody throw the 'house is my pension' arguement at me a few weeks back. I asked them if they had thought about how the value of their house might be compared to the value of an index linked pension when they retire. They simply had not thought about it. Anyone retiring on the price of a house in 1997 would be stuffed to day, it would be under 80k, plus they will have to sell and fund somewhere to live with that, it's not going to happen. Your £200,000 house that you bought in 1997 for 65k may look wonderful at todays price, but when you retire in say 25 years, £200,000 might be worth very little, well in fact not might, it simply wont be. "spare me 10p for a cup tea mate, thought me 'ouse was a pension didn't I....cheers guv'nor, god bless...'
Last weeks sub prime hit in America has to happen over here, and my guess in around middle of autumn, smack bang in the middle of a quiet housing market. I don't believe it will crash, but its going to be a hell of a correction.
12. george monsoon said...
"latest government figures"
The clue is in the title..
13. Symo said...
Well it doesn't matter if financial institutions can't get loans, Joe Public always will because he is a better bet isn't he? As long as the Chinese don't decide to dump that $1.3Trillion or revalue the Yuan or raise their prices.................
I see three to four years of misery ahead beginning in 2008
14. stillthinking said...
Also, the views on this site are not reflected in the real world. Of the people I work with absolutely nobody shares my view that house prices are going to collapse and in fact, they are all of the opinion that they will continue to rise. People are still doing viewings with a mind to buy and are desperate to get on the property ladder out of fear of being left behind. In the admittedly dire but widely read Metro free London paper last week house prices to go up 40% was plastered all over the front page. The populations opinion is supplied to them and they willingly accept that because they can't be bothered to read about it themselves. There is no reason why most people will connect the news from the stockmarket with houses, as they block out that topic, nothing to do with them. There are also a large number of people with houses who repeat the mantra to avoid cognitive dissonance (!) ("oops, I'm f**cked"). Plus the early bird gets the worm etc. The last crash was years and years ago. I have no memory of it and neither do most people looking for homes.
I seem to remember reading somewhere, probably here, that the market goes absurdly ballistic before the final collapse. Just wait and see. I have to save for 3/4 years to buy anyway. I don't believe sentiment in the population is going to be cause of the crash, rather it will be triggered through repossession and unaffordability and ever lengthier waits to sale. At this point surely the timing of the crash is less important than knowing when the bottom occurs.
15. Stoatgobbler said...
@stillthinking
I agree strongly with what you say, and would reinforce your point that markets go ballistic before they collapse by saying that, in my experience, the trades generally expected to yield the least return, generally yield the most - in any market. If you look at credit, equities, currencies, commodities, property, fish, whatever, you find the market invariably operates in four phases:
1. Indifference. The trade is neither here nor there to anyone, no-one is looking at it.
2. Disbelief. The market starts moving one way, but commentators quickly dismiss the idea.
3. Spike. Suddenly everyone has to be in it. You can't fail to make money! Hooray! This is the extreme movement phase.
4. Crash. The leverage used takes its toll, the market collapses, and you are in an indifferent market once again.
The trick is of course figuring out when stage 3 reaches the tipping point, because of course you don't want to hop off too soon - but you certainly don't want to wait for stage 4 either. My rule of thumb is that if you hear about a market being foolproof from an uninformed source (BBC, Metro, CNBC, whatever), then its deep in phase 3 and you need to square up before you get buried. Nothing has EVER gone one way and one way only forever.
Just a thought, but I guess I'm singing to the choir.
16. Planning4acrash said...
The bottom is irrelevant if you want to buy to have a home. The relevant thing is when falls start to level off to the level where mortgage repayments equal price falls. At that point you are treading water buying and anything you do to improve the house, new kitchen, etc. will add real value Look at the graph on the homepage, if you bought after 1992-3, you were quids in. There was no need to wait till the market bottomed out in 1996 if you wanted a home of your own.
17. cyril said...
@ stillthinking - Crashes are normally be triggered by external events so the timing is impossible to predict.
The man in the street is not well informed, so the housing market is fairly immune to changes in direction - and it overshoots as a result. Unemployment is the missing ingredient for a house price crash at the moment I think.
18. Brightonrentfodder said...
yes and as they said on TV the other day, 1 in 5 companies are highly geared cash-wise (including the people I work for), and they therefore will be severely affected by a stock market crash, so there's your unemployment!
19. shipbuilder said...
Stillthinking, I believe you're spot on, apart from the sentiment bit - the ordinary homeowners moving up the ladder won't bother looking beyond the headlines, but they have always been effectively out of the equation in this boom. The boom was caused by speculators and 'investors' who will have done some research and I believe are now spooked and cashing in - they will cause the crash, irrelevant of outside economic factors, as has happened in the US and Ireland, where we are witnessing a 'slow' crash becuase unemployment etc. is still OK. Any outside factors will speed the crash, but I believe it will simply be investor sentiment that starts it.
20. tony marshall said...
Shipbuilder - the 'slow crash' puts me in mind of the Japanese experience - I mentioned the last UK crash to someone the other day (who is old enough to remember it well) and he said 'Yes, but it only went down about 20% and it had recovered all of that within a couple of years'. Selective recall, maybe, because it actually took a lot longer, but it shows that people haven't faced a really slow crash - a long, painful drag to the bottom and beyond - I think the VIs had better fear this more than a 'conventional' plane crash type crash...
21. Mark said...
what amazes me is how they must cook these figures... after look at old gordon the other day on TV, just like Bush, full of BS about subprime... like we are all kids that need reassuring that we will be ok...
lets get back to reality... what goes up always comes back down... maybe not as pretty as bridgette Jones coming down the firemans pole.. but all the same the bottom will hit the floor in the same way...lol
22. stillthinking said...
Of the admittedly few BTLs I know, there is no way they will sell unless they are absolutely forced to. I have discussed what I think with them, and they (the three of them not some big sample) view it as a matter of riding it out. They have some concerns about vacancy because of lack of tenant interest, but I don't think the number of people who require to rent is going to change.
They look to me as though they are going to hang on like grim death, and are taking an extremely long view i.e they would like but don't expect a profit until retirement. This is an around 37 age group, mainly IT contractors. I think, and personally hope from the view of getting a place, that interest rates will rise and repossessions will cause the shift. @Cyril, I don't see unemployment rising quickly and few bosses take an axe when necessary anyway, they delay, also the government is the employer of around 50% of the population, who coincidentally happen to be their most ardent voters. Although you probably are right the financial bunch wouldn't hesitate to offload and they are all the high earners. That notwithstanding, I think that interest rates will be the slow kill, which means that we are waiting on Mervyn et al. who can (and has) delayed the inevitable before. A big concern I have is that the government are understating inflation and seem to be lying about price rises that I can see in just about everything, perhaps they have made the decision that transferring wealth to debtors is socially preferable, which is very scary indeed.
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24. Didntwait said...
I believe that its public belief that is allowing prices to rise (i.e. people expect them to go up so they do) but as soon as people start to believe that there will be a crash then there will be one. its possible that the first people to stop buying and start selling will be the investors... this will then cause the news (TV and papers) to start predicting a crash, which will cause some people to panic and stop buying, which will affect the house prices, then more people will panic, and there you have it, a crash.
So thats how I believe the house crash will start, but the big question is when will the snowball start to roll?! Well some investors are selling up already so its possible that it already has, but so far the house prices have remained strong.
The next big question is, how big will the crash be?
Again its impossible to know for sure, however my personal opinion is that it wont be as deep as some people are predicting. Some people are talking about figures around 40% crash, but I doubt this would happen simply because all the investors will start to get interest in the 'bargain' prices again well before it reaches that level. I know I for one would certainly be interesting in buying if prices drop by 20%.
25. d'oh said...
stillthinking said: "A big concern I have is that the government are understating inflation and seem to be lying about price rises that I can see in just about everything, perhaps they have made the decision that transferring wealth to debtors is socially preferable, which is very scary indeed."
My fear too. I do wonder whether the plan is to continually bail the irresponsible out as there are so many more of them than savers.
26. dohousescrashinthewoods said...
"transferring wealth to debtors is socially preferable"
Wow, there is something which rings terrifyingly true there.
If a debtor is a slave to the economy, then why not make debt more financially rewarding than saving. That would be frighening indeed.