Thursday, Oct 04, 2007
It's Falling!!!!!!!!!!!!!!!!!!!!
Guardian: House prices fall in September, says Halifax
"The average cost of a home in the UK fell by 0.6% in September, providing further evidence that the housing market is running out of steam" "Going forward, housing demand seems set to lose further momentum." Buy-to-losers, on top of subsidizing your tenants think of how much equity you have lost in September. I can help you: It is an astonishing 3% of your equity investment in just one month (assuming you are 80% debt leveraged). Ah ahhha ahha ahahah
Posted by confused76 @ 09:38 AM (1562 views) Add Comment
29 Comments
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1. su said...
This is from Reuters version of the story:
"Halifax said the annual rate should decline further in the coming months..."
That sounds good to me!
2. Titch said...
Buy-To-Letters be afraid...be very afraid...I
was watching a recent episode of "Houses under the hammer". Four properties all up for auction. The estate agent described the seller as having been a landlord who "had had his fun and was now cashing in on his profits". Mm? If the auctions that I have been going to and watching on line are anything to go by, he might be finding that his profit isn't quite what he was expecting. So many are either selling at considerable prices below their previous purchase price (25 - 40% is not unusual especially Derby and Nottingham) or they are not selling at all because they have failed to reach their reserves. Of course there is no way of knowing if this is Buy-to-Letters getting out ( or trying!) or repossessions, although many of those - and believe me there are very many - are normally signalled by the wording "By order of the Mortgagees".
Buy-to-Letters now wishing to turn the fruits of their efforts into cash safely in the bank or tired of paying money in to cover the difference between rent and mortgage or unable to cover voids any more or not willling to take the latest tenant defaulter to court...may be finding that the market is not that willing to give them it so easily.
Any Buy-to-Letter that isn't afraid hasn't looked at the figures recently. Burying your head in the sand doesn't change your situation.
The house I rent, if going on the market would be priced at about £400,000. Supposing it sold ( big assumption I know) and the money put in the bank it would accrue about £2000 per month interest. We pay £1000 rent!. My landlord is losing £1000 per month even before we take into account any drop in value of the house in the time that we anticipate being here.
3 houses we looked at 12months or so ago are still on the market. One belongs to the owner of the Estate Agents. If he isn't able to see what is wrong who is????
3. Tulipmania said...
In fairness it's only 3% if they had just bought at the start of September and had no previous capital gains. If they bought a while back then the loss won't have be anywhere near their equity investment and they'll still be sitting on very large capital gains.
But new BTLs are going to be in major difficulties if this continues for any period of time because they're already in the red due to the costs of purchasing a house. For example if you bought a £300k house with 80% leverage then you've already lost over £10,000 in fees. These falls will start to hurt pretty quick.
4. Magnifico said...
I remember when I started to read this blog 2 years ago, and prices were beginning to fall and we were expecting the crash to come.
It didn't happen then because of:
5. harold said...
"Going forward, housing demand seems set to lose further momentum."
But I thought that HPI was all to do with supply and 'demand'. What's happened, has the UK population suddenly shrunk, or perhaps there's suddenly more green-belt to build on? Doh...
Next time some developer-friendly politician (sock-puppet) stands up and says we need a billion more homes to "supply the demand", just ask him/her to tighten credit. It's far easier, honest, and more environmentally friendly.
6. magnifico said...
when I first started to read this forum, 2 and a bit years ago, prices had taken a downturn, but the crash never materialised mainly because:low inflation,low interst rates, reckless lending,high wages/overtime, pension uncertainty.
Things have changed except for the pension bit, but now, even the more optimistic BTL supportes will admit that the good times are coming to an end and that the market has reached unsustainable levels.
I think the rates cut in Aug 2006 was a most reckless decision. Don't think it will happen again now inflation is here to stay for the forseeable future.
7. harold said...
magnifico, good points, but the reckless rate cut was Aug 2005.
8. bingo said...
Not to keep stating the obvious, but interest rates are fairly immaterial at this point (obviously within reason). It is more difficult to qualify for a mortgage today than it was 2 weeks ago. MEWing will be a thing of the past when people see the set up fees etc. and even at that, there will not be enough equity left in a lot of homes to qualify. A homeowner would need to own at least 60% of his home outright just to make MEW something the lender would consider. It's all gone belly up for the loan companies. So basically it doesn't matter what happens to anything anymore, cheap and easy credit is GONE and with it has gone rising house prices...
9. David Smith's Sub Prime. . . said...
Is this house prices or flat prices because we know that in some areas they (flats) have declined by up to 40%.
10. pecker said...
TIMBER!!!! If this is truely the start then expect rates to be slashed over the next 12months! Crash Gordon isnt going down without a fight! I dont think it will make any difference though! Trying to stop this once it starts will be like trying to stop a charging elephant with a peashooter..
11. talking rot said...
Let's not get excited please. The rate at which house prices are rising has decreased from 11.4% to 10.7% because large gains from 2006 have dropped out of the calculation. House prices ARE STILL RISING! They are rising at 10.7% per year. For the average house, that means they rose by GBP 20K in the last 12 months. Who can save GBP 20K per year?
It is still too early to tell what is going to happen. Yes there are risks but risks may, or may not, actually occur.
We all know the Liebour Glubberment will do its very best to prop up the housing market. When does the BoE MPC meet next to discuss interest rates? Anyone care to guess what the result will be? (Sorry Bingo old fruit, I think base rates will continue to be of great importance and the divergence between mortgage rates and base rates will only be temporary.)
No doubt, if the market does fall, actions will be taken to limit or halt the decline in prices. (Although I accept that Glubberments can manipulate the market for only so long ....)
12. inbreda said...
Personally I think Halifax are bending the figures to give a very negative outlook before the next MPC in an attempt to encourage a cut. Shortly after teh MPC decision they will suddenly turn bullish and find stats (probably just 0.1% rise) to justify their bullishness.
I'll take their comments today with a pinch of salt, but i still think that the housing market is doomed as I agree with bingo.
13. bingo said...
TR, I am not a fruit (none taken).
Even the BoE admits they have little or no control over global economics, and if there is one thing this country is heavily invested in it is global economics... You rightly state, the government would try their damnest to stave off any kind of hardship for homeowners, but there are definite limits to what they can acheive using interest rates as a tool.
Interest rates down,,, currency weakens, imports become more expensive and inflation goes up.
Interest rates up,,, currency stronger, imports cheaper, inflation down.
of course they could say 'bu99er inflation' and let the whole economy become a basket case of the course of 4-5 years....
14. voiceofreason said...
IGNORE THE 12 MONTH 10.7% FIGURE. I quote:
"The three-month figures, which are often regarded as giving the best picture of where the market is headed, showed prices inching up by just 0.9% between June and September,"
0.9% x 4 = 3.6% per annum.
Oh yes, and the journos must have a special macro programmed into their MS Word program that splurges out the following line with one button press....
"Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices." blah blah blah
Worrying about the wrong thing a usual. The price rises are actually caused by cheap & easy credit which is no more....
15. Bloo Loo said...
TR They are not rising as you say- They ROSE as compared to last year, but are falling NOW- Likewise should they fall for a couple of years, you would say they FELL from last year, but they are now rising agian- uts the difference between month on month and year on year figure- as i am sure you are well aware
16. nacho99 said...
TR, the next MPC meeting is happening right now so we will find out about rates within the hour.
And yes "They are rising at 10.7% per year" that’s true, but that rate is slowing, have a look at what the rate of increase on increase over the last quarter was.
Even if they had fallen 5% this month, the total for the year would have been up 5% on the year.
Look at the trend and how its changing.
17. cyril said...
@ talking rot - the year-on-year figure is up but the month-to-month figure is down (a bit). So house prices are actually falling but I accept it could be a temporary blip. The problem with statistics is you never find out whether it was a blip until afterwards, then it's too late.
18. bingo said...
No blips, no trends, the camels back is well and truly broken. The loss of cheap/easy credit was a really heavy straw...
19. maddison said...
Was cheap and easy credit partly available because prices were going up due to shortage, good employment etc. Chicken and egg. Easy credit wasn't the only reason prices went up..
20. pecker said...
They WERE rising by 10.7% per annum!! A 12 month moving average is not the greatest estimate for the next 12 months!! As mentioned, the last quarter roughly x 4 is more accurate!! That figure will get slashed over the next few months anyway, once all those chunky monthly rises fall out of it! Howvever, im sure some of the more stupid BTLs will be clinging on to a "10% return" still in place!!
21. David Smith's Sub Prime. . . said...
Are we into the final quarter then?
I predict that it will be a falling figure by December if so.
22. pecker said...
Easy credit was by far the main reason this bubble has happened! The bigger this bubble has got the less it has anything to do with interest rates, unemployment, so called supply problems etc etc. The definition of an asset bubble is simply when an asset is bought for the sole reason it is expected to show a capital gain in the future!! Thats where we are now...
23. nacho99 said...
its out, rates left unchanged at 5.75%
24. Davros said...
Talking Rot, what are you talking about?
House prices arn't rising. They fell last month! Compared to this month last year they're up, but they're falling.
25. confused76 said...
TR,
1. Rate is on hold, sorry Maddison
2. I totally disagree that debt spreads are now up TEMPORARILY. They were very low temporarily for the past 3 years. And now the party is over, spreads are aligned with long term averages (if you have not noticed)
3. Any BoE rate cut cannot save the housing market (unless of course they bring the base rate to 2%!! and that is IMPOSSIBLE) for two reasons
-- housing prices got very very far from fundamentals. it was a bubble and bubbles do burst. House price = 3.5 x salary, that is the truth
-- the City economy will not grow for a couple of years or sligthly decline, so expect no HPI in London, that will enough to scare BTLosers
-- credit spreads are now aligned with historical averages, do not expect more mortgage fire sales in the future, too many banks got their fingers burned
26. Aloha said...
@pecker&@voice
"The average cost of a home in the UK fell by 0.6% in September"
-0.6*12=-7.2%
BTLoosers you are set to loose 7.2 at that pace.... so now who is going to write this on a large audience paper/webiste?????
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28. doomwatch said...
TR, let's face it the only stuff pushing up the YoY figures to 10.7% is the places bought with funny money in Chelsea, Mayfair, Kensington etc.
by "entrepreneurs". They don't really care how much they pay, just long as it's all washed.
29. Si said...
Surely as the sales at the bottom of the chain decline, the average sold house price will increase, I guess until it's only the really rich trading. This would make a market that is actually stagnating look like it's still buoyant (that is if you're a VI skewing the figures)
Over the last few weeks in Bristol over a hundred properties a day are coming onto the market at asking prices that are, in my opinion, silly money, significantly higher than they would have been even 6 months ago (source the rightmove website). Apply either the beloved supply/demand equation, or the credit availability equation, and surely you have to conclude that sale prices must be falling already. This is a stark contrast to the last couple of years where houses have been snapped up, and very few went onto the market, pushing prices up. I know as I've been watching with growing despair (and now elation :o) )
I reckon this is the blair effect unwinding (remember those 2 flats they bought round here? do you think that just maybe the whole of london jumped on the bandwagon?) Only a complete fool would buy when we have just passed the peak of the market, around here anyway.