Friday, Nov 09, 2007
House Prices Fall for Two Consecutive Months
Market Oracle: UK Housing Bear Market Has Begun
The Market Oracle's New enhanced affordability index indicates that UK house prices are now at extreme levels of unaffordability not seen since 1989. The indicator also clearly shows why house prices were extremely under valued for nearly 8 years right into 2002, when many housing pundits were prematurely calling for a UK house price crash without doing the sums on affordability.
Posted by sold 2 rent 1 @ 03:52 PM (1168 views) Add Comment
9 Comments
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1. techieman said...
I saw this chart (affordability index) before "enhancement". The RHS wasnt as high as now. My question is how is this "enhanced" affordability (or even actually the original affordability index) calculated. Whether the fundementals are right or not is one thing but i cant see how you can comment positively or negatively on an index when you dont know how its derived. or am i missing something?
2. cornishman said...
Quote from one of the links in the article follows, basically saying that the capital gains tax changes will support the market until April and then there will be a flood of BTL on the market. What do you bet that Darling Brown backtracks on the CGT changes just before the end of the tax year just like they did with SIPPs
b. "Government Tax Changes on Capital Gains - Gordon Browns Darling in all his wisdom has probably done more to set a date for a crash in UK house prices then any one could have imagined. Basically Alistair Darling has cut the capital gains tax on property investments from 40% to 18%, effective from 1st of April 2008. The effect of this would be that those sitting on fat profits built up over over recent years now have an incentive to sell to lock in profits whilst they can. Whereas in the past the incentive would have been to hold onto properties for many more years to benefit from taper relief which would reduce tax liability from 40% to 24% over 10 years.
Whilst many market commentators view this tax change as a boost for the Buy to Let market. What it effectively means is that there will be NO tax incentive to hold onto properties. This will to some degree support the market in the lead-up to April 08, with the expectation for a large number of buy to let properties coming to the market in April 08. More so if the housing market continues to weaken."
3. Still Waiting said...
techiman, I agree, me too saw this chart before it was "enhanced". It would be great if someone here who knows more about how they calculate their index could comment on this.
4. sold 2 rent 1 said...
The graph looks like a cheap imitation of the Lombard Street Research one developed 12 months ago.
5. Rollonapril2007 said...
Aha! - That quote is from Nadeem Walayat (also from The Market Oracle) and one which I wholeheartedly agree with: http://www.housepricecrash.co.uk/forum/index.php?showtopic=60093
6. techieman said...
i see this "unenhanced version" looks like we are still in the "fair" zone???? - only just though. Is there an update?
7. Techieman said...
2ndly i'm not really sure i understand why BTLrs will wait until April 2008 to get out. Surely if thats when taper relief disappears then the peeps should be getting out between now and then, not after.
I saw this which indicates some people may be sh*tt*ng themselves: http://www.pistonheads.com/gassing/topic.asp?h=0&t=449960&i=20
i like the "estate agent here i come" comment.
8. techieman said...
i sent this (or similar) without using my password - duh!
2ndly i dont really understand the GCT point - surely the peeps will be getting out BEFORE April 2008 when they lose the relief not IN April 2008. I saw this website http://www.pistonheads.com/gassing/topic.asp?h=0&t=449960&i=20 looks like BTLrs are sh*tt*ng themselves - see the mention of neg equity and estate agents here i come.
However I'm not so sure its gonna be mega bearish - if you have bought relatively recently you may not sell to hold out for a cheaper CGT because you havent 1. Made much gains, 2. Secured much taper relief. Looks like the smart money will be trying to transfer their BTL portfolios to the new money...but of course duh there wont be any new money because there is not enough commercialism in (effectively) new BTL properties for them to get in (credit tightening etc. per other threads). I take it back - mega bearish after all.
9. sold 2 rent 1 said...
The index update at 1 Oct 2007 was at 85.3
http://www.financemarkets.co.uk/2007/10/03/housing-affordability-barometer-predicts-period-of-price-correction/
Calculations based on the real world
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=QUG3DUN0Z1GX5QFIQMGCFFWAVCBQUIV0?xml=/money/2006/10/02/cnhouse202.xml
By Q1/Q2 2008 we should be in crash territory