Saturday, Dec 22, 2007
Rightmove: "On borrowed time"
BBC Breakfast News: First-time buyers 'at fresh low'
I was watching Breakfast News this morning and heard the interview with Rightmoves spokesman. A carefully worded piece in response to the first time buyer issue, but I couldn't believe the freudian slip: "in a sense we're living on borrowed time" with reference to the fact that BTL and parents helping FTBs have extended the demand for property.
Posted by growler @ 08:16 AM (1795 views) Add Comment
31 Comments
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1. wdbeast said...
There has been an enormous pent up demand from the FTBs for property.
What has driven this lust is a generation that have only seen house prices go up.
For years all their friends and families have said how important it is to buy property and they have become more and more depressed because of the lack of affordability.
Oh how that will now change!
I can just hear the conversation.
You rent do you? how very, very sensible.
Now that the tipping point has arrived tenants will revel in their new found status as "the lucky ones"
They will not be buying property for a few years to come.
The game is afoot!
2. wdbeast said...
Or in this case 8 inches (-33%)
3. handle_it said...
"........and should house prices drop in the early part of the year, many will be ready to pounce, especially if more repossessions filter through into the market," said RICS chief economist, Simon Rubinsohn" These guys just can't let it go ! The reason this story is news, is because the statistics prove the housing market is fckude. But no ! Not for Simon,oh no !
4. growler said...
I have just had a job move and had to rent. Now I feel like Keanu Reeves when waking up from the Matrix. The next months will be the answer. Job losses are being announced in Europe and stikes are popping up all over the place. Holiday companies are going into liquidation as presumably customers are not booking to cover outgoings. Interesting times... I remember the 1980s crash very well.
5. jack c said...
Absence of first time buyers, lack of affordability, Mathematics on BTL simply doesn’t add up for new entrants which coupled with much tighter lending criteria from all lenders = falling house prices. Anyone with an ounce of common sense and a basic grasp of economics knew the continual rise in UK house prices was unsustainable - the difficulty was pinpointing when the decline would really start - April 2008 onwards now looks a good bet.
Ps – you can always tell when things are on the turn when people start asking brokers for Accident, Sickness & Unemployment insurance cover.
6. renting2 said...
Estate Agencies will find themselves with stock on the books they cannot shift because the sellers' expectations and needs will be higher than the market value.
They will be begging the few viewers that turn up to make an offer however ridiculously low, which the seller won't accept (until it dawns on them that that is all they'll get!)
Sellers will be trying to change their agent with ever increasing rapidity and EAs will be trying to enforce contracts all over the place. They will also slash commission rates for clients where there is a sniff that the seller will accept a reasonable price and therefore be cutting their own throats.
But, as the EA, banks and brokers only get paid on what they sell, a lot of the smaller ones may well fall by the wayside in 2008. Followed by brokers, HIPs providers etc etc.
The first repossessions available may well be from people who work within that bloated sector.
7. Gameover said...
A friend of mine recently needed 25K for payment to builders on a property abroad, not wanting to liquidate savings in shares etc he approached the banks for a short term loan (until bonus time next year) he would be a tip top credit rating - high salary, city bonus etc. Never had a credit issue in his life and he has so far had 5 flat refusals from banks. I fear the vice is well and truly turning now if extremely solvent people are having difficulty obtaining money from banks. .
8. growler said...
@ jack c: I'm with you. April 2008 and it will be impossible to argue that "things are levelling out" as we'll have had 6-7 consecutive drops on the house prices.
It will be interesting to see how the Government try and bury bad news when the end December reports come out on house prices. You'll see the Jan sales stories filling the press and TV with huge discounting to top what we've already seen.
Like every garden after a bolt of growth - a good weed out is what is needed!
9. enuii said...
I like the way the BBC carefully words their headline as most other media sources get the fact in that 'the number of first-time home buyers in the UK has dropped to its lowest point since 1980'.
One can put an ever better spin on the headline if the fact that the UK population is now some 20-25% higher than it was 27 YEARS AGO so lets get some percentages into the headlines which should read The Percentage of First Time Buyers has Dropped to the Lowest Since Records Began in ????.
10. it_is_going_with_a_bang said...
Yes I can't wait for the words "inflation" and "property" to part company.
"many will be ready to pounce"
Keep talking it up. Ready to buy one day when prices are right. Not 'pounce'.
11. Yuppski said...
My question is "Will the FTB's /BTL's come back in numbers if from the rumoured Interest rates cuts happen next year" I read large cuts propossed for early next year. Time will tell.
12. taffee said...
so no first time buyers and no buy-to-letters
DON'T WORRY IT JUST MEANS PRICES WILL PLATEAU!!!!!
13. wiltshire said...
After so many years of huge increases and property prices reaching the stratosphere I would imagine that most not already in the market (i.e. FTB and STR) are now extremely cautious and probably patient. The way the press is talking at the moment it is certainly painting home ownership as extremely volatile if not untouchable. Once the herd is spooked I can't see it returning to the watering hole until it's pretty certain that things are safe, regardless of assurances from EAs.
14. stillthinking said...
I think the job losses of the estate agents will be more significant than people think. Normally ea shops blend into the background and you don't really notice them. I was looking for a flat recently and I was astounded how many there are, literally every other shop in parts (for London anyway). They must be coming up to 15% of retail premises. I wonder how many people work in estate agents, must be loads. Enough to impact on unemployment.
15. Mark said...
tell u what guys there are loads of shops up for rent around where i live in cheshire, usually a sign things have turned bad..
16. drewster said...
@stillthinking, If we look at what happened in the USA, the housing market collapse caused pain across the entire spectrum of property industry workers. Here in the UK we can expect job losses amongst estate agents, surveyors, conveyancing lawyers, companies that run local searches, new HIP inspectors - and that's just on the sales side. The construction industry in the USA took a battering too, although in the UK housing construction didn't boom to quite the same extent. I've probably missed a few groups, can you think of any more direct job losses from the property slowdown?
The sheer number of estate agents is mind-boggling, especially in London, but they're just the public face of the industry - there are tens, perhaps hundreds of thousands more people working behind the scenes. Remember that estate agents are paid on commission, so they may remain "employed" but be earning far less in bonuses and commissions each month.
In the USA, many estate agents are self-employed rather than employed directly by a company. This means two things: firstly, even if their sales drop from thirty per month to just three, they still count as employed. Secondly, under their benefit rules, they basically can't claim for unemployment benefit if they've been self-employed. This flatters the employment figures over there, when in reality a lot of those supposedly employed are actually earning a lot less each month.
17. The Xyy Man said...
Another sure fire sign that the crash is happening.
Once any pyramid scheme has no new recruits joining the bottom layer - FTBers in this case - it collapses.
This is universal and cannot be avoided, whether it's a "chain letter" or rampant HPI, the same flaw exists - the mathmatics requires an infinite number of participants, the reality is that the supply is finite.
And as usual, the ones who get in at the start prosper, the ones joining at the end get creamed...
18. drewster said...
The bloke from RICS says: "There is huge pent-up demand from first-time buyers, and should house prices drop in the early part of the year, many will be ready to pounce."
Erm, no they won't be "ready to pounce". Two things:
1) The credit crunch means they are unable to pounce, as lending conditions have been tightened. An FTB in the past might have gotten away with a £7.5k deposit and a 95% LTV mortgage to buy a £150k home. Because the banks are scared of falling house prices, they're tightening their LTV ratios to 90% (these are just example figures - I could probably dig out the real figures but I have Christmas shopping to do...). This means that same buyer will need to save up for a £15k deposit instead - and it could take a year to save up that additional £7.5k. Hence the dearth of FTBs, they're all too busy saving up for a larger deposit.
2) No-one catches a falling knife. On the way up, aspiring FTBs thought "Prices have risen 10%, everyone says they're going to keep on rising, I'd better buy now before it's too late!". On the way down, aspiring FTBs will think "Prices have fallen 9%, lots of people are saying they'll fall further, I'd better wait and see if they fall any further before I jump in."
19. Jonielightning said...
Agreed the FTB with a little nous will wait patiently and be able to by-pass the small apartment end of the market going straight for the Victorian terraced home. This happened in the 90s for those with foresight.
20. inbreda said...
He makes the implication that "ready to pounce" FTBs will keep house prices up - which kind of ignores the fact that the "pouncing" will only happen at a lower price. If a house is currently for sale for 300,000, a first time buyer who pays 300,000 for it cannot be described as "pouncing". a FTB that pays 200,000 for it might be describable as having pounced.
It doesn't keep prices high - it simply confirms that prices have fallen.
FTBs will be "pouncing" all the way to the bottom, I'm sure. FTBs will be "pouncing" on the 300,000 house and paying 50,000 for it. The whole concept of FTBs pouncing means the market is fugged.
21. uncle tom said...
Jack C / Growler
April will probably be significant as the month when the likes of Halifax and Nationwide start publishing house price stats that show a year-on-year fall (Rightmove may show a YoY fall in asking prices as soon as February..)
The psychological impact of this should not be under-estimated - it could be the spur that pushes the BTL camp into a rush to offload..
22. justwatching said...
Te he, and then the house of cards fall down.
There can not possibly be enough first time buyers with a) enough cash and b) a lack of intelligence, to replace the BTL 'investors' who are jumping off the bandwagon. When I sold in nov2005 'no onward chain' was almost unique in the property details. Now 'no onward chain and vacant possession' are rife.
Drewster @13, do you know any EAs on purely comission? Me thinks next wave of redundancies could very well be a raft of EAs.
One purely piece of annecdotal evidence; a good friend and fellow believer whose wife is an EA (I know, he's a bit of a hippocrite) stated in pub other night that 'they haven't sold a house in 3 months' . I chuckled thinking that his wife has had no business for 3 months, but no, it was the whole branch.
Nice
23. Prophet Of Gloom said...
The housing market can only continue so long as a closed system (no FTB's entering the market) before it crumbles. The health of any housing market should be measured by the rate of FTB's (IMHO) entering the market which is related to the Ave House Price / Ave Income. The long term average is 3,5 - 4. When this ratio increases above this level we seem to see a peak, which is inevitably followed by a trough. The housing market has lured in too many 'sheep' and now its time for a slaughter. The only thing the market has going for it is the lack of supply in the South East.
My next mission is to guess when the bottom of the tough will be - thats when I want to climb into the market again.
24. Submedia said...
We are going to see a flood of BTL after April trying to offload their properties. CGT changes! Some more experienced (older) BTL may buy a proportion of those available - the bargains. But i don't think it will be enough to hold prices. As for FTB - I believe they will wait and see for as long as possible. Besides, they are often comfortable with their rent payments and happy with their rented property so why should they rush. The FTB need to see through the market and not listen to the media too much. If they can act as one force they can help to force the market down to a sensible level. I suspect they will do just that.
25. dohousescrashinthewoods said...
it_is_going_with_a_bang, exactly. Don't touch property with a barge pole until it has gone below the long-run average of 3-3.5x salary. Expect a significant undershoot and protracted sub-fair-value doldrums as fingers will have been very badly burned. Ppeople will take time to heal - and to change their minds to think that property is a good thing.
All this "affordability" chatter we used to get just points the finger clearly at cheap credit/easy money as the real driving issue issue. If it's been "affordable", it's because borrowing was cheap, not because the population increased (with people who were priced out before they got here).
If 3.5 is the long-run average, that is because that amount, relative to salary, is what has always been affordable to borrow at the long-run sustainable cost of borrowing.
26. geed said...
According to the ONS the average salary is £22,000.
3.5 times Salary would mean a mortgage of £77,000.
So deposit realistically being 20% (£15,400) means a property worth £92,400.
Sounds about right for an Average property price in the UK and roughly 50% drop not adjusted for inflation.
Marvellous!
27. little professor said...
I think that's a tad unrealistic, I foresee average prices dropping to £115,000 with my crystal ball.
28. Watching And Waiting . . said...
My friend is trying to sell her house in Teignmouth and her Estate Agent has to ring his office telephone via his mobile just to check his landline is still working, such is the absence of 'business'. Tee hee.
However, the majority of the housing stock in England is so manky it would take a fall of at least 50% before we even look!
29. Sold My Soul To The Never Never Never said...
Little professor - I think you mean £15,000! You are on the mark though. My husband was made redundant from his 29K job (manufacturing - gone to China). No more work in his field now and he is working as a casual in the Civil Service on £14,776 - one of many Gordon's job creations. At least when Mrs Thatcher put people out of work in our area she did it big style (mining). New Labour have stealthily done it with their Economic miracle.
30. uncle tom said...
Geed,
It's not enough for someone on average earnings to be able to afford to buy - those on below average earnings also have to find somewhere to live. Try burrowing into the ONS data and look at the finances of households in the fourth quintile of household income.
These people have so much of their income going out on other essential expenditure, they don't have a lot to spare for mortgages. The old prudent maths of 2.5 x first salary + 1 x second salary is as much as they should be running to, which roughly equates to a mortgage of £60k.
This would suggest that modest terraced houses in 'middle England' should be worth no more than £75k - half their current value
31. geed said...
UT, No disagreements here, your predicted value is lower so I'll buy into your theory with pleasure. Merry Xmas.