Wednesday, Jan 16, 2008
HPC gathers pace
Times: A short, sharp housing shock may be best
Suppose the gloomsters are right. Suppose house prices do fall significantly. Suppose there really does have to be a significant adjustment to bring residential property values back towards their normal relationship with wages. How do we as a nation best get there? A short, sharp shock might be the lesser of two evils. Just don't expect estate agents to agree.
Posted by jack c @ 09:22 AM (1408 views) Add Comment
33 Comments
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1. tick tock said...
But what would be the best path for such a fall? What would be optimal - or least damaging, anyway - for the wider economy? Is it better that prices should slide gently but continuously for three years? Or would a quicker and deeper plunge in year one, followed by two years of stability or even gently rising prices from a new lower base, be better?
It is a question that hasn't really been addressed. It is becoming more pressing, though, as the market turns.
Hahahahahahahah they still think that they can choose the method of revaluation, and choose the duration of the correction!
Hahahahahahahah Its way too late for that you idiots! Hhahahahahahahahahahaa.
2. sovietuk said...
"Take a 20 per cent fall in average home prices from the present £197,000 to £158,000 over three years. That might sound cataclysmic, but it is not a particularly extreme outcome"
No, its a disaster if you've just taken out a large mortgage (e.g. £180k) or invested money to the full value of the property. How do these people get jobs as journalists on national newspapers?
3. confused76 said...
"Suppose the gloomsters are right. Suppose house prices do fall significantly. Suppose there really does have to be a significant adjustment to bring residential property values back towards their normal relationship with wages. How do we as a nation best get there?
Take a 20 per cent fall in average home prices from the present £197,000 to £158,000 over three years. That might sound cataclysmic, but it is not a particularly extreme outcome. Such a fall would bring prices back to levels of two years ago and would still leave the ratio between prices and earnings stretched by historic standards."
Now you got it!! It will be a 40% drop!
MWUA AHHAH HAHHAHAHA
4. Theboltonfury said...
will 'desirable' areas and hot locations fall less, or at all. I live in Hale, Cheshire and like it but won't pay 250k for a 2 bed shak. Should I be looking elsewhere for a crash?
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15. uncle tom said...
What a sweet little piece!
The writer believes that a 20% fall will cure all ills - oh dear..
He also seems blissfully unaware of the extent to which the UK economy is now dependant on rising house prices - when prices fall, some 50bn p.a. of mortgage equity withdrawal will vanish - with immense consequences for the economy.
But most exquisite is the notion that the fall can be controlled - bless!!!
16. sold 2 rent 1 said...
I see the 20% drop being the dead cat bounce figure. Prices will stabalise at 20% with a bit of renewed confidence. Then they will begin their plunge to 50% as greed turns to fear and desperation.
17. Dude said...
Of course it's worth pointing out that at the end of the fall there will be many who can't sell because of negative equity; but also many who have been waiting to get onto the housing ladder. So once sentiment changes from 'prices are still falling' to 'end of the decline, houses are a sound investment,' we'll be on the inevitable incline to another boom. It's just how hard this current decline happens that will determine how many struggle or fall off the ladder, and how many new people decide to jump on.
18. Is It Me? said...
Who in their right minds would now offer more than 70% of the asking price of any house ?
19. crash bandicoot said...
This is a bit downbeat from the times isn't it. What happened to those projections showing the average house price being £875,000 by 2020? What happend to painting your living room beige and putting up some new curtains to secure a 20% profit? What happened to talking the market down?
Where did the emperor's clothes go?
20. hpwatcher said...
People realised that he wasn't wearing any clothes, it was all hype.
21. Orwell said...
From the Times blog itself:
"...Property will crash by 25% this year and 15% in 2009. Interest rates will increase to stave off rising inflation driven by rising energy and food costs. Those people who think it will be a soft landing (5%) or even stagnation are away with the fairies.
There has never been a soft landing since records began. The ramping and the estate agency froth are not working any more. It is human nature that fear is a greater motivation than greed... Deal with it...."
Guy, South Kensington
Sums it up really.
22. hpwatcher said...
I have just spoken to an estate agent - in the Windsor area - and he is saying that things were a bit quiet before xmas, but now think are really taking off. Apparently lots of viewings......
At the end of our conversation, which he spent mostly talking up the market, he said ''these are the words of a wise estate egent''. I told him I would remind him in 6 months about what he just said, he said 'please do'. So we shall see. I would say, he sounded a little too confident tho'....
Like I said, I am looking for clear and unambigious signs that will wipe the smiles of the faces of these con-men, once and for all.
23. cyril said...
@ hpwatcher - Never listen to an estate agent. You might as well talk to the cat.
24. drewster said...
@hpwatcher: January is a busy month for estate agents in general. Your estate agent friend has lots of viewings, but how many of the prospective buyers have checked what the bank will lend them? With tighter lending standards, fewer viewings will translate into purchases.
25. fahrenheit451 said...
It seems that rents are moving up ... any comments ...
26. Icarus said...
Why is it that anyone who would like to see housing become more affordable is a 'gloomster'?
27. crash bandicoot said...
@hpwatcher
My neighbour has just put her house on the market - at an astronomical price. She has also put in an offer on somewhere similar. I suspect that she is trying to sell high/buy low in one transaction. As part of the process she is visiting every similar property in the area. Is this increased activity? It certainly is. Is this a sign of a turn around in the market leading to a sustsained recovery in house prices? It certainly is not. Read between the lines my friend.
28. Uh Oh Were In Trouble Something's Come Along And Its . . said...
The very fact that a crash, sorry, I meant to say 'sharp correction', is being spun as a good thing shows how widespread the acceptance of it has become.
Had the bubble never been allowed to happen in the first place this would not be necessary.
Sadly, like bad parents, our leaders have turned a blind eye to the sheeple who , like children, have been raving with drug dealers - the drug in question being cheap credit with the promise of ever inflating asset prices.
E's are Gord, E's are Gord,
Its Ebeneezer Gord.
29. p. doff said...
hpwatcher ---- saying that things were a bit quiet before xmas, but now think are really taking off ---
That would seem to be the case in this part of Wales too. The agents I deal with on a daily basis are telling me how busy they are. I know which ones usually bullsh1t and which ones are more honest, so I am fairly confident of the situation.
What I would say however is that we are extremely quiet on the valuation side - in fact, I've had a couple of days off due to lack of work. This is not altogether unexpected as we lag behind the estate agents and what we are valuing now are the few sales that happened over the Xmas period. I will only start to worry about my job security if it stays quiet beyond the middle of February. (I was made redundant in the last crash).
For anybody that is interested, we seem to be doing a higher proportion of sales at the moment. That is not to say that there are more sales - just fewer remortgages. I assumed the credit crunch had removed the competetive deals at the moment, but one of my broker associates has just told me that he is currently busy on remortgages.
We are still doing quite a few 'we buy your house dirt cheap.com' valuations. These companies are making a killing just now buying at 30% or so below OMV from distressed owners and flipping the houses round in a matter of weeks. I think it's becoming quite risky, but there again, I am risk averse (and that is why I still have to work for a living).
30. Orwell said...
I have just been at the local Law Society talking to a lot of conveyancers. They tell me that the market is dead with a capital D. They seem to think it may return though in April?
What do you lot think?
31. Lem said...
Busy estate agents? Sounds like pass the parcel and the music is about top stop. The prize in the wrapping...negative equity.
32. confused76 said...
p.doff,
I sincerely hope you keep your job!
Here in London, housing market trends (both sales and rentals) are dominated by job security in the financial sector. I have spoken to friends in recruiting and HR of banks, who told me there is a complete hiring freeze at the moment. I do not have a view on layoffs, but if these start big way (as some was saying) the market is killed. Also because mortgage rates are going to stay high this time (forget the 3% introductory rates with no upfront fee of 2003!!)
Talking about surveyors, if you do not mind me ask... is it right that surveyors received precise instructions from the banks to assess BTL rental potential more conservatively? I am aware of 4 BTL deals in Chelsea where the surveyors insisted a 15% vacancy rate should be considered for the rental coverage calculation. The 4 deals fell through for that reason
33. p. doff said...
C76
I have not heard that banks require conservative rental assessments. Most lenders BTL forms just ask for a monthly rental figure - the likelihood of voids therefore does not figure in the equation. They are simply given a rental assessment based on comparable evidence obtained from eg letting agencies.
Most BTL lenders ask for the rent to be based on a 'single occupancy' although a small number will do student lets/houses in multiple occupation. I cover myself by stating e.g 'a rental of £60 per week per lettable room should be achievable during term time, equating to a total of £x per month, although there may be a reduced retainer or voids during the summer recess'. If the lender wants to advance on that basis, they can't argue they have not been given the necessary information.
The only reduction I do make relates to houses that would fall into the HMO category (e.g. three stories or more, with over 5 bedrooms) but do not have the necessary certification. Although the space might be there, you couldn't legally stick that many tenants in, so the rental assessment is cut.
I spoke too soon about the job BTW.