Saturday, Feb 16, 2008
Spectre of negative equity back with a vengeance
Guardian: Pop goes the property boom
Prices for new-build flats are in freefall, with some buyers who paid top-of-the-market prices as recently as 2005 now seeing the values of their homes down 40%.
We focused on Manchester and found flats selling for £50,000 less than the owner paid for them. Repossessed flats are being dumped on the market for prices that would have seemed unimaginable a few years ago. Meanwhile buyers are reluctant to enter the market in case they end up over-paying.
Estate agents windows marked up with "price corrections", and one saying: "Make me an offer - I may say yes."
Posted by little professor @ 01:52 AM (824 views) Add Comment
14 Comments
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1. japanese uncle said...
A one-bed flat sold by a developer for £140,000 in 2001 fetched just £87,970
· A two-bed flat selling for £180,000 in 2005 struggles to get £128,000
· Estate agents windows marked up with "price corrections", and one saying: "Make me an offer - I may say yes."
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This will be the reality throughout the UK, hence I predicted 25% fall in 2008.
How badly the top-heavy London market dictated by the financial bonuses will be hit, only God knows.
2. talking rot said...
JU
I hope you are right but I have a feeling that the decline in house prices will not be so fast. My guts tells me 2008 will see minor declines of a few 3% leading to later decline in 2009 and 2010 as credit conditions tighten and, [he biggie], unemployment rises in an inflationary period.
My favourite lines are: Firstly, "There is a "buyers' strike", in which people are unwilling to purchase until the floor in prices is found. " This represents a return of "Buyer Power" and that healthy market function called gazundeering. Long may it continue. Secondly, "However, it's not all bad news: first time buyers are seeing previously unaffordable homes fall back into reach." Realistically, house prices have dropped from being wholly, totally, vastly unaffordable to just wholly, totally unaffordable. So no FTBs yet then. And how does this view tie in with the buyers' strike???
3. Icarus said...
Stories like these make you wonder how house prices are falling by as little as the lenders report every month. Any clarification anyone?
4. Davidg said...
"But the signs of over-supply elsewhere are evident; rents are falling"
Hang on, that labour woman on question time said that there was still more demand than supply and that the fundementals were sound.
5. Duncan said...
I like the final comment
"Brokers specialising in buy-to-let say talk of a crisis is misleading as it is based purely on the new-builds in city centres."
As if someone who was considering buying / renting a flat in an Edwardian conversion wouldn't be tempted by a new build at any price.
:- Duncan
6. Orwell said...
What will happen in the smoke then? Property Snake still shows some very high prices?
7. Letthemfall said...
What about this line: "Brokers specialising in buy-to-let say talk of a crisis is misleading as it is based purely on the new-builds in city centres."
These brokers must be getting worried since so many BTL were on new-builds.
But talking rot is right that price falls will generally be slow at first. Here in sunny Surrey, the average 4x4 driving home owner thinks the latest inflated prices quoted by the estate agents are their God-given right to receive. But the credit crunch reaches everywhere eventually.
8. mark wadsworth said...
Tee hee, bring it on.
9. Spiderchannel said...
Its just so much harder to talk up the prices this time round. Websites like HPC do a great service in acting as bullsh** police. What mug is going to pay the asking price for an overpriced property today when we have news like this. And last week we had the news of a bunch of auctioned property some of which sold at 40%down on the asking price. Even the most dimwitted buyer is going to wait. Why would you pay the asking price when you have clear information (thanks again HPC) that real properties are being sold now at huge discounts. And by the way, don't forget to factor in the sterling value drop... and still the powers that be are spouting crap and expecting the hoi polloi to believe them.
10. harold said...
"that labour woman on question time said..."
Forget it, she's a professional liar. Whatever she said, the opposite will be nearer the mark.
11. stillthinking said...
I was in Manchester and its true that there are new builds everywhere. I also looked through a copy or two of the many property magazines they leave lying around everywhere. However, I live in London and I haven't seen many new builds (area of West London), and I haven't seen any sign of London rents coming down. Regardless of property price falls, there is a shortage of housing in London and I can't see rents coming down for a long while. House prices crashing yes, but rents no until Londonerss start losing jobs in greater numbers which won't be for a while. At least the rental prices in Manchester can be compared to a mortgage, in London they can't. Rents are still (although expensive) cheap.
Manchester is truly doomed because they have more properties than people, and there is no way around that killer irrespective of sentiment/availability of funds.
12. Davidg said...
> Manchester is truly doomed because they have more properties than people, and there is no way around that killer irrespective of sentiment/availability of funds.
which kind of shows the free market doesn't work, or something is distorting the market. There is nothing wrong (beyond rain and drug gangs) with Manchester compared to London, the accent is a damn site more tolerable than Estuary, innit, but still the UK is totally Londoncentric. In a more balanced world companies, jobs, people etc would move to areas like Manchester to restore some kind of equilibrium.
13. drewster said...
StillThinking - I believe the population of London is more mobile than that of Manchester. If the jobs market turns sour, many of them (young, unattached, renting, internationally focused) could easily move abroad. There are a lot of foreigners living there, not just Polish plumbers but American bankers, French analysts, German lawyers too. The international finance and international law businesses employ a diverse range of nationalities, many of whom could easily move back home. The departure of these middle-class workers would affect the housing market more seriously than the Polish plumbers. So London could be doomed just as much as Manchester.
14. stillthinking said...
I sincerely hope so, just for a modestly priced property for a change.