Tuesday, Feb 12, 2008
You knew this was coming
Daily Express (of course): SHOCK RISE IN HOUSE PRICES
Home owners were given much-needed cheer last night with the news that the average price of a house went up by almost £1000 to £219,591 in December.
The 0.4% surprise rally defies the “doomsayers” who had been predicting a big slump.
Stuart Law, chief executive of property investment company Assetz, said: “Here is yet another piece of evidence that property prices are firming up, ready for the annual spring rise, which flies in the face of doomsayers. There is plenty of hard evidence that the market is, in fact, starting to grow again. There is no evidence of a house price crash whatsoever.”
Posted by little professor @ 01:09 AM (1481 views) Add Comment
39 Comments
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1. Driver said...
I guess the Dianna stories must be drying up for them to come back to their second favourite topic ~ House prices.
Its a sign of the times that the optimists will hold high a single good statistic as a banner for all things to come whilst ignoring the trend. Next month it could be "SHOCK FALL IN HOUSE PRICES".
I am minded of the Daily Sport years ago reporting "World War Two Bomber sighted on the Moon" - The next week or so it was "World War two bomber DISSAPPEARS from moon!!"
(It might have been a double decker bus ~ my memory fails me slightly)
2. Yakov said...
I hope the chap, who at this moment considering my offer of 43k below the asking price for his property, doesn't read this! He'll be getting even more flustered.
3. quiet guy said...
Let's give the bulls a bit of credit here. The numbers look good. Us doomsayers have been proven wrong. Go on: sink your savings into another property. You know it makes sense: The Daily Express says so.
Go on. Put your money were your mouth is.
Oh what the hell; take out some equity while you're at it. Get a 100 inch wall mounted telly. The Daily Mail says that there is nothing to worry about.
Enjoy it.
Really.
4. new user 2007 said...
No one would ever say that house prices fall or rise in a constant manner. That has never been an issue of revelance. London prices fell by over 30% in nominal terms during the last crash. But it was not some continuous fall. It was a downward trend with prices rising and falling around this. That is what we are seeing now. Mr ASSetz knows that the CGT will get rid of hundreds of thousands of BTL i.e. a trigger
So, as ever, not sure what Mr ASSetz's point is. I suspect that the people who read that newspaper are already part of the moron crowd that really believes we have not built enough houses, we have built on all our land (not the under 20% that is reality), that it is possible for income multiples to reach such levels that entire salaries will go on housing but no food, and that our credit cycle is different to Japan, history and the US.
5. new user 2007 said...
p.s. he is the same person who said it was the school season, then he said mortgage rates would have come down by now, then it was the Xmas season....he has an awful lot of springs:)
6. quiet guy said...
@new user 2007
"No one would ever say that house prices fall or rise in a constant manner."
Good comment. Sorry to all for the sarcastic tone of my last comment but the thought of a young hapless FTB reading Mr Law's latest 'news' and buying in just makes me so angry. The odds are that someone, somewhere will bankrupt themselves due to Mr Law's spin.
Does Mr law care? I think not.
7. new user 2007 said...
http://www.communities.gov.uk/news/housing/694055 (this is the source).
"6. A month on month comparison of the Communities and Local Government index and price is not advised, as the series are not seasonally adjusted and comparisons over periods of less than a year will be affected by seasonal fluctuations. The series will not be seasonally adjusted until a sufficiently long monthly series exists." (This to reinforce my point that not too much should be read into either individual falls or rises in any short series of months, particularly where the numbers are are not seasonally-adjusted.)
"UK annual house price inflation in December 2007 was 9.1 per cent, down from 9.7 per cent in November 2007. Annual house price inflation in London was 13.5 per cent in December, down from 14.5 per cent in November. This is the second consecutive month that the annual house price inflation rate has fallen." (This is also from the site. It shows that the data tomorrow will be interpreted depending on the newspapers' political stances, rather than any significant change in trends, up or down.)
I used to think Mr ASSetz interpreted such things the way he does because he is a VI, but I now think he really cannot read indices, knows nothing about economics and the hate he seems to show to the world implies he is determined to see prices rise simply because he cannot take being wrong.
8. new user 2007 said...
No worries. I was off checking the source and assumed you were being sarcastic:)
9. Stevie Dee said...
Breakown of the Age & Socio-Econmic Groupings of 'Express' readers found on this link:
http://www.nmauk.co.uk/nma/do/live/factsAndFigures?newspaperID=1
10. Blank Cheque. said...
Its more ExpressWang, what d'ya expect?
Besides, if the powers that be say house prices are rising they won't be cutting interest rates, right?
If the Express are consistent, tomorrow they'll run the opposite story. Its no longer a newspaper, its a confewspaper.
11. George Sore Ass said...
I suspect next month when the figures show another drop Mr Law will be on his knees pleading for massive and fast interest cuts to rescue the market from a 1930s style depression. Talk about a flip flop. The VIs need to get their story straight.
12. symo said...
We are so wrong. Looks like another great opportunity to buy. Go on people buy some houses and prove how good an investment property is. I imagine the bulls will be first in line to get those easy low price mortgages.
13. Freewheelin' Franklin said...
No need for interest rate cuts then?! Indeed if the BoE is seeking a 'neutral stance' then fiven that .4% a month is above the CPI then perhaps they should stick them up by 25 basis points. Nice one Stuart. Oi thanks you, moi savings thanks you and moi savings savings thanks you....
14. growler said...
Always amazes me the (s)express. It's as if noone reads and sees anything else. To splash that on the front page might satisfy an editor, but the readers faced with a lot of analysis from other papers and friends at work (who surely all can't be Express readers) will soon reveal to them that they are wrong. Nothing like looking a fool to help convince you to buy a real newspaper.
15. growler said...
Funny: reading the Times, it's another case of cherry picking news from the Express: http://business.timesonline.co.uk/tol/business/economics/article3352971.ece
Connells, the estate agency, reported that mortgage approvals in January were the weakest since Bank of England records began in 1994.
16. Holding Off said...
THis is called a bull trap dont get suckered
17. mark said...
really, a house in moreton on the wirral has just been dropped from £350k to £299k that is a big rise huh!!!
18. Jolo said...
Mark,
does that mean the house in moreton in now worth 300K!! as of yesterday. :¬)
19. Kirsty said...
Just what is it with the Express and their mania about house prices?
20. george monsoon said...
the Law is an ass, in more than one context.
21. Alan said...
...but the Daily Express is The World's Greatest Newspaper, it says so on the front of their website.
I'm actually saving that front cover image as an example of some of the worst journalism I have ever seen.
22. jack c said...
Regular contributors to HPC have pointed out before that The Express only has 3 headlines - House prices up/down (this week they are "up") Diana and The McCanns - the latter being slightly off the radar at the moment so they have the Sir P Mc divorce case as a substitute.
There is a poisitive (IMO) to this headline because it reads "shock" rise in house prices which immediately suggested to me that their readers should infact be expecting a reverse headline.
23. Op_dir said...
New User wrote
Mr ASSetz knows that the CGT will get rid of hundreds of thousands of BTL i.e. a trigger
Hi This is my first posting. Could New User or anyone else please explain why Capital Gains Tax will be a nail in the coffin for BTL
24. Davros said...
Anyone who ignores the downward trend is a fool.
25. Lem said...
It must be the week after a BOE meeting.
26. hpwatcher said...
It's a very bold headline as the country moves towards higher unemployment and recession.
The HPC won't happen overnight, but will take a number of years to be fully manifest, just like last time.
The beauty of a headline like this is that it will confuse people and may make they less likely to do anything.
27. jack c said...
@Op_dir welcome to the debate. There is a theory that some long term BTL investors will look to leave the market prior to April to take advantage of their CGT allowance including indexation and taper relief whilst others may exit after April to take advantage of the proposed flat rate of 18% - if this happens in any great quantity then the thinking is that excess supply will help push prices down or further stagnate the market. I cant see it being a "nail in the coffin" on BTL but will potentially have a big affect on the market.
28. Sacred Contracts said...
Well I hope that anyone who does get a "feel-good" feeling from this just enjoys the moment.
Who is it really going to convince?
Will it convince all those owners of houses that have been lurking unsold for over 9 months that their problem is too low a price tag?
Will it convince anyone who has actually worked out how much they can really afford that an unaffordable house is worth stretching for?
Will it convince anyone hoping to remortgage to pay for their summer holidays... ah maybe this is who it is aimed at... yes I can imagine anyone who is already bleeding themselves dry by remortgaing so that they can have the pleasure of paying interest for another 25 years on transient pleasures, maybe they will look at this and think oh where can we go for £1,000?
29. Pelethar said...
Absolutely unbelievable. This has to be the worst, most out-of-context headline the Express has delivered yet (which is up against some very stiff competition). Alongside the home.co.uk survey (more up to date and the most bearish mainstream survey I've seen yet) this looks nothing short of criminally misleading. But the punters are reading it and believing it.
Look at the comments at the bottom: "well this proves that the so-called experts know nothing ... house prices only go up ... might expand my BTL portfolio ... "
30. new user 2007 said...
Op.
Op.
It is not a question of BTL suffering during the CGT changes. Merely the process involved.
The original BTL crowd did indeed go into the market so many years ago that they have an equity cushion (and the ones who stick to the rule that the rent should cover at least 125% will be ok).
But there are large numbers who build their models based on building equity through higher prices and using that to buy yet another property. There is an increased risk if they cannot reschedule their debt at the previous interest rate as they have no equity cushion as collateral for the bank.
Their entire model relies on capital appreciation. I do not even think that this groups is the one at most risk, as they have some experience and may know what they are doing (taking on risk based on knowledge). I am not sure about this group's financial position.
There are around 1mn BTL mortgages and 2mn BTL dwellings. Anyone who entered and bought since 2005 is effectively subsidising rents. Despite what Mr ASSetz says, there has been such a surge in BTL that rental supply has outpaced rental demand…at the start of 2005 there were 576,700 BTL mortgages (CML data) and by the end of 2007 there were around 1mn…the increase has been more than enough for the increase in population and smaller families (see the ONS and UK Housing review…there are more properties per person now than in 1991, albeit of a different composition).
Many of these BTL bought first and second properties (it is possible to take out one mortgage and then purchase multiple properties (the 2mn figure above is based on around 55% of BTL having at least 2 properties)). I know some experienced BTL who started looking in areas they know/ have researched but outside London, as the numbers have stopped adding up in most of the South east, so they have been surprised by the continued surge in BTL buying in that region.
Now the issue I have with Mr ASSetz is his character. I have only seen his "profile" when it relates to people in the time share and pyramid scheme cons. Both of these work for the person who starts them and for all those who can find mugs beneath them BUT when the mugs are no longer there it crashes, and he will be the only one laughing. Plus he generally masks knowing nothing with some very weak economics...straight out of "this time it is different crowd".
Back to the CGT issue. Even if looking at surveys of BTL by VIs they say only 30% are in it for the short term…that is some 600,000 houses not in it for the long run. I think that many of the 400,000 off who bought in the last 2 years are in trouble as rents are not matching costs. On top of that we can go back to 2004 BTL as well…they will be the ones who are not losing money on subsidising tenants and have a cushion BUT as a financial decision I would like to know what they will do if they have thought through the leverage argument in reverse….
….1 £1mn portfolio with 25% equity means that a 10% fall in house prices is a loss of 100k BUT this is a loss of 100k on 250k not on £1mn. That is 40% capital loss. I suspect many would want to realise their capital in a falling market, particularly the hundreds of thousands in it for the short term.
This is a trigger for falling prices that then scares other BTL. This is all while repossessions rocketed last year when employment was strong and mortgages cheap (the problems of 2007 will not even start having an impact on repossessions until March i.e. remortgaging, credit card limits being raised etc..) What happens to repossessions when BTL bankruptcies increase, unemployment goes up and people with no equity or can no longer self-certilie, have to pay the SVR i.e. high risks of capital losses for BTL?
Finally….
Given the existing income losses (subsidising tenants) many BTL are making, and the now certain capital losses, I think many will sell, but as the most vulnerable are the ones who bought in the last two years, they are waiting until April as they will have to pay a far lower CGT (new rules come in they favour those who bought recently). So we shall see them enter the market with a huge supply….hence the TRIGGER.
I would also add that the HIPS worked in favour of VIs. Demand has been falling since summer 2007 but supply on estate agents books have gone up. The reason is lack of buyers BUT imagine what would have been the case if demand had fallen off over the cliff (was going to happen for sure given the turn in the credit cycle) BUT supply had not collapsed as well owing to HIPS (regulated support). There would have been a massive surge in stocks on books. By April HIPS will have filtered out i.e. the market will return to normality on the supply side.
Hope that helps.
31. new user 2007 said...
So not a nail in the coffin of BTL who know what they are doing (I think this is far less than 50%). Rather, a tax advantage for all those who are new to it (the bulk of them who could not see it was a pyramid scheme) and are waiting to get out.
I may be wrong. It is incredible how many are not aware of the tax implications of their "business", or that we have more housing per person now than in the last crash...ignorance can make self-fulfilling prophesies keep asset values away from fundamentals for years, after all.
32. C'mon Correction said...
What about the home.co.uk report released today stating falling prices??? Which is more independant - the Goverment or home.co.uk.
I'll let you decide.
33. techieman said...
NU 2007 - Good analysis. An issue here though that I dont think many people have mentioned ("i mentioned it once but i think i got away with it"). In the last "crash" in the late 80s / early 90s there was no real alternative to buying. I sold my property then and moved in with a mate, but there were no rental alternatives really. My recollection is even then councils were cutting back building and had lost stock (right to buy in mid 80s) . BUT now its a different story, that an the internet sites in general indicate a viable alternative to purchase. People can draw their own conclusions from that.
34. new user 2007 said...
C'mon...
rock and a hard place comes to mind lol
35. new user 2007 said...
techie:
I have always been in London lived and studied. both areas had a rental supply, although it was not as organised and there certainly were not To Let signs as the far as the eye could see (no marketing channel at the time maybe the main difference?) as there are now.
But from what I can tell there is indeed more rental supply out there than I can remember at any time before (part of the reason I believe and have expereinced little rental price growth in the last 3 years).
36. techieman said...
NU2007 - I take your point, but isnt the point that BTL was encouraged by the fact that there was a change in the law re short- term tenancies and security of tenure - some sort of housing act change. Quite possibly to supplement the (local authority) market. That in turn made it a no-brainer at the time, if you accepted the falls in the early 90s didnt represent the begining of a downward spiral. (obviously this is easy to say now!!) Because of - in effect - the replacement of social public housing with private landlords the local authorities could spend less of the money on housing and more on er other services, that meant that council rents were lost (RTB) , and any increase in council stock would have to be paid for by central government subsidy. Now we have come full circle?
I must admit i didnt look too hard at the time - was living in the suburbs, so i didnt really need to. However the numbers you quote in your prior post look - on its face - to show plenty of available choice.
37. new user 2007 said...
1988 Housing Act allowed Assured Shorthold Tenancy agreement. It allowed landlords to repossess their properties. Something that was actually quite hard to do before that. This was the major change that took place and it seems to be more important than what happened in 1996..
The Assured Shorthold Tenancy agreements were amended in 1996 and came into force (before the Labour party came to power to be fair to them) in early 2007. This helped landlords as in the 1988 version the minimum period was 6 months regardless of how bad the tenant was. There was also more paperwork.
The part I don't get is the change (not a lawyer)...even under the old act the minimum was 6 months and the courts could not force a tenant out within the first 6 months unless the tenant agreed. I am sure there is some legal difference, but I am not sure what that is in practical terms.
38. new user 2007 said...
Techie. Please ignore the above. Put the wrong date and words in.
The 1988 Housing Act allowed Assured Shorthold Tenancy agreements. It allowed landlords to repossess their properties. Something that was actually quite hard to do before that. This was the major change that took place and it seems to be more important than what happened in 1996.
Assured Shorthold Tenancy agreements were amended in 1996 and came into force (before the Labour party came to power to be fair to them) in early 1997. This helped landlords as in the 1988 version the minimum period was 6 months regardless of how bad the tenant was. There was also more paperwork.
The part I don't get is the change (not a lawyer)... under the new act the minimum was still 6 months and the courts could not force a tenant out within the first 6 months unless the tenant agreed. I am sure there is some legal difference, but I am not sure what that is in practical terms.
39. new user 2007 said...
p.s. I forgot to add that it does not even have to be BTL selling in significant numbers...the pyramid scheme will collapse even if they just stop buying.
You may have read that FTBs are now making up a higher proportion of buyers i.e. they will take up the slack that is being left BUT
The absolute number has not risen, just that other buyers have fallen to match the fall in FTB i.e. the cake is smaller so FTB share has moved up