Monday, Apr 28, 2008
agent says house prices could fall 25%
agent says houseprices could fall 25%: times
its actually happening and now agents will be forced to slash prices to stay in business
I have always said its the agents bizaarly who will start and push the crash
Posted by taffee @ 08:30 AM (1261 views) Add Comment
26 Comments
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1. hpwatcher said...
25% is still far too conservative.
Remember that the reason for the huge increases was the availability of cheap credit, that situation is now at an end. Prices will fall back to levels consistent with people's ability to pay i.e. wages...remember the good old days? I think we are looking at eventual 50-60% drops, with interest rates will reverting to their long term norms around 9% - 12%.
Mind you, the days of thinking at any price drop - no matter how small - was possible, now seems like decades ago!
2. Ijjhall said...
I was speaking to a acquaitance the other night who could be described as a property bull who insisted that the BOE would continue to cut interest rates this year and that combined with some falls in Libor in part attributed to the liquidity plan would would ease mortgage conditions/lending late this year going into 2009. In other words, the party hasn't stopped yet though he acknowledged this artificial propping up couldn't go on forever, eventually there would be a reckoning but it could get Brown/Darling through an election ..anybody think there is anything in this ? I know Techieman etc has appealed for credible Bull arguments to mull over...
3. harold said...
"Its the agents bizaarly who will start and push the crash"
Couldn't agree more - they need turnover, not necessarily high prices. Could the EAs become HPC's best friend? Ironic, really.
4. Landedgentry said...
This deadlock must be unbearable. :-)
5. it_is_going_with_a_bang said...
The same old line - it's the banks fault if prices drop because they won't lend the money.
Why should a bank lend money to people who cannot afford to pay it back? or are a risk?
I realize a lot of people would 'like' a price reduction if up to 50%. Me one of them! But it I can't really see it going much further down than 30% - 35%. The demand on letting it still very strong.
If the demand was to reduce because of economic / immigration issues then maybe just maybe it would go further down.
Obviously the BTL Flats etc are a law unto themselves and over 50% on some places is very likely.
6. str 2007 said...
Although I feel there will be some price support at -20 to -25% off.
There will likely be a flood of BTL properties hitting the market as mortgage lenders will be demanding top ups at that point, if not before.
Nice to see agents starting to get their heads around the situation, although I don't think they've fully grasped it yet.
At least with Savills pointing it out the lesser agents have now effectively got the green light to down value property on the books.
If I was an agent I'd be using this article to encourage existing clients on my books to reduce asking prices by 10% in the hope of selling before prices fall further.
7. str 2007 said...
In fact if I was an Estate Agent I'd be offering clients a 10% fee reduction for them agreeing to lower prices by 10%.
8. jack c said...
As I have stated in several previous posts EA's need to turn the stock on their books to generate commission/fees - a static market will see them go out of business. At the moment we appear to have a stand off between sellers (who are reluctant to drop the price) and buyers who are effectively priced out or are now waiting to see if prices fall - the EA's now have a vested interest in getting sellers to accept a lower price because it will turn the stock on the books - Savills appear to have woken up to this !
9. mark wadsworth said...
What Harold & Jack C say, EA's have swung round to our way of thinking and are doing our work for us.
10. growler said...
I do hope the EAs learn that they must be realistic - and I have an example of the sort of VI that makes me lose all confidence. In the example to follow - which is no rubbish and I can name names - I have no confidence in one particular agent. I saw a house last may that was being extended and popped a card through the door - thinking he might sell and can save fees. We met, he showed me plans and we talked what he'd been advised. We're talkign APRIL 2007. Via the internet, you can see that the owner paid less than £400k. The owner told me an agent (nameless) advised £485. We thought this was OTT then. It never went on anyones books back then and we kept texting the owner to say we were looking. Recently we have heard nothing and know why. I'm renting anyway, so no worries. Anyway - my wife rang me in shock on Saturday. The house went on the market with the agent Bramptons, Beaconsfield branch for £675,000!!!! This might flatter the other places that are demonstrably not selling (I've got the lot logged by price from about 400-600) and this totally wrecks confidence in anything this particular agent (who cannot be alone) says.
11. titaniccaptain said...
Flood of BTLs, no more easy credit which gave house prices their unrealistic prices, Major City Job losses and one of the worst economic enviroments in history = Way over 25/30% drops in house prices. There has never been such an enviroment, house demand means nothing if you cant afford the house. The prices have to fall to levels where people can afford them again and without credit that no longer exists.......oh yes and the big money from london is soon to be a thing of the past so less chance of that cash buyer on the top end
12. Dead Money said...
@ growler
very similar price increases to that example still happening in west swansea. There's still a long way to go!
13. planning4acrash said...
As I always say in situations like this, those with a vested interest in high prices only call a falling market to manage expectations. If they feel that people will call 30%, they jump in first to call 20%, or whatever they feel they can get away with.
14. str 2007 said...
I hope your right TC but my figures agree with 'its going with a bang' if I factor in a couple of years of 5% inflation.
The recently purchased BTL flats will likeley get a huge hit.
I'll be satisfied with family houses in good areas currently 5-600k back at 4-450k.
15. titaniccaptain said...
@str 2007
time will tell mate.............I have no vested interests either way
16. uncle tom said...
I posted this in another thread:
I re-visited my long term forecast calculations over the weekend, and concluded that my prediction that prices would eventually settle at 40% below peak was fairly bullish.
It is quite difficult to estimate the extent to which the credit boom has unsustainably fuelled incomes, the extent to which earnings will be depressed by the correction of trade imbalances (and no-one seems quite sure how much oil will eventually be wrung out of the North Sea..) and the extent to which increasing single person occupancy will depress affordability.
However, I'm now of the view that a fall of 40% (in real terms) is the least sustainable correction - it is more likely that prices will eventually stabilise at a slightly lower level.
17. taffee said...
What amazes me is the forgotten costs of btl
building insurance
management fees
tenancy gaps
repairs
management fees
these additions make btl a waste of time imo
18. harold said...
In fact I'd go so far as to say that most EAs are probably desperately praying for a HPC.
19. uncle tom said...
taffee - this is my list of BTL expenses, roughly in order of cost to the average landlord:
- Void periods (tenancy gaps)
- Management fees
- Near term maintenance (re-decorations, carpet renewals, minor repairs etc)
- Letting agent fees
- Long term maintenance (kitchen, bathroom and heating refits, major refurbishment)
- Legal costs
- Statutory compliance (boiler inspections etc)
- Bad debt (irrecoverable rent arrears)
- Accountancy
- Insurance
If the property is to be let furnished, a significant extra cost has also to be added for quite frequent renewal of furniture.
As a 'ball-park' estimate, 60% of the headline rent is a reasonable expectation of income for unfurnished properties.
20. taffee said...
Thanks...forgot about statutory compliance and accountancy
21. titaniccaptain said...
Just a passing thought........what if we had another Northern Rock situation or more than one? What effect would that have on the housing market? because we can see that its a very real possibility
22. micasasucasa said...
Judging from my experiences house hunting last year, a lot of (if not most) EAs will go to the wall before they push sellers to drop their prices. They don't seem very bright!
23. uncle tom said...
tc,
Bradford & Bingley looks set to become NR MkII and Alliance and Leicester also look very shaky.
However the thing that is probably giving our Merv nightmares is the possibility of HBOS or Barclays going down..
24. str 2007 said...
How close are HBOS and Barclays to the wire UT ?
25. titaniccaptain said...
@uncle tom
So what happens to housing market if Barclays or HBOS go down?
26. Hp9man said...
@growler "this totally wrecks confidence in anything this particular agent (who cannot be alone) says"
Bramptons have always (since 2000 anyway) been near the top of the list of Beaconsfield's "price it stupidly high to get the business" EAs.
I'm thinking of starting a thread to predict which HP9 EA will fold first. My money is on Jackson Howes with their pointless and no doubt very expensive chain (geddit) of offices.