Monday, May 26, 2008
Falls accelerating
Telegraph: House prices fall as buyers 'go on strike'
House prices falls are accelerating as home buyers "go on strike", according to the latest analysis of the housing market.
Posted by doomwatch @ 10:36 AM (1008 views) Add Comment
11 Comments
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1. paul said...
This notion of a "strike" indicates we're still stuck in the denial stage then ...
2. A Saver said...
"'buyers go on strike""
Good for them!!!
3. stillthinking said...
These articles always seem to present the first time buyer as canny and aware of the cycle. I don't think they are. I think that there are lots of FTBs even now, tapering off admittedly, who are refused mortgages or look at the deposit requirements and realise they don't qualify. The banks are on strike, not the FTBs. Probably in the future when the enormity of the falling trend becomes apparent they will then strike, but they aren't now. EAs are talking the market down already, of course they are, because they need completed transactions every month, but they are in a bind because of lack of deposits. Banks moved from 0% deposit to a 10-15% deposit. That has been a sudden shift over only a few months. Buyers need to move from unsecured debt of 5-15K to a saved 15K.
How long does it take somebody on the average salary to save 20K+? Or even to save 10K ? Years. Years and years and years. Basically the FTBs are down and out.
Too misleading to imagine they are on strike, or even that they are waiting for substantial falls. No.
-They are in the stuck position of waiting for easy credit to come around again, whatever happens to house prices. Look at the prices, take 30% off, work out the required deposit, and include the average unsecured debt in the UK which is over ten thousand. They can't do it whatever.
4. Kruador said...
Some of us are thrifty and don't spend beyond our means. I've bought a car on credit recently but only so I could preserve my deposit (> £30k) in order to jump in at the appropriate point. Still, I'm waiting for the market to fall further, which I think it will.
The Home Information Pack may be a killer for many property owners. Right there, in paperwork you have to give to the prospective buyer, is the price you paid for it and when you did. So an FTB could well look at it and go, well, you've done f'ck all to this place and you want 20% more than you paid? I was looking earlier at a leasehold one-bedroom flat listed at £125k. It last sold in June 2007 for £87k. 44% increase in a year? Yeah, rrrright... (Probably mate's rates or a misreported price to Land Registry, or possibly in need of serious work.)
5. str 2007 said...
@ still thinking
I hear what you're saying but I can't help thinking this deposit thing is a bit of a red herring.
The only time in housing history that you could purchase a home without a deposit is in the last 3-5 years.
If a FTB can't save 10k then I'm sorry but they're not ready to purchase as they will come unstuck.
If they were going to borrow 90% but now can only get 85% LTV why can't they get an unsecured loan for the the 5%.
The % difference between a mortgage and unsecured loan these days is very close.
6. sold out said...
The concept of buyers "on strike" is daft.Buyers are either unable to get the deposit/morgage or have relised that it would be mad to expose themselves to debt by buying in a falling market. A house near me(looks to be a BTL) that i have been casually observing has been on the market for about 8 months.It went on at 200k, then dropped to 195k then 189k.Sold signs have gone up about 4 times only for the buyers to back out,due to the reasons above.Its now on the market at 160k cash buyers only.The only "Strike" there is at the moment is in the deluded minds of the bulk of sellers.They continue to remain in denial of the reality,Peak 2007 bubble prices will not sell in 2008.Once the denial stage is over,probably within the next couple of months, we will then start to see larger falls and so it will continue,the downward spiral of falling prices.
7. jonb said...
The estate agents near me have absolutely nobody in them at the moment, except for the staff.
That doesn't suggest that people are finding part way through the purchase process that they can't get a mortgage. It suggests that they are waiting for price falls to take place before they buy.
8. shipbuilder said...
In NI the viewings have dried up, which suggests that people are unwilling, rather than unable, to buy. They may even be both.
9. stillthinking said...
I agree that deposits are not a fundamentally strange idea, and had they been required over the last 5 years perhaps the situation would not have escalated as it has. However, my point is that the change in deposit requirements has occurred quickly, over 6 months, but for buyers to adjust to deposit requirements will take years. While renting saving a deposit is nigh impossible.
From a London point of view, there is no disposable cash to save for the vast majority of people. The expenses of daily life are too high, so you get the strange effect that your disposable income compares very badly to much lower paid jobs abroad. The change in deposit required affects ALL buyers but look at unsecured debt. I think that, yes, people can save 10K for the deposit, and perhaps in a different time they would already be nearly there. Now though, this requirement is relatively out of the blue and requires clearing personal debt to start. If debt repayment for one comes from the new debts of another, how can the UK collectively acquire a deposit without sinking existing long term repayment schedules?
10. stillthinking said...
This is why I think that this ends with deflation, because the timing of restarting affordable borrowing is too difficult and tragically, the UK government cannot be the borrower of last resort because they binge borrowed at the same time as the population. The banks will not collapse, and deposits will be safe, but to do that in a scenario where repossessions and payment failure increase, will force the government further into debt. The debts of government are not sufficient to replace a collapse in mortgage borrowing. People have been borrowing 6 times their annual salary! The UK government already has 10% of tax going on debt repayments, debt probably held abroad so free exports.
I think about this a lot but I do not see how borrowing can restart, because the balance/timing is all wrong. When you look at the 90s crash, the value of a house stayed flat nominally, and went down in real terms, this allowed debt repayment. Now the houses look as though they will crash even in nominal terms, despite inflation. Thats why the BoE is desperate to inflate and why the value of sterling has dropped in anticipation of this. However, they cannot inflate because they got whammied by global inflation taking their place. Hence GBs fury at the oil producers. If they turned on the taps, he could safely inflate in the background. So one way or another the current debt holders look busted in the future, even more so with the deposit requirements.
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