Sunday, Jun 29, 2008
More confirmation of the good news ahead
Observer: UK housing sales plunge to record low
"...and he expects prices to decline by 15 per cent this year; by up to 12 per cent in 2009, and by yet another 10 per cent in 2010 - one of the most pessimistic City forecasts."
and
"...78 per cent fewer mortgage products available than at the pre-credit crunch peak last summer"
But ... this is going take ages, how can we speed up the process ?
Any ideas?
Posted by voiceofreason @ 08:46 AM (1189 views) Add Comment
12 Comments
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1. Fromuk said...
"35% by 2010" since when is 15% + 12% + 10% = 35%? It does not even work out at 37% but a good 5% or so higher than that! once you do your sums correctly, someone send the Guardian a calculator
2. inbreda said...
It struck me the other day that although house sales are falling, it might not have the desired effect on stats.
As things progress I expect more and more distressed sellers from people losing their jobs or, more likely, coming off a fixed rate and not able to cover the mortgage. Most of the actual sales however will be in auction rooms, so will not show up in Halifax HPI stats. They will come out in the land registry figures which are several months behind everything else. So I think we will see less of a lagged correlation between the indices.
Also, I think we all expect unemployment to rise. I don't think it will - I just think a lot of immigrant workers will return home. The effect on the housing market will be much the same, I just don't think the unemployment figures will be as bad as they could have been.
3. pendulum said...
Putting a bid on a property tomorrow. The agent was realistic and the house is ~20% priced under average. He said anything else just won't even get a viewing. It's already happening, just it will take 3 months for the real figures.
4. montesquieu said...
Patience, Grasshopper. These things unfold on a timescale of years and for the wishful thinkers there may be several false dawns and temporary rallies. Going with the fundamentals, this hasn't even started yet.
5. Charlie Brooker said...
Somebody on this website was frequently referring to the Kubler Ross model of grief about six months ago. Funny it should now show up in an Observer article.
6. drewster said...
inbreda, that's a good point about both the Halifax stats. You can get a mortgage on an auction-room house though, so the Halifax figures would still include any auctioned properties bought with a mortgage. The more misleading thing about Halifax or Nationwide stats is that they reflect the banks' own lending criteria. So if Halifax suddenly tightened up its lending criteria, their figures would show a consequent fall in house prices. The Land Registry figures are the only truly accurate ones but sadly they also suffer the most lag.
As for the unemployment figures, that's very interesting and I hadn't thought of the effect of migrants on unemployment. This will surely make a mess of the government and the BoE's attempts to keep track of the economy. The old measures aren't as relevant any more.
7. mark wadsworth said...
What can we do?
1. Go round putting in 'cheeky offers' (one-third less than asking) until message sinks in.
2. Inbreda had a great idea for ruthless gazundering on another thread - you tell the vendor to his face that your lending bank has downvalued the property (even further).
BTW HM Land Reg stat's are only two months behind Haliwide. And please note re HMLR:
"The Land Registry's quarterly survey is still very comprehensive. The proceeds of all the transactions are totted up, and then divided by the total number of sales to reach an average sale price. However, repossessions and property transfers following a divorce are excluded to avoid skewing the sample."
http://news.bbc.co.uk/1/hi/business/3132863.stm
8. stillthinking said...
The big problem is that borrowers won't be able to repay the banks.-> Bankrupt banks. When people say that fiat money isn't backed, they ignore the backing of people holding debt with assets. Their assets back fiat money. Should the government move to replace this asset backing with future taxation backing, they will find themselves in the situation of holding debt that I am not obliged to pay as a taxpayer (having the ability to leave the UK).
The big issue (!) is that those who sold and banked the money, and there are many of course, don't really have that money. I know people with 100K in the bank because they sold their flat near the peak. This is only backed up by the debt of the purchaser and the purchaser doesn't have the money to follow through.
What we are seeing now with bank share issues is the transfer of wealth from bank shareholders to these sellers. Fair enough. Though a bit tough if you have your pension tied up with the stocks. Will this transfer be enough to cover the defaults? I don't think so. So the next wealth transfer to these lucky 100K winners will have to come from government.
The unbacked profits of selling at the top are the problem now. I am so p*ssed off with GB I am even thinking of stopping smoking to deny the evil git the tax revenue. Its on my mind whenever I have a heavily taxed beer at the pub.
Maintaining the many 100K winners is a problem that cannot be fixed. So far the government seems to hope that inflation will take the sting away, but bad luck, deflation is here soon, whether you think I am wrong or not. Watch.
Simply, I will move out of the UK rather than pay for the profits of housing speculation through taxes. So the situation is going to be;
a) 100K winners get paid from taxation.
b) 100K winners lose money from inflation (which won't work because they will move the money)
c) 100K winners get paid from bank shareholders ownership dilution (not enough there)
d) Banks go bust and their winnings disappear.
So, from the point of view of "getting a bargain" in a few years, seems to be tempered with basically paying for a property without getting one. There is a coming financial storm and worrying about the price of housing will be a laughable anachronism.
9. mark wadsworth said...
Stillthinking, your logic is spot on, but you seem to overlook absolute figures.
My magic fag packet says that UK mortgage losses in UK would be worst absolute case £50 bn, which the banks can cover by doing four-for-one rights issues, or issuing shares to sovereign wealth funds.
Further, your "£100k winners" can stick the money into National Savings and Investments.
10. stillthinking said...
The mortgage losses that will be suffered are not just the mortgages themselves, but all trades derived from them. The derivatives market in the US is apparently 500 trillion. UK banks have 30% of the global financial market (roughly right call it 20% or 40% whatever). The housing market has geared up and enabled a whole host of financial speculation. Trades derived from housing will cause losses to the banks that will cripple their ability to pay out to the 100K winners.
If somebody loses their house they will go bankrupt. Of course, I would you would anybody would, there will be no partial payment. Unemployment is rising. People question the banks solvency. I think we are facing a problem of national solvency. Quite aside from the fact that even 50 billion requires £2500 from each worker (20 million workers). Soon the unions will be out, assuming they represent mainly low paid people their members are not going to be so concerned about GBs threat of a higher interest rate on a pay rise. Also, inflation is cumulative, if you don't compensate for the inflationary flare now and miss say 2%, you actually miss that 2% -forever-. There is no such thing as inflation resetting per year.
Mark, politico that you are, I wonder whether you just want to hush up talk of bank insolvency, which is a bit irrelevant considering that most of the visitors to the site are hair trigger paranoids who don't want to hold sterling anyway.
There are trillions and trillions of dollars floating around, but somehow the UK banks are having difficulty doing their share issues, so presumably they smell worse than sh*t. A four for one rights issue will go down like a lead balloon.
Selling to a sovereign wealth fund ? Umm... so the people we have to pay for oil become the people we have to pay for oil, and the people we have to pay for the interest on our debt, in a debt based money system! Could it ever get worse than that do you think? What else is left to go at that point?
In the vain hope that you adopt my solution, here it is. Massively slash the public sector. Literally kill a third of it or more if possible, and default on all PFI debts. Then cross fingers.
11. stillthinking said...
I mean cut taxes as well from the savings, which I suppose isn't implied. I include local council as well as government spending.
12. mark wadsworth said...
Stillthinking "Massively slash the public sector. Literally kill a third of it or more if possible, and default on all PFI debts. Then cross fingers."
Yes that's in the MW manifesto as well, did I forget to mention it?
As to all this derivative crap, a loss is a loss - the derivatives just spread it around differently, but ultimately it's the same people bearing the same losses.
And if you don't want to pay interest to oil barons, then take out a mortgage with a good old fashioned building society.