Thursday, Aug 28, 2008
Dropping like a sack of sh**
bbc: UK House Price Calculator
Look at houseprices in your region, against prices last year and in the last quarter.
Intersting stuff this, because I thought prices were going up in the Ribble Valley, but in the last quarter they have registered a 20% drop overall.
Posted by george monsoon @ 12:09 PM (2280 views) Add Comment
48 Comments
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1. denzil said...
Ah yes the Ribble Valley. At that time we identified it as an anomaly as it was possible to find other similar anomalies from different regions.
I'm awaiting the VI's to throw another anomaly into the mix accompanied with the phrase "green shoots of recovery" ..........
2. mark said...
even spiders are making people leave their houses, what next!!!
http://uk.news.yahoo.com/skynews/20080828/tuk-giant-spider-bit-pet-dog-to-death-45dbed5.html
3. Jayk said...
Yes they are dropping across the UK as a whole, but take a look at the regions individually. There are as many areas stagnating or rising as there are falling. Take a look at the rate of change for the type of property I am trying to buy in my area (semi-detached in Rushmoor):
http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/24ul.stm?se
Yes, that's a 3.4% INCREASE last quarter, which tallies perfectly with my experience at estate agent windows, Rightmove etc in recent months. It's not all about the bad parts of Northern Ireland and huge apartment development failures in Yorkshire towns which in my view are contributing heavily to the extremely large falls across the country. Take them out of the equation and what would the figure be I wonder? Negative still, yes, but as high as 10% YoY?
Now I know what someone will say: this is LR data which is well behind the curve. That is irrelevant; the point is that it is all relative. On this BBC page alone, look how some areas are resisting the crash - defying it even - compared to others. It matters not that this is three month-old data, it proves that the crash is not universal and all-pervading as many would have us believe. Some areas are fairing okay, much to my annoyance.
Guess I'll have to wait another year. Next summer, NEXT summer.......
4. Hermitage said...
As someone previously mentioned, it more than likely most properties sold are the better, more desirable ones. These may sell at a premium but even then the margin has been cut. Don't despair.
5. denzil said...
Jayk.
The most recent land reg data is showing those properties sold during the "spring bounce". If I were to be convenient and extrapolate the seasonal aspect away from the falls then those falls would be significantly worse.
You only need look at transaction volumes and LTV ratios to see where the market is going. It will get much worse before it gets better.
As for "Next summer, NEXT summer". That's a pretty good guess. The market is shafted and many of those employed in it, especially Estate Agents.
6. Wiltshire said...
Even in a rapidly slowing market, the BBC STILL want to trumpet how great high house prices are. They highlight the following -
Hot spots -
Top 10 highest priced areas
Top 10 areas by volume of sales
Top 10 quarterly increase
Top 10 annual increase
I can't wait until these 'house price inflation is god-ists' realise that the contrary is actually true.
7. plato said...
Jayk @ 3
denzil @ 4 is absolutely right.
Jayk, even if you believe you are correct now, you are forgetting the current mortgage requirements. This puts most property out of the reach of ordinary folk, and most certainly local folk at current prices. This means : House prices go down with some very odd exceptions.(i.e: Buckingham Palace)
On what premise would such property you mention increase in value?
We have to talk in general terms on HPC and you may well be a rare 'lucky one',in which case you'd be mad to move anyway. Result? Stagnation and no housing market. Correction needed!
8. Pundit said...
Its hard to believe in the Northern Crock heartland of Newcastle, North Tyneside and Gateshead prices increased by an average of 9.4% in the last quarter. If true the HPC must just be a malicious rumour and everything is going to be alright. Perhaps we can all share the PMs optimism on the economy.
9. mark wadsworth said...
Quoting selectively from that BBC source is highly dangerous:
Round where I live (and would like to buy), change in last quarter:
Overall - down 7% (hurray!)
Detached - down 18% (double hurray!)
Semi - down 3% (wot?)
Terraced - up 12% (boo!)
So I can only assume that the sample sizes are so dwindlingly small as to be meaningless.
10. Joe Buzran said...
If inflation is at nearly 5% does this mean the actual house price fall is closer to 10%?
11. george monsoon said...
I would like to see the raw data from which all this is calculated...
i.e. what is the proportion of terrace sales against detatched?
12. Sensiblebear said...
@7. mark
There is also the "Lidl" effect here. People's take home income falls and they are forced into lower price parts of the market (eg Lidl, Wetherspoons, terraced houses) temporarily boosting those relative to the rest. The housing market is so weak it is hard to see this being sustained in this case (I hope).
13. Btl_and_milking_it said...
Come on guys.. Ive been watching this site now for a week or so and your're all acting like spoilt kids jumping up and down with excitment and the prospect of carniage in the property market. The truth is thats not going to happen is it? ..Yes a 'correction' was long overdue, but we are not going to see a 65% drop in prices, the fact is, house values will ALWAYS be underpinned by rental yields, and once the prices hit such that they yield 6.0/6.5% investors like myself will buy in.
Last month i bought a 2 year old apartment in SK15 for £95000. The current rental figure is circa £600PCM = 7.79% What are you all getting for your savings in the bank at the moment? 5.5%? Even if this property drops lower before it rises in value it has no consiquence unless it has to be sold, and these are all 10yr+ investments. This is a no lose situation...the prospect of long term capital growth with a 7.79% income in the meantime.
With a financial interest in many properties the current climate does not phase me at all, it just presents a discounted buying opportunity, and with mortgages proving difficult or near impossible to obtail for Joe Public, it will be the professional property investors field day.
14. str 2007 said...
South Bucks Detatched av price £908,605 up 18.4% based on 91 sales
Chiltern Detatched av price £824,636 up 25.8% based on 113 sales
Winchester Detatched av price £503,524 0% increase/decrease based on 122 sales
Eastleigh Detatched av price £348,990 1.3% increase based on 121 sales
Don't know what to say really, some daft people with an awful lot of money/big mortgages.
Either I have alot of saving to do or houses round me have ALOT of falling to do, clearly I hope the latter.
15. Ewood said...
The Ribble Valley has been in its own private bubble, puffed by good schools and demography for the past ten years, agents have always overvalued here by 20per cent, so the drops should only be the start as the market falls.
16. Joshua said...
Hackney still managing +8.3% in last quarter and +11.1% in the last year.
Neighbouring Islington doesn't seem to be fairing so well though.
17. Jayk said...
"Quoting selectively from that BBC source is highly dangerous"
Which was exactly my point in response to the poster who said "Dropping like a sack of sh**".
Plato/Denzil, so the spring bounce only applies to certain areas? You ignored my point about relativity. Where was the spring bounce for the areas falling, whereas my area is rising? Does the mortgage drought only apply to some parts of Hampshire, not mine? And Rushmoor is NOT a rich area.
18. Theboltonfury said...
my god, I dread to think what sort of hovel you've bought in sk15 for 95k.
19. drewster said...
str2007,
You have picked some of the poshest and priciest parts of the country in your list.
There is a recent trend of wealthy Londoners cashing in on their overpriced urban homes and moving out to the commuter belt. The reasons are fairly straightforward: up until the credit crunch, many of the well-paid city workers were working 12-14 hour days. With such long hours, they had to live in expensive properties no more than 20 minutes commute from the City.
However since the credit crunch took hold, the amount of work in banking, M&A, international law, etc. has dried up. With less work to do and reduced bonuses to aim for, the working day has shrunk to a more normal 7-8 hours. Faced with the unhappy prospect of having to spend more time with the family, they quickly decide to buy a big house in the commuter belt and spend more time on the train instead.
20. beartil2010 said...
Jayk - Some areas are doing better than others, this is true. There is a complex set of factors involved, particularly important are the number of transactions ofer the recent period (which indicate less capital in the housing stock - see current Las Vegas housing problems for an extreme comparison) and also how nice the area is - rather than in expense, in how much people want to live there - the more people want to stay, the less moves, the less transactions and so the less impact so far.
What is a fact is that mortgage costs are up, and transactions are DOWN big time. This means that, with the stricter lending criteria being applied to both normal people and BTLers, prices will continue to erode until an equilibrium is reached. In some areas these prices will drop slower, and they will never reach the same bottom as others - you probably all know the areas you want to live in and what may happen there.
As for Btl_and_milking_it you are either very smart and consequently prepared or very stupid and about to lose lots of money. It all comes down to your capital ratio and your debt service. If you have sufficient capital then the downturn should not affect you too much - except for falling nominal yields as renters are given too much supply to live in, and so start paying less per month against your relatively fixed cost of mortgage, tax and maintenance (and your void periods will increase). Yes your apparent yield will be good and increase as property values fall - this is only good if you have enough capital. How leveraged are you? If you have 30% capital across a property portfolio and values drop 30% you are left with a large debt to service and no extra capital. This makes you a difficult loan proposition for banks - and like any other 'business' (housing companies anyone? Wimpey? Persimmon?) when you cannot continue to service your debt, you need to produce extra capital or you default.
Your comment seems, really, like a trolling comment because you don't give any detail. Fyi while a lot of the comments on here are jovial or puerile, most of the more common posters have a very good grasp of economics.
So what's the deal?
21. Still-waiting said...
@ Jayk. I agree. I live not far from you, and the prices went UP in the last quarter! What is going on? Even flats are increasing!! Who on earth is buying them? Is it people with large amounts of capital snapping up some more buy to lets? It's going to be a longer wait than I thought for an affordable house!
22. theboltonfury said...
i wish I was btl-and-milking-it - must be dead proud of yourself but also in the last throws of optimism
must be lovely to be a self-appointed 'professional investor' - is that the same level of self appointment as a 'relationship expert' on Jeremy Kyle?
23. mark wadsworth said...
@BTL and milking it, rental yields in the 1990s were well over 12%, any sensible chap will wait until they hit that again. Even your 8% implies a further fall in prices of one-third. If you deduct price falls of 10% p.a., your 8% p.a. rental yield starts to look a bit ... er ...
24. denzil said...
Jayk.
If you are saying that certain areas will suffer less in a crash then I agree with you. That's commonsense.
The point about spring bounce is that house price falls accelerated during the traditional spring bounce. The fact that you can
find a few exceptions does not really matter because people will not buy when lenders are announcing that monthly falls are
the biggest on record and prices are -10% YoY.
Whatever view you want to take is up to you but you cannot ignore the stats from the Halifax and Nationwide -10% , transaction volumes, falling rents and probably the worst LTV lending in generations.
The game is over for Estate Agents. The good times are gone. Lots of builders will suffer too, but not as much as they tend to be more practical and are used to getting of their bottoms to find work.
25. techieman said...
In a tweetie voice "I thwart i saw a property bull.....i did see a property bull i did". Hooray theres one on here at last. Great i was worried that the bulls had all gone now further falls are gauranteed!
26. James said...
Not to mention that that's your gross return btl - how much do you pay your managing agent / how much is your time worth? How much did you spend on fixtures and fittings? How much is building insurance? What's your vacancy rate? A 'professional' investor would factor all that in and give us a net return...
My portfolio's return (interest mainly, some dividends) of just under 5% might look quite attractive and guess what - I'm liquid!
27. theboltonfury said...
the best bit is, the worse the news and general outlook, the more bullish they get and of course, they all claim to be gazillionaires
28. peter_2008 said...
Btl_and_milking_it @ 13, I don’t agree with your figures. Yes. £600pcm x 12 month = £7200 is about 7.6% GROSS yield of your £95000. BUT, a BIG BUT, you have to be a 100% cash buyer to make that equation stands, which I don’t think so.
On the opposite end, the equation collapses. If you are a novice BTL and got 100% mortgage on your flat, you are in for a shock. I will assume you need to pay 7.25% interest rate. That reduces your gross yield to 7.6 -7.25 = 0.35%. I assume you have some decency to pay tax and do the maintenance, you yield then will be around 0.2% = £180 a year, unless you evade tax and neglect checking boilers, which is criminal. In that case, I suggest you’d better make more money by robbing banks and sell African children’s organs.
I reckon your flat can be bought for about £70,000 easily, at the bottom of this down turn. So to make up your lose of £95000-£70000=£25,000, you need to rent out your flat continually for £25,000 / £180 = 139 years to breakeven = 0% yield. And you won’t see it alive. Maybe when your great grandson retires, just maybe.
It is mis-presentation like yours, lured so many people in to trouble. It is not the dreadful news exciting us, it is seeing comments like yours still flying around make our blood boiling.
29. Suzy And Joe said...
Hi Btl_and_milking.
What will you do if your tenant can't pay the rent because of job loss?
30. Pundit said...
@19 beartil2010 said
"Fyi while a lot of the comments on here are jovial or puerile, most of the more common posters have a very good grasp of economics."
Yes, one of the best aspects of HPC is the clear understanding of economics and finance demonstrated by many of the posters – however, at a macroeconomic level we seem to be rapidly moving into uncharted territory where the conventional rules may no longer apply. Is it still possible to explain the current economic mayhem with the old paradigms?
Like many things, economic theory should be continuously evolving and responding to changes in the wider environment – what we need now is a new interpretation and new solutions. It’s very evident that the highly paid government and central bank advisors are sinking. Perhaps the HPC posters should lead the way forward to a new age of economic enlightenment - any takers?
31. mountain goat said...
Btl_and_milking_it @13 welcome aboard! Probably a bit boring for you here though with us cheering the house price crash. But to be fair things never go in straight lines so I am definitely expecting a few dead cat bounces on the way down as banks sort their lending problems out. Hope your investments work out. Bankrupt btl investors are no good to me since I plan to keep renting for a few more years yet.
32. Plato said...
13. Btl_and_milking_it
33. Btl_and_milking_it said...
beartil2010 @ 19
'Whats the deal'...
The capital to debt ratio is zero i.e there are no mortages on the portfolio, so on long term investment a 30% price drop with be immaterial. 3 of the properties bought in 2000 and sold last year increased in value 3 fold, and then re-invested this year in more modern property at the currently depressed prices and bought at auction. A 2yr old property with builders guarantee usually just requires a annual gas contract, electrical inspection, and letting agents fees. Property in desirable area's tends not to have any substantial void periods, and the tenants are usually medium term anyway. So with no debt to service and no substantial costs the ROCE from an investment point of view is excellent.
Mark Wandsworth @ 21 Yes, rental yields in the early 90's were well over 12%, but then base rates were up and around 15%. Investors will always look at the full picture, and if interest rates are 15% then your money is probably best in the bank in a falling property market, but lets face it, can you see interest rising to that level in the current economic climate?
Peter_2008 @ 25 Your argument doesn't apply to cash buyers. I agree with your logic, but the market is flooded with 'have-a-go' investors who thought paying 7.5% on a BTL 90%LTV mortgage would make them very rich 1 day. Its these very people who have contributed to the dire repayment statistics quoted by many of the BTL lenders. As for the flat being worth £70k at the bottom i doubt it, as we'll be buying them at levels well above this whilst you're still trying to raise the £20k deposit you'll need.
Think about it.. how many people want to buy a property but don't because they think they can buy it cheaper next year. The fact is when it turns you'll be left without a chair when the music stops. There are 1000's of buyers waiting to pounce on the bounce, and when the time comes you'll miss it. You won't get a look in with gazumping, pushed out by the quick to complete cash buyers, and institutions. Whilst i accept that some of the posters on here do have a good grasp of economics, the people who predict a 65% crash are the ultimate optimists. All IMHO of course.
34. Stevie Dee said...
Pampers Time for even the most Hawkish BTLer. But the freeze is a blessing, because these lunatics as now being illustrated are seriously dangerous people for society. And given the opportunity these individuals would have bought more. I'm now of the belief that GB will honour his promise on affordable housing, and that another HPC (after this one) will ever happen again in my lifetime. It is actually a wonderful thought and a great thing for rebuilding our scarred communities. There will be pain, but ultimately or eventually things will return to a way that is British (decency, wholesome & fair). As a Tory, I would never vote for David Cameron, nor the Lib Dems. As I think GB is going to come up trumps! (And no i'm not on the pop or chemicals!). I say this looking back on John Major, in truth, when you have not got much, you learn to appreciate it more. And the opportunity for the state to buy at rock (as in northern) bottom prices would be to tempting for any government to resist. The banks have failed, the government in this case holds the key, and for however poorly presented or as bad as GB is with his performances (unlike Blair). This is one guy, from his background I feel will prove to be a winner. Thatcher he is NOT, Churchill he is NOT. But I think he will make a name for himself and in the realms of the latter fore mentioned.
35. handle_it said...
@13. Thanks for giving us all a laugh btw. Rents will tumble. Your sums won't add up. Sell up now and get what you can. You're f*cked. :o)
36. crash bandicoot said...
BTL_and_milking_it, the fundamental question with BTL is why don't the tennents buy the house (or a similar one) instead of renting it? If your answer is that they can't afford it (and assuming that they can afford the rent) then up until now the landlord had to have bought it several years ago - if the landlord is making a profit that is. Now on the way down, if their rent pays your mortgage it will also pay for one of their own. This time next year they will be able to buy their own flat with a smaller monthly mortgage repayment than the rent that you are charging. What are you going to do then? Drop your rent? Sell the flat? Find another tennent - there will already be loads moving out to their own place as prices fall don't forget. I'm glad that you're in it for the long term............
37. This comment has been removed as it was found to be in breach of our Blog Policies.
38. little professor said...
Great deconstruction, peter_2008!
39. mark said...
i can safely say SK10 area is dead in the water, a lot of "Jones" empty flats.........and prices are dropping quite a bit around macclesfield.............
40. mark wadsworth said...
@ BTL comment 33, *yawn* interest rates were at 15% for a few months in 1991 or 1992 or something, even in 1999 rental yields were just a smidge above 12% (or in my area when I was buying flats, at least, also sold for three times what I paid for them, thank you very much) and interest rates were 6% or 7% or something.
41. nooneo said...
2 Btl_and_milking_it @ 33
Interest rates were at 15% for ONE DAY ONLY in 1991 chaps.
September 16th 1991. To support the pound in the exchange rate mechanism (ERM) Lamont raised rates from 10 to 12% and the 15% and back down to 12% all in the same day. The currency traders were creating a run on the pound and the chancellor was simply trying to defend the pounds value within the contraints of the ERM. We left the ERM that evening !
The bleedin media are always bandying this old chesnut about !
42. shipbuilder said...
Btl_and_milking_it
If things are so great and you're doing so well, why are you even on here? I think you protest too much....
43. crash bandicoot said...
BTL_and_milking_it, wow dude, you had enough cash to buy a house - AND YOU BOUGHT A HOUSE WITH IT! Are you fed up with making money or something?
44. peter_2008 said...
Btl_and_milking_it @ 33. If you are a cash buyer you don't get tax relief on your rental income. Then as I said, unless you do something HMRC won’t approve, you only get £400 out of £600. Say you then spend £50 on maintenance and insurance etc, that makes it £350. I reckon the best NET yield you can actually get, as a cash buyer, is £350 x 12 = £4200/£95000=4.4%.
The above is assuming you get rent 12 out 12 months. I think a more realistic business model will assume 10 out of 12. That reduces the yield to 3.7%. That is below current inflation of 4.4%. Your money is shrinking.
I am a cash buyer and I am leaving my cash in ISA making 6%, with no risk whatever. I doubt you are actually a cash buyer as you say. It feels like you are talking about somebody else’s money. If you really have £95000 in your bank right now, there are quite a few accounts will pay you monthly at 4% net, even that still gives you £320 per month. I reckon it’s a much better investment in current market.
You normally need to get 9% GROSS yield (because HMRC take 33%) minimum to better a 6% ISA. That means you need to get £750 pcm OR your £95,000 flat have to fall to £80000. A more realistic low risk model will have to wait until it hit at least £70,000.
45. Missingteddybear said...
Btl_and_milking_it
I get more than 5.5% on my savings.
I get 10% on my Halifax regular saver (£500 per month limit) and 8% on my Abbey (£250 per month) and pay in the maximum every month (no withdrawals allowed for a year). Anything else I have left over I put into a 6.55% instant access account. It may not be an absolutely brilliant return but a whole lot better than buying into a falling housing market and losing the lot through depreciation.
46. Peter_2008 said...
Missingteddybear@ 45 6.55% instant access account? Mind tell me which BS is it? I want to move my money there!
47. peter_2008 said...
Missingteddybear @45 6.55% instant access account. Mind tell me which BS is it? I want to move my money there!
48. Hash Browne said...
@46.
I believe thats the Kaupthing Edge easy access account. It also guarantees to stay at least 0.3% above BOE rate until 2012.