Friday, Nov 21, 2008
And next year it will get worse
The Times: Mortgage debt forces thousands to sell up
"A survey of estate agents suggests that at least 5,000 properties a week are being put up for sale by “forced downsizers” – people who are in financial difficulties.".................very sad
Posted by titaniccaptain @ 12:09 AM (1067 views) Add Comment
28 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Rimmer said...
Things have gotten a little more expensive but hardly a lot, sadly i have sympathy if they have lost their jobs but if they cant afford it then they never could and shouldnt be helped, mortgage rates are lower now ( historically ) than they have ever really been - on average.
2. amjidk said...
will probably revise my forecast for a bigger drop in house prices, i would guestimate around 50% what do you guys think..
3. Letsgetreadytotumble said...
50% has been a popular figure around here for some time. It certainly has been with me. Others are now suggesting substantially more.
The mortgage maths tends to suggest 50%. At least I base mine on something tangible, unlike the EAs and other property 'experts' who make predictions based on nothing, except trying to minimise their pain.
4. sold out said...
The forced sellers are just now starting to come to the fore in the housing market.The next 6 to 12 months we will see an acceleration in the falls, i reckon that by this time next year we will be at 50%.A further 10 to 15 % in 2010.
Then a flat market for probably 10 years.There will be NO quick recovery (IMO) in the housing market this time, not after the Depression.
5. drewster said...
People who bought houses bigger than they could afford are now losing them. Diddums.
I expect 50% peak-to-trough. At the peak, the salary-to-house-price ratio was 5.84; it's currently 4.92 (according to Halifax). Assuming salaries remain constant, house prices would need to fall 50% to return to the 3:1 traditional ratio. If deflation hits hard then salaries might fall; alternatively if banks really cut back on lending then we could undershoot the 3:1 ratio, possibly hitting 2.5:1. So total price falls could be 60% down (the opposite of a 150% rise). The Japanese example is instructive - prices there fell something like 70% I think.
Some areas will be worse affected than others. London has a long way to go down, simply because prices are so high and so dependent on financial sector jobs. Places with resilient employment should do better (mainly the home counties); but prices will still fall in those areas too. Boom towns in the north will suffer a lot too - so many jobs in Liverpool in recent years have been in construction or related activities. Everywhere will be cheaper by the time this is over.
6. jackas said...
It is important that peole who overpaid for inflated assets lose money. If that doesn't happen, then our currency is worthless.
My take is a 60% fall from the peak. Bring it on.
7. amjidk said...
I agree with jackas, it just wont be fair on savers like myself, if these idiots are not made to pay. They always told me i don't understand and that it is "Different This Time"
hahahahahahah
8. growler said...
50% drop most likely. If you think that 20% of sellers are there because they shouldn't have bought in the first place then if you multiply the effect they have (too much money slushing in the system) through the system its certain that there will be plenty more falls to come.
Wait until the US style unemployment comes here. Imagine the sales you'll be seeing in Jan as the "closing down" bargains come after the Christmas period. Add all that lot together, the fact banks will be having to deal with tougher times and it will be a minimum of another 12 months of price falls.
9. japanese uncle said...
Tut tut tut.
HPC? 80% in London (partially 92%) 70% in Edinburgh (partially 75%), 60% elsewhere (partially 70%) is a foregone thing.
10. Buyinginafewyears said...
I'd generally agree with the falls needed to bring prices back down to reality, but the factor I just can't judge at the moment is the politicians. Every week i'm amazed at what they come out with and do with public money, which has left me thinking "is there anything they wont do?". It makes me remember a friend of mine who said pre-crash "i'm going to buy, Gordon wont let prices falls, there's too many people with their money in houses". I guess what he said was true, it's whether Gordon can do anything about it though?
Here's hoping for 50%+ off :o)
11. sold out said...
JU,
Great predictions as always,especially London. whats your estimation of the home counties, the commuter belt, essex,kent,herts?
12. japanese uncle said...
sold out
Edinburgh rule shall apply in the 'quasi-London' areas.
13. Fred56 said...
There's a bit of a problem with the 3x or 3.5x salary figure that's frequently mentioned in these pages. You have to remember that there are costs in involved in building houses. It's a bit difficult to build a decent standard of home for less than around £700/sqm even if the infrastructure is already in place. If you throw in a few roads at £2m per kilometre, new substations at any figure the distribution company cares to dream up and you're way past £1000/sqm. These figures DO NOT include the cost of the land. The designer/builder has to meet the requirements of the planning policy guidance which imposes often expensive and totally unnecessary archtiectural style and features. Developers have been forced in recent years to build 'affordable' homes as a proportion of the the 'market' homes. In practice the 'affordable' homes are provided at a loss to Housing Associations and the cost and overheads recovery are loaded onto the 'market' homes.
What I'm saying is that you can't build at 3x the average salary so where will your new housing stock come from? 4m peolpe awaiting social housing. Before you say it, refurb costs more than new build and much of the old housing stock is irredeemable in terms of conservation of energy.
I'm a keen advocate of reduced house prices and want to see some sense in lending policy which I believe was the root cause of our latest problems.
14. str 2007 said...
JU
What makes you so sure that houses will dip below their build cost with the land thrown in for free ? That is a £500k house going for £150k.
15. maddison said...
My prediction is only 20-25% in the SE in more desirable areas. Shoddy flats in boom cities will and have already fallen hard. As always I am less of a bear than the rest of you. 2 reasons I feel it wont be as bad as people think.
1. The government just wont let it happen.
2. Low interest rates will bring back in the chancers, BTL and people who just hate renting from dodgy professional landlords the amateur BTLers are generally better towards their tenants as they arent hard nosed businesses people..
Japans experience was a little different in that the banking crisis was caused by 0 capitalization of the banks. Here the banks have been recapitalized partly due to Japans experience.
16. str 2007 said...
My prediction of all indexes at -25% (bare in mind some are still back at -5 /-8%.) still stands, although I feel more confident of that being achieved than I did. When the lowest recording indexes are at -25% I would expect to see Hali/wide indexes at about -35%.
At present at least I'm inclined to agree with maddison on the falls for the South East commuter belt.
Although only last night (trolling rightmove for property rentals) I noticed alot that have been on in excess of 4 weeks and prices of some rentals definately falling (which is more than can be said for sales asking prices).
2009 will see some serious falls in rents and asking prices I believe.
17. mytimeisnigh said...
Prices have already fallen 15%, we're entering a recession, therefore further falls of at least 30% are a certainty for the vast majority of homes and areas.
18. It_is_going_with_a_bang said...
The rental market is still fairly strong which would probably prevent prices slipping below 35% on average.
However, a deep recession could hit the rental market very hard in which case there would be nothing holding prices up at all.
The building industry lags at least 6 to 12 months if not more behind the general ecomony. So housebuilders out of work now won't get work for 6 months even if everything picked up tomorrow. From personal observations all the companies I deal with are preparing to cut back and seem to be intending to carry on cutting back for 6 months to a year at least.
Just as the huge increase of house prices was difficult to imagine or justify it would seem the same may well be case for the way down also.
Smug comments from nulabour about Gordon Browns handling of the ecomony may well be a little early.
19. jack c said...
This is the main debate on R5Live today for those that have the facility to listen in
20. japanese uncle said...
str2007
Unfortunately the power of recession and asset deflation may not be linient enough to take accoun of 'build cost', which themselves could well have been vastly inflated. Look at the size of discount often amounting to 30% or even 40% offered by the builders for their newly built city flats. It just shows how lucrative their profits have been.
21. str 2007 said...
JU
Building blocks of flats is a lot less expensive 'per unit' than detatched family houses (and yet were almost as expensive as) that is how come they were able to offer huge discounts to get rid of the last ones.
Whilst I hope your % predictions are correct (preferably quick falls not drawn out) I was pushing you to reveal your calculations as by any measure (including here) they are extremely large falls you predict.
If they weren't prepared to drop interest rates or force banks to lend sensibly I could possibly go higher with my predictions, but the 'bailout' factor I've just mentioned is IMO a relevant one.
22. techieman said...
Maddison is that the same government that - according to Greenbay - wouldnt let houses fall at all? Dont you think they are trying everything in their power NOW to not let it happen?
Now they may be successful in the short term (which would take some time to reflect in the numbers) but i just have no confidence that in the Long run the government can control any part of macro economics (whever Lubour or Tories). They can distribute the wealth created, but against popular misconceptions cannot beat the business cycle.
As for low interest rates, the huge increase in the PSBR will have to be paid for by IMO an increase in Gilt yeilds. Now that will be offset against deflationary aspects - for example the yeilds on T-Bonds have fallen yesterday, but to me thats a flight to quality in the short term as the dollar is still perceived as the currency of choice. Lets see how the banks then price their interest rates as they compete with Gilts for savers money. In other words whether bases rates are cut or not the jury is out as to how that gets passed on to SVRs.
23. sold out said...
"The government just wont let it happen."
So what are they going to do?
24. crash bandicoot said...
maddison, the stop on falls will happen at the level that people can afford to pay. If builders can't afford to build and sell at a profit at that level then they will go bust. This is happening already. If you can't afford it then you can't have it is the new paradigm.
25. letthemfall said...
I would have thought the SE would see price falls as large as elsewhere, perhaps larger, given that prices have been supported by highly paid workers who are most likely to lose their jobs. There is no reason why prices should not return to trend (maybe with overshoot), which I think the figures suggest is about a 40% drop. Rents are looking good value compared to prices, implying some pretty big drops in prices ahead. Bring them on.
26. mark wadsworth said...
@ str2007, comment 12, it is quite possible that prices drop so low that you get the house for build cost and the land thrown in for free. In the early 1990s I bought an old house for £78k, reinsurance/rebuild cost £100k (or possibly a bit more). Agreed, those rebuild costs were overstated, but the land element was next to nothing, i.e. that would have been an excellent time to introduce Land Value Tax.
27. fjcruiser said...
When I bought my house 13 years ago, it would have cost about £95 per sq ft to rebuild it (based on insurance). Today it would cost about £200 per sq ft to rebuild it.Based on the best offer I received on my house a couple days ago, my house is worth 3.2 times more than 13 years ago, while its cost of rebuilding is only 2.1 times more expensive than 13 years ago. In all honesty it is another way of saying how over valued property was and still is, while property should only broadly increase in line with the construction index, no more.In my case a fair value would be another drop of 34%! May be I should accept the offer!
28. Tenyearstogetmymoneyback said...
fjcruiser has half answered my question but I was going to
ask Fred 56
In 1995 you could buy a brand new Crescent 2 bedroom house in Hampshire
for £52000. How much did they cost to build and how much would they cost now.
As for all the predictions of how far prices will drop you are all missing out the effects of inflation.
Even if they just stagnate for ten years and wage inflation is 3% a year that is the equivalent of at
least a 25% drop.
:- Duncan