Monday, Nov 17, 2008
Rightmove: -2.9% MoM, -7.1% YoY
Times: Falling prices prompt slump in home sellers
Rightmove reported a decline of 2.9 per cent in asking prices this month, to £222,979. Asking prices have fallen 7.1 per cent this year, the biggest annual decline ever recorded by Rightmove. The number of homeowners selling their properties has dropped by 43 per cent in the past year, as falling house prices deter potential sellers.
But Rightmove said tighter constraints on mortgage availability were likely to ease next year.
Miles Shipside, of Rightmove, said: “Whenever it does, there is likely to be a degree of pent-up demand fuelled by historically cheap borrowing and cheaper property, lessening the advantage of those in a privileged position to proceed now.”
Posted by little professor @ 01:04 AM (1931 views) Add Comment
25 Comments
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1. little professor said...
"Some sellers could avoid months of disillusionment and despair if they started marketing at an asking price a lot closer to where the evidence indicates they are likely to end up," said Miles Shipside, Rightmove's commercial director. "While average asking prices have fallen by 7.1% over the past year, in most parts of the country you should look to at least double that discount to achieve a sale."
2. paul said...
The Times is fundamentally such a die-hard property bear.
Their staffers and hack minions must be shoulder deep in less-than-attractive BTL property still.
This one goes like this: reduced prices = reduced supply ... ?
However, we see the Times yet again fundamentally muddling cause and effect. It is because of reduced demand that prices are falling, not reduced supply. Such market basics are always beyond reach for editors keen to "maximise return" on their dwindling equity.
Losers.
3. 51ck-6-51x said...
True paul.
I would say that the reduced numbers of sellers were due to:
a) that they no longer forecast a gain to be made from selling their recent (< 5 yr) purchase;
b) it's no longer worth the costs of bringing their asset to market (or even that the agent has dissuaded them! - it's probably best for agents to keep a small number of quality properties on the books right now)
c) those that already sold to rent or downsized are no longer selling;
"Pent up demand."
I heard that there was pent up demand for free lunches in the city.
- But seriously I suppose there is a grain of truth to this - I'm sure there are still some people out there who would buy if they could get a mortgage, but cannot currently do so. However, as house price falls gather momentum, as the economy gets worse, as the headlines get more dire (and articles start explaining how tough people's lives have been made), and as people start to have more first hand experience of the effects - I think that most of the aforementioned will actually realise what kind of risk they would be putting themselves in by purchasing at >3 * gross annual salary and think about the whole thing a bit more (regardless of the fact that they may still not be able to borrow next year!)
4. titaniccaptain said...
I hate to do this but...............this is what I said would happen back at the start of the year.........this is going to snowball...............2.9% in a month?????........I think the overshoot will take us to 80% drop in prices from 2007 prices by april 2010.......
5. it_is_going_with_a_bang said...
I can't see that. There are plenty of hard core BTLrs with plenty of money and when house prices get to about 35% off their high,buying 'in' makes sense - regardless of wether prices fall any more - they will still make money per month on what they buy.
At the moment there is no monthly profit and no capital gain. When the 'income' aspect reappears BTL will buy again.
The only thing that will stop this is local 'letting conditions' - i.e. what the demand is for rental.
Personally I would love to see an 80% drop but cannot see it happening.
6. Will said...
Rightmove - who are currently losing around 300 estate agents each week. I wouldn't believe a word they say.
7. phdinbubbles said...
imho The only thing that will stop it is when people buy houses to live in again - ie when they become affordable (and there's enough people still with a job ready to start buying). 80% sounds too much to me, unless it is the end of the world as we know it, like some think on here. Haven't BTLers got their fingers burnt? There wasn't much economic reasoning to them buying during the last years of the boom - wasn't most of it down to greed (and fashion) when they saw others who bought earlier watching the nominal value go up? I'm sticking with my boring 50%.
8. titaniccaptain said...
Guys I dont expect many to agree with my mega bear stance...........but with a recession/depression heading our way, mortgage products being pulled due to banks wanting to return to more sensible lending levels............i.e. two and a half times a single family income, unemployment rising, Personal debt at record levels....etc. etc........then I think its disaster time..........I may be wrong.......but think on this (Yes I am repeating myself again) house prices have been falling for 6 to 7 months and have fallen 15% to 20% in that time.............so what will the picture look like in 2 years with the recession/depression heading our way.......at best I would say 60% drops from peak
9. Orcusmaximus said...
@phd BTLers have got their fingers burnt, but there will be potential BTLers out there who are envious that they missed the BTL boat 10 years ago. Anyone looking at houses as an investment will be poised to jump in at the right time.
Note1: According to a BBC article a few days back, the Stock Market tends to recover prior to the Housing market after a recession.
Note2: Techieman suggests we beware of a dead cat bounce in the housing market. I can't see that myself. The house buying process is so long and drawn out, that I can't see house price trends changing rapidly enough for a DCB.
10. hash browne said...
Slightly off topic....and I apologise....but has anyone heard Kirsty & Phil on Radio 1 this morning??
They're basically advertising their show tonight whilst also giving 'advice' to people calling in! Since when has the Chris Moyles show been anything more than a light hearted comedy-based show? Suddenly they're 'helping' young people (like myself) buy houses. Its disgusting!!
One caller was a 20year old lad still living with his parents, wanting advice on how to buy his first house, not to live in, but to RENT OUT. No word of a lie, without asking about his income or job security or anything of the sort, she came straight out with hailing him as an entrepeneur!!!!!!! She actually said well done for not going to university and instead getting a job and looking straight onto the property ladder!
I tried to get through to the show to vent my rage but they weren't having any of it! So I just texted in and asked when Krusty would eat her HAT!!
11. Splatt said...
Looking at HPC front graph, 1997-1998 trend line £106,000 overshoot to the downside, £68,000, ( is that 64% down from TREND), therefore, with economists saying this is likely to be the worst recession in 50 years, it is not unreasonable to think perhaps 70% below trend ie down to 87k at least!!!!
12. uncle tom said...
The pace of the fall - as I have long predicted - is quickening, and will eventually overshoot before it recovers to a sustainable level.
The mortgage providers are unable to function normally in a falling market, but the market will continue to fall while the mortgage lenders are thus constrained, hence the inevitability of an overshoot.
Meanwhile the consequences of falling house prices will continue to complicate matters:
- Equity withdrawal - 'MEWing' - had become far too significant in the economy, and was responsible for some economic growth that was, essentially, phoney. The drying up of equity withdarwal is resulting in many job losses, and with that, many households who no longer have the means to pay their mortgage.
- Wealth destruction - many people have seen their net wealth dramatically reduce over the last year, with a great many more people facing the reality of having debt that exceeds their assets. The casual attitude to debt that used to be so 'cool' is no longer clever. People are as a result reigning in their spending, especially on non-essentials like cars and entertainment technology.
- The BTL implosion - a person with one mortgage on one property that they live in, will usually continue to pay the mortgage if they have the income to do so, if they descend into negative equity. If they find themselves very deeply under water, with no end in sight, they might contemplate going for bust, but they are unlikely to rush into that decision.
However, the person with a portfolio of BTL properties that do not generate sufficient rent to cover the mortgage payments, will soon realise the hopeless nature of their predicament (if they have not already done so). This is no small detail, and by this time next year, the number of repo'd BTLs coming on the market will probably top 20,000 per month.
This factor alone will put a huge downward pressure on prices, as no-one trying to buy into the rental market will be able to raise finance at a sensible rate.
While attempts will be made to support the sale price of these repo's, there will ultimately be market capitulation - and some fantastic bargains.
13. phdinbubbles said...
If you go down to the woods today,
You're in for a big suprise.
If you go down to the woods today,
You'll never believe your eyes.
For every bear that ever there was,
Is gathered there for certain because,
Today's the day the teddy bear's have their picnic.
Sorry.
14. fancypants said...
BTLers poised to come back to market? Maybe there are some that currently feel that way, but their numbers will irreversibly dwindle.
In the next couple of years, tpublic pain of property speculators will be so great that we will be culturally repelled by it for a generation. As part of this, even should mortgage lending recover to any extent, I don't think BTL rates will be anything like as competitive as they have been of late. It also wouldn't surprise me to see legislation coming in to make such speculative activity more difficult, and the task of providing rental stock reverts to the state.
15. 51ck-6-51x said...
uncle tom - Could you tell me how you got to the 20,000 per month figure for BTL repossessed* properties coming onto the market?
* This does not affect my question or your number for the purposes of the question, but, I don't think all will be classified repossessed since financial institutions may prefer to let these businesses wind themselves down whilst recovering a percentage of debt repayments in the meantime, as the average case it will probably result in a greater total recovery for said institution.
16. planning4acrash said...
Titan, the falloff in sales points to NO market within 6months even if the current falls do not accellerate. I am predicting many places with no market at all, many places with 80/90% falls. I think we will see total collapse. You know that our earnings to debt ration is far worse than the USA? Close to 170%!!!!! That suggests massive deflation in the domestic debt arena, albeit with hyperinflation in commodities and goods if government keep printing money, but, maybe the genius of the market will find ways around inflation. In the collapse, we will see more black market and more barter. Just thank God that we still have cash, they want a cashless society because cash allows for a black market during a depression, thus limiting how far they can push us, so, cash (and gold) give us liberty.
17. Welshie1701 said...
Hash Browne @ 10
I heard this as well - shocking! I was shouting at the radio....
I also texted in asking when she was doing her public hat-eating :) Wonder how many of those they got.....
18. phdinbubbles said...
@fancypants.
Completely agree with you.
I can't see BTLers coming back to the market in any numbers, let alone leading a price recovery.
I think the public will need someone to blame for the boom when they realise prices are down and are staying down, and I'm sure there will be politicians happy to oblige in passing legislation to satisfy.
19. 51ck-6-51x said...
p4ac - add to that earnings to debt ratio stat the reliance of the UK's economy on financial services.
20. Renterabroad said...
Assuming I'm allowed to post (?) re. estate agent closures, comment 6, Gabetti just made 500 staff redundant.
21. Fjcruiser said...
supply will truly come to the market next year when people are loosing their jobs in droves.There will be even less mortgages agreed next year as mortgage arrears at banks will increase dramatically meaning the banks will be busy shrinking their loan books even more. the pent up demand from first buyers and the likes who cannot obtain mortgages today may not be around next year because of unemployment risks. Property prices will have to come down and probably there will not be buyers around. May be the only buyers will be cash buyers and there cannot be that many even if prices come down 90%.
22. Hip Hater said...
I quoted to do the conveyancing on a house sale back in April. The client was looking for £199k and they are emigrating. They came back today to confirm that they'd sold the property-
For £159k
Tha's a big drop since April
23. letthemfall said...
This "pent up demand" mantra is trotted out by lazy journalists and commentators who can't think up their own improbable reasons for why house prices will rise to infinity. We will continue to hear it for a while until people begin to doubt the old beliefs and start to think that prices will never rise again. If things get really bad, it might just cure this country of its property fantasies, in which case houses will never be so overpriced again. The time to buy will be when the Times stops publishing these articles.
24. uncle tom said...
"uncle tom - Could you tell me how you got to the 20,000 per month figure for BTL repossessed* properties coming onto the market?"
1m BTL mortgages, of which I estimate only 250,000 will survive the storm. a further 250,000 will be sold by their owners, and 500,000 will go to repo.
I'm projecting that around 60-65% of those repos will occur next year, with most of the rest in 2010
The repo rate looks set to take off after xmas, rising steadily each month, and probably peaking about this time next year.
Putting numbers on that, it looks likely that the peak repo rate for BTLs will top 20k pm.
What is not certain is how long they will take to sell once repo'd - how resistant to falling prices the mortgage lenders will prove to be..
25. Rod said...
If you look at UK house prices in global terms, ie from a European of US POV, then prices must already have dropped 30+%. Even the S2R crowd are also loosing money hand over fist unless they have their money in Euros or Swiss Francs. In addition they could loose all their capital if they choose the wrong bank or currency. Do you think Brown will have any compunction hanging the smug S2R crowd out to dry?