Sunday, Mar 22, 2009
The experts seems to agree prices have fallen 30% and possibly 50% by the end of the year
Telegraph: Do not pass go – or expect house prices to rise soon
It would seem that nothing is going to stop property prices falling, no matter how much spin we get treated to every week, and even with the government still encouraging people with 50% loans to put down as a deposit via their Home Buying Scheme , mortgage lenders giving the other 50%.. Martin Weale, Director of the National Institute of Economic and Social Research said:
"..... someone who bought a house in 2000 will have done quite well out of it - "
Perhaps someone needs to tell the sellers ! I do feel it is only a matter of weeks now before we hear : "NOW IS THE BEST TIME TO SELL WHILST YOU MAY ONLY HAVE TO REDUCE 30% . SOON IT WILL BE 50% AND PRICES WILL NOT GO UP FOR A LONG LONG TIME AND THEN ONLY IN LINE WITH WAGES "
Posted by sybil13 @ 08:26 PM (2318 views) Add Comment
50 Comments
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1. japanese uncle said...
Simon Rubinsohn says
Most of the house price indices suggest prices have fallen by up to 20pc from the peak. However, many of our members [surveyors and estate agents] cast doubt on this and calculate independently that the scale of price falls has been even greater − 30pc or more already.
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My prediction 25% from the peak by the end of March/09 seems to have been vindicated with a bit of margin after all.
2. britishblue said...
@Japanese uncle bear in mind that Simon Rubinsohn used to be a BULL, with a very,very vested interest in keeping the market rising. For someone like him to suggest that prices have already fallen 30% and will fall further is a clear indication that prices have a long way to fall and 50% may soon become a mainstream prediction.
3. Lucas said...
The notion that stocks are cheap is false. Yes stock prices and down but that's because the earnings powers of many firms has also fallen. But PE ratios are still to high for stocks to be cheap. Historical analysis shows that usually after a major economic recession stocks will actually end up overshooting on the downside with single digit PE ratios before they become cheap. This has not happened and until it does we will not have seen the trough in prices. Either stocks will fall further or prices will stay around same levels until earnings rise over the next few years.
So comparing the stock market to house prices is misleading and there is a major difference, you buy stocks as a financial investment, whereas you buy a house to live in, not to make money which is what has got us into this position in the first place. House prices have a long way to fall further and probably stocks as well. In the medium term stocks will recover sooner as they anticipate economic recovery whereas house prices will continue to fall until we are way into economic recovery and the feel good factor returns which wont be for a few years!
4. tyrellcorporation said...
Where are these falls happening? I don't see any reduction whatsoever in Devon. Just my fricken luck.
5. inflation is eating my savings said...
I think the Tory press are trying to find a bottom. Speculate on why. The landowners want to offload? Their man is next? They want their man to be next? We need to find a bottom?
Tyrell- Devon is full of DFLs. You know the type. You may have to wait for them to die. Let down the tyres on their 4 x 4s.
Even better, dress up like a long-haired leftie and go and drink in their pubs. Sleep with their wives so they all catch syphilis- I'm not suggesting you have syphilis- but if you really hate DFLs, then contract it, spread it, then go and see your GP afterwards as it can be treated very easily.
I know of good gastro pubs going down in South Devon, if this is any indicator.
6. Rimmer said...
I must say where i am ( Guildford ) Prices are still mostly at 2007 prices and not selling, theres a 5 Bed place ( quite nice but not that special ) just come on the market locally for £750K - No way was this worth £1Million 2 years back.
From where i am looking there is mostly denial
7. magnifico said...
Tyrrel, do you know how much these properties are selling for? In my area Middx/Surrey there seems to be a silent agreement that a vendor should take a 15-20% drop on their asking price, that's why the latter cannot come down....yet.
8. tyrellcorporation said...
LOL thanks for the advice guys, I'm not sure my wife would approve of the exteme measures but maybe I need to get radical! True I haven't been monitoring selling prices but I would have hoped for some visible price slippage by now.
9. d'oh said...
Certainly in my area (Oxon) asking prices don't seem to have shifted much in the past year. Having said that, what you ask for and what you get are 2 different thinks.
10. Suzyandjoe said...
tyrellcorporation message 3
Don't wait for it to be offered to you - offer it to them...
11. Imacleod said...
Tyrell: thats just what I thought. the asking prices havent budged really untill the last week. Property snake shows huge amounts of 15% falls in the last 2 weeks in north devon.
Devon is one of the least affordable regions and rest assured the falls here will be huge.
12. bidin'matime said...
Martin Weale, Director of the National Institute of Economic and Social Research :- "The normal growth rate for houses ought to be 1pc or 2pc above inflation."
So the ratio of house prices to earnings continues to rise forever? So after say 50 years, house prices in real terms have doubled? And double again over the next 50 years, and the next?? Where do they find these idiots to be 'Director' of such an august sounding body...?
13. quiet guy said...
"on most metrics house prices, which have fallen by around 20pc on most bases since peaking in late 2007, are now close to fair value."
"Capital Economics founder Roger Bootle says: "What Lord Turner is suggesting seems to be a recipe for much lower house prices." Whether this transpires is yet to be seen. Others anticipate an eventual return to health for housing."
This seems to be a very strange article to me. Despite the bearish message from all four commentators, the Telegraph still seems to be wishing for the 'good old days' as if that would be a good thing. Phrases like 'fair value' and 'return to health' betray the writer's bias.
(I, of course, am completely unbiased. LOL)
14. Sybil13 said...
For those that say "not in my area" I agree, but I am sure I read somewhere recently that the problem is that there are not enough people going out there and offering 30% off THAT IS WHAT IT TAKES. I do think the past few months everyone thought things would turn round, the market had bottomed etc., things ARE different, people are getting the message. If you are interested in buying, look in Rightmove at properties at the price and the price you can afford + 30% , then look and see what price that property was in 2007, and if you like the look at it but it's 30% too much, then put in an offer. Rightmove's Director, Mile Shipside says prices should be 30% below peak by now. We are struggling to find anything we would want to live in even 30% off peak and that we would not mind losing another 20% or more on, (lower end of the market not one of the House Price Crashers that are looking in the millions. )
15. happy mondays said...
So why is this not on mainstream TV ? Or is there a bit of censoring going on by Vi's BBC etc or maybe the government do not want the cat out of the bag to early as it might scare of potential Muppet's (sorry buyers) and help keep the cogs of the economy in reverse!
Property in my area Brighton, has not shown significant falls as of yet but then we do live by the sea and have a pier which is lit up at night and fat boy slim lives here aswell which might explain the reason. LOL
16. Nomad said...
@3 In North Devon there has been a huge increase, year on year, in rental properties - and prices are slipping. Choose your area, choose your price. 12 months ago we took a 3 bed property without looking inside and by paying 6 mths up front.
17. crunchy said...
3. tyrellcorporation
Soon to be another clotting of the cream!
18. will said...
The FTSE 100 recently touched 3470 - a level previously visited in 1993 (almost 17 years ago).
Why is it that house sellers are still in denial of just how serious a situation we are in. We are told by the home price index trackers that prices have fallen by 20% or so, but one only has to look at Rightmove etc to see many vendors are still in denial with many in my area having not reduced their asking prices over the last year or more . I wonder if the price tracking indexes expect a proportion of the falls to be an offset of inflation, as in the early 1990's, but in contrast to the1990's we have relatively low wage inflation, so prices have to REALLY fall to become affordable once again.
I don't trust the method for calculation of house prices in this country due to the complexity of the data involved; seasonally adjusted, inflation etc. Furthermore most indexes are provided by the Banks (Halifax / Nationwide) or Government ( Land Registry, RICS). I know several homes which have been sold but don't appear on the Land Registry database, over 12 months later.
19. House said...
It would appear that in many areas the asking price is the same as it was in the peak or perhaps lower by £5000 or so but as some one already suggested that if the prices have not been brought down then there is a silent understanding that the seller would probably would accept 20% lower than the asking price and this filter's through the whole chain. It would appear that once an offer is receive on the first property in the chain then there is a rippling effect such that everybody in the chain may become more willing to accept a lower offer as you are making an offer on the basis that your property is sold. This gets this particular chain moving if everyone in it accepts the lower offered price. The estate agents will try very hard to ensure that the created chain does not collapse.There appears to have some flurry of activity of this kind. This does not mean that prices may not go down further but in this instance everybody is happy that they are moving properties. However, thy may regret this move at the later date but that is another story.
I still feel that a FTB's price may settle around the £100k to £110k but it ma overshoot because of the unemployment fears. Time will tell.
Any comments on this.
20. house said...
It would appear that in many areas the asking price is the same as it was in the peak or perhaps lower by £5000 or so but as some one already suggested that if the prices have not been brought down then there is a silent understanding that the seller would probably would accept 20% lower than the asking price and this filter's through the whole chain. It would appear that once an offer is receive on the first property in the chain then there is a rippling effect such that everybody in the chain may become more willing to accept a lower offer as you are making an offer on the basis that your property is sold. This gets this particular chain moving if everyone in it accepts the lower offered price. The estate agents will try very hard to ensure that the created chain does not collapse.There appears to have some flurry of activity of this kind. This does not mean that prices may not go down further but in this instance everybody is happy that they are moving properties. However, thy may regret this move at the later date but that is another story.
I still feel that a FTB's price may settle around the £100k to £110k but it ma overshoot because of the unemployment fears. Time will tell.
Any comments on this.
21. icarus said...
@ 8 - bidin'matime - MW is in the "government can inflate its way out of debt deflation" camp and I think that's too simplistic, but with regard to your argument I think he would say that house price rises AND earnings are above inflation over time (the latter gives rise to higher living standards), so there's little difference between house price rises and earnings rises. We can argue the point about the extent to which living standards have increased (complicated by the widening gap between rich and poor) but this would be his argument.
22. house said...
@12 Will
Be patient as I have stated in my earlier comments, it takes time for house asking prices to drop. 1n the 1990's it 3 years before it bottomed out and stayed there for another 10 years. Ther will be more and properties will sit on the estate agents books.
23. icarus said...
It wasn't long ago that Fionnuala was telling us that anybody who bought in 2005 was doing rather well. Now Martin Weale is telling us the same thing about anybody who bought in 2000. Do I hear 1998? The gentleman at the back?
24. Asiaphile said...
in Cambridge here, and while prices have dropped a bit for smaller houses in less desirable areas, they haven't shifted at all for anything larger. We are waiting - but in the meantime anything half decent that goes on the market is getting sold in a matter of just a few weeks - or taken off the market again, if it doesn't.
25. will said...
House@13
I agree with you that asking prices are only falling £5K or £10K. As a cash buyer, I will not view a property which has remained at 2007 price levels and will not negotiate with agents to fulfill a chain. I want price transparency with lower advertised prices.
The houses in my area that lowered their prices by 20-30% have gone under offer fairly quickly, but those that hold out for last years prices are simply not selling. I think that estate agents are still trying to be too clever for their own good, they need to get tough with their vendors who won't drop their asking prices.
26. justwatching said...
home.co.uk
use it to track asking prices of specific houses, quite interesting really, one drawback is when they change EA it sarts listing again.
Loads of properties in my area that have dropped in asking price, they even give lovely graphs tracking the specific drops. One has been on for 18 months, nice house. Started at 310k, then down in steps to 230k. I booked in to go and view, but it then delisted. Now on with new agent at 228k.
Then there is mouseprice.
When I get a bit of free time I match the auction site selling price, with the previous selling price. A good nomber are selling at 2002/03 levels.
ps
only one house sold in my postcode area last month, wife went to collect other details from Ea & was told its a good time to buy as prices are going up
lies, lies lies
27. flashman said...
I don't want to sound like a holocaust denier but I don't think we are seeing a proper HPC. A true HPC would see a far more even distribution of price falls and economic pain. I think what we are witnessing is just a rebalancing of the property market and a removal of wealth from untalented people.
In aesthetically beautiful parts of the country or in areas that genuinely provide a higher quality of life, there has been almost no reduction in prices. At best the froth has been blown off the market. However in grey Suburbia and in the more miserable urban areas, the market has tumbled 30-40%. This is because houses in these areas badly overshot their economic and social worth. All booms cause this type of aberration and the soaring prices in these shitty areas would have eventually crumbled, even without the credit crunch
The same thing can be seen in the workforce. Useless pencil pushers, estate agents, overcharging tradesman and dog grooming types have suffered far more than more useful members of the workforce. I have always thought that the housing boom was largely caused by untalented and uneducated people having unrealistically high earnings and economic clout. They may have temporarily had money but did they have taste and common sense?
In the current situation it is the owners of dog grooming parlours with their overpriced suburban houses who are taking the larger economic hit. A dentist with a house in a rural village is better off than ever because his house has retained its value, he still has a job and his plumber is now cheaper and more respectful. It's a bit like a social revolution in reverse.
28. house said...
Will@17
How right you are but many estate agents are afraid that the vendors will bite their head if they suggested that their prices should come down. I know somebody who offered £18000 lower than the asking price, the estate agent said the seller would be insulted and did not think that they will accept the offer. The offer was passed on and it was rejected. But here perhaps the estate agent may not be doing his job by explaining to the sellers that a lower offer is better than no offer at all and perhaps they should consider making a lower offer on the property they are purchasing. Many seller are still in denial but as I have said previously it takes a long time with some seller for reality check to set in. Therefore it would appear that patience is a vrtue.
29. mark wadsworth said...
@ Bidin' - Martin Weale is quite right to say that house prices go up faster than RPI by 1% or 2% in the long run because they increased in line with earnings in the long run, and earnings increase by 1% or 2% more than RPI in the long rung. He is also a moderate LVT supporter so he gets a bonus point for that.
30. will said...
@19 flashman
I certainly seems that the lower end of the market is being hit the hardest, with the top end sellers in denial. Surely if this situation persists we will see an ever increasing divide between the top and bottom of the markets with first time buyers going down to £100K and the top end in their millions. This may be because of the Baby Boomer situation, but what will happen when they die, who will be able to afford to buy the houses off them ?
31. icarus said...
house @20 - maybe the reality check isn't working because (a) there are no deals taking place for that type of house in that area, so nothing to check against and (b) the vendor is in negative equity - desperately deleveraging like the banks - and is reluctant to get rid of the house and end up with a debt - decides that the market will come back "eventually", so close your eyes and hold on tight.
32. flashman said...
@22 will
yes I think that eventually the top end will have to come down a bit but there will always be 'old money' and desirability propping it up. Population increases, urban sprawl, social breakdown etc will only serve to make these top end areas more desirable. People will be prepared to cut off a finger to live in them.
33. str 2007 said...
flashman
Agree with your observations. However I wonder if the unfolding in the last recession actually took on a similar course.
The good properties in better areas I remember seeing and thinking they looked cheap were in '93 - '96 not at the beginning of the crash. At the beginning of the 90's crash it was my friends who in their early 20's had just bought that suffured first.
I think this crash may pan out in a similar way. The nicer houses in the better areas are owned by people with generally better jobs and 2 incomes etc. It could be another couple of years perhaps before realisation kicks in.
During the next 2 years two of the biggest factors outside the obvious unemployment factor are :-
1/ Any fixed adjustment to borrowing multiples by the FSA
2/ A rise in interest rates.
Either of these things could speed the inevitable falls (which BTW I think would be a good thing and not just because it suits me personally).
34. icarus said...
flashy @ 19 - there's some truth in what you say but you come close to arguing for the existence of that mythical creature, the investment that can only go up, i.e., posh houses.
35. flashman said...
str 2007: yes I'm sure the top end will suffer in the end. In the trading world there is that hackneyed expression "all boats rise and sink with the tide". The point I am making is that the low end benefited more from the boom than the high end so there is a bit of re balancing to be done (houses in my area were always expensive but they definitely didn't go up as much as the national average). When I was a young man in the 80's everyone fantasised about living the life of a cool urbanite. Now everyone dreams of a bucolic idyll, so I think there is also a slight social change to consider
36. flashman said...
Icarus: The concept of 'posh' houses raises an interesting question. I was cycling through the Surrey Hills yesterday and I came across a "posh" development built in the grounds of a country mansion (just outside Betchworth). God alone knows how they got permission to build them but that is beside the point. These houses were very large and quite out of keeping. I imagine they cost about 2 million when they were built in 2006. They are nominally 'posh' and they are in an uber desirable area but I don't think they are worth any more than 1 million now which is a sensational fall (50%). In 2006 the same buyers could have spent 1 million less and got a beautiful cottage with an an acre of grounds in the same area. This cottage hasn't lost a penny in value. The conclusion is that if you were a crass buyer with no taste, you could even lose money in the Surrey Hills. The Americans call this type of house McMansions
37. Not Sure said...
My friend bought a one-bed flat in London, opposite Canary Wharf just cross Thames river at £230K back in October 2007.
His is thinking to put the flat in market for sale and property agent - Foxton positively valued it at £250K becaused of the location. My friend is counting net profit he will make.
Based on abovementioned, I am not sure there is property price deline, at least in my friend's case.
38. str 2007 said...
Flashman
Are you saying Hugh Fernley Whittingstall and Monty Halls are to blame ?
Perhaps you should be designing a Solar Powered Land Rover instead of the bike. LOL.
Just joking.
39. flashman said...
str 2007: Of course it's their fault. Isn't Hugh Fernley the bloke who cooked a human placenta?
40. str 2007 said...
Flashman
Surely not that's terrible.
Fancy cooking out all that goodness !
41. str 2007 said...
Makes you wonder how many of his guests make it through the whole meal.
And tnight we'll be servicing Placenta Salad, followed by Road Kill Soup....................
'mmmm sounds lovely Hugh.
42. icarus said...
flashman @28 - I too was thinking of the embedded and tasteful kind of property with unique characteristics (best of its type in that part of a sought-after part of the country etc.). A friend of mine owns such a property and claims there are cash buyers who want it at any (within reason) price. Let's wait and see.
43. Flashman said...
str 2007: don't think I'll bother with lunch today!
icarus: my best guess for the HPC: crap areas -60%, middling areas -40%, desirable areas -25%
44. flashman said...
str 07: I don't think I'll bother with lunch today
icarus: My best guess for the HPC: crap houses/areas -60%, middling houses/areas -40%, desirable houses/areas -25%
Believing the 35% difference between crap and desirable is not much of a stretch because it's already happened
45. icarus said...
flashy @37 - already happened? when? where?
46. icarus said...
That should be flashy @44
47. flashman said...
icarus: New build flats in Manchester already down 50% and detached cottages in the Surrey Hills down between 0% and 15%. You might not like it but it is true nevertheless
48. icarus said...
Flashy - I don't dislike it, just wondering mainly about the 25% drop in desirable properties.
49. flashman said...
icarus: Apart from social changes I am basing my predictions on the pre 1997 status quo. The boom caused relatively undesirable properties to rise in value more than desirable ones. In 1997 I sold my house for 560K because I went to America. I noticed that it was back on the market in 2006 for 860K. Let's assume that in 2007 (at the peak) it would have been on the market for 900K. That is an 11-year increase of roughly 60%. The national average increase was as you know way in excess of 60% (Northern Ireland 331%).
Now that the boom conditions have vanished, I think that the artificial differentials it created will vanish as well. As per my post @44, some or all of these % differentials have already gone
50. icarus said...
I understand your point. I thought you meant that the 25% drop in desirable properties had already happened. Re-reading 44 I realise that that was your forecast. Well, that gets the 50 up.