Wednesday, Mar 25, 2009
This has started to happen - like it or not !
Assetz: House Price Falls Show Early but Strong Signs of Softening
Examining UK house price data reveals a clear picture of the housing market has started to see signs of softening price falls.
Posted by foa4 @ 01:58 PM (1145 views) Add Comment
10 Comments
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1. Sybil13 said...
Blah Blah Blah Blah , sorry to keep repeating myself here but property prices are falling, every major economist agrees, or indeed anyone capable of doing simple arithmetic, sensible lending is here to stay the UK cannot afford to do otherwise. The FSA sent a LOUD message to lenders last week when he said that he would cap mortgages at 3 x's loan to income or less to ensure property prices do not inflate if they stop lending at sensible levels that is 4x's income or less. The weekend papers said that on top of the 20% falls "every major economist is expecting 10 - 20% falls in the coming months, " whether this is reflected on the street doesn't matter THOSE PROPERTIES VALUES ARE NOW LINKED TO lending levels whether people like it or not.
For those of you that are going to retort "not round my way" I have this to say, or rather the figures have this to say.
It really does not matter where you live, sensible lending is with us, the UK went broke trying to do otherwise.
Sensible lending means loan to income ratios going back to 4x's or less , most believe 3 x's is more likely. This does not mean FTB's will not be able to afford to buy, it means property prices should have fallen already in line with lending levels. That is the point of HBOS / Halifax figures in February reporting:
'The house price to average earnings ratio has decreased to an estimated 4.44 in December 2008 from a peak of 5.84 in July 2007. The ratio is at its lowest level for over five and a half years (April 2003: 4.44). The long-term average is 4.0.
So if the market were to fall back to long-term trend, the average home price, already down from a peak of £200,000 (Aug 2007), needs to fall from £160,000 to £144,000 - that would be a ratio of 4.
Some economists argue the long-term trend (it depends on timescales) is lower, maybe 3.5. That would suggest a price of £126,000 (- 21% on today's price {20% down from peak} ). end quote.
They weren't saying, property prices MIGHT FALL but property prices HAVE FALLEN from £200000 from peak to £144000 if lending levels are now at 4x's income , or £126000 if lending levels stabilise around 3x's income. What a property is worth is what a lender is willing to lend measured against what a person earns, (funny idea I know!) THAT HAS FALLEN from the lender giving nearly 6x's at peak (HBOS figures ) to 4x's times now or less.
The link at: http://www.housepricecrash.co.uk/forum/index.php?showtopic=109132&st=0&gopid=1765854&
Says: According to the annual world retail banking report from Cap Gemini, Unicredit and EFMA, mortgage lending has "exceeded reasonable limits" with the volume of debt running at 86pc of GDP – or about £1,200bn. The report recommended 60pc as a sustainable upper level.
Andrew Sheehan, a management consultant at Cap Gemini who contributed to the report, said: "The scale of mortgage lending in the UK is unmanageable. As GDP grows, mortgage lending should decrease to about 60pc over time." Mortgage growth shrunk by 26.6pc in the UK between the first half of 2007 and the same period in 2008.
The US is even worse off with the value of mortgage debt at 104pc of GDP. The report said the "main explanation lies in the uncontrolled increase in housing prices".
One can't argue with the figures . IT DOESN'T MATTER WHERE YOU LIVE. :
House prices are DOWN, the sooner the sellers catch up the better. This isn't speculation .
Lending levels have returned or fastly returning to being sensible / sustainable / more affordable / and linked to incomes.
Mortgage lending has to return to 60% of GDP.
Recovery means getting back to where things would have been if not for a few years of HUGELY irresponsible lending that broke the banks.
Indeed most lenders are already there, someone has to tell the rest of the UK that at 4'x income (and on a higher than average wage) the average property price is £144000, not £200000 and FALLING.
2. Smiley said...
This is only half the picture - and from a VI!
Yes, house price falls have softened, but only with record low interest rates. Once these go up, along with unemployment, and all the other things discussed on this site, expect another flood of properties onto the market, and further significant price falls.
3. Poacher said...
Er, what has started to happen exactly?
This is the weirdest graph I think anyone has ever posted on the site (at least regarding house prices - some of the 'technical' analysis of stockmarket movements has been pretty bizarre). Why would any analyst perform two completely contradictary functions when plotting data of this nature: firstly annualising single months of data (and so exagerating volatility) only to then 'average' these annualised figures (and so smooth out the volatility)? The answer is obvious of course: you would do this if you are a VI that wants to magnify the inflection between a market hurtling down hill versus one merely coasting towards the bottom...
4. ana lytics said...
well, mr comedy club, it depends on what you want the statistics to show doesn't it?!?!?
if he thinks anyone is falling for the old extrapolation of short-term data into annualised numbers trick, he's having a laugh (especially if he's using Rightmove and CLG data in his "model")....
Let's see what the Nationwide and Halifax data shows for March, April and May (traditionally the months where there is a large Seasonal Adjustment factor)........
"Our best estimate of when prices will stop falling is currently September 2009." You want to have a bet on that Stuey? I'll have a few shekels against that!!
Amusing none the less....... I
5. will said...
A short term change of direction on a chart in a clear down trend. There should be laws against people coming out with such drivel, in an attempt to get folk to part with their hard earned cash.
6. growler said...
@foa4:
Ass-etz fail to show that in 1991 you'd have also seen a softening of the fall.... Right to the bottom of the market quite a few YEARS later in Q4 of 1995.
7. hpwatcher said...
Ah, Mr foa4, our very own troll!
I put this down to low interest rates, those with large amounts of savings biting the bullet. May work in the short term...as for the long term HHHHhmmmmmm.....
8. crash bandicoot said...
"Assetz® is a UK and International Property Investment Specialist"
Isn't it about time the FSA started to show an interest in these clowns. Is he the last person using the words "property" and "investment" in the same sentence without including he word "bad" as well?
9. trough2010 said...
zzzzzzzzzzzzzzzzzz
10. Greenshootsandleaves said...
So the message is: 'Hurry & buy now or you'll miss out on the next bubble!' Do you think we might see less of this sort of drivel if those responsible (after a while you notice that some names in the national press and, yes, at the BBC tend to recur) could be held financially liable for any losses incurred by investors who followed their advice?