Saturday, Apr 04, 2009
Anne Ashworth again
The Times: Knock-down auction prices risk knocking back recovery
Apparently the best time to buy is BEFORE the light appears at the end of the tunnel, so you can guarantee initial capital losses. Also property auctions are doing us all a disservice by actually selling houses for what people are prepared to pay for them. My brother is currently buying a house, quite possibly after reading such tosh, and against my advice. You can take a horse to water etc. As the price falls continue, I hope Ashworth ends up in a few years' time as unpopular as senior bankers are now.
Posted by monty032 @ 08:38 AM (1213 views) Add Comment
11 Comments
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1. Quad said...
For bargain hunters, this may sound great news, but they should ponder the human cost of REDC’s policy of accepting any price for a property, no matter how low. This risks adding to the debts of these homes’ former owners, for which they continue to be liable after the repossession.
WTF
So we have spent many years renting because we cannot afford a home of our own. and trying to save a deposit at the same time, making many sacrifices along the way. Now we should show a little consideraton for those muppets who borrowed way way beyond there means.
2. mdmick said...
This article preamble reminds me, I haven't heard people saying, "Shh! Stop talking down the market!" for ages.
I just wonder if, in a few years' time, the popular perception will be that it was all a problem of confidence.
Spin will be trying to mass market that idea in an attempt to help only positive positive talk about the economy.
"We bought a place and it would have been OK except that the doom-mongerers made it's value fall...." .
3. str 2007 said...
Manchester flat, bought for £195,950 in 2006, which went under the hammer at £75,000 at one sale. REDC, the razzle-dazzle repo men from the US, will be offering more of the same in their British auctions.
In 1999 I paid £85k for a Victorian 2 bed flat with 11' high ceilings and 8' high picture windows. The flat was within 10 miles of Heathrow outside M25. The flat would've rented out for £8-900 per month.
At the time the future (apart from the tech bubble and 911) was pretty rosy.
What makes anyone assume £75k for a manchester flat that would rent for I guess £5-600 per month (with the future looking as grim as it could) be an absolute bargain.
I suggest £75k may still be 25% too high, but to be fair a good discount from £195k (over 60%).
This is I guess the current 'liquid' end of the market, I suspect the rest will start to follow more quickly.
Anne Ashworth I can only assume is nursing a BTL portfolio or at least an oversized mortgage.
4. quiet guy said...
@Quad
Well said. I had my WTF! moment as well while reading this. Ashworth is asking us to consider the 'human cost' of speculators losing their bets plus advising people to buy property while prices are dropping.
Totally ridiculous.
5. letthemfall said...
The headline is like saying falling prices are knocking back rising prices. I think it's a pretty fair bet that the Times housing columnists are heavily invested in BTL.
6. sold out said...
Anne Ashworth and her ilk seem to only love the free market when its rising and their greed is being rewarded.
But when its reversed and the "market" is calling the price on the way down suddenly its wrong.
I have zero symphathy for those BTL's who are, and will continue to be repossed and lose huge sums of money, did they care about anyone on the way up?They gambled and they lost, if they had the foresight and intelligence to realise the party was not going to last forever they would have got out of property at the right time.Investors and speculators who don't really no what their doing deserve to fail and lose everything.
7. britishblue said...
This will effect the market, if the large banks and building societies decide it is better, quicker and more effective just to clear the houses out by REDC. Given the REDC brand I wouldn't be surprised if they take off in a big way in the UK.
Why? Because REDC charge a 10% premium on the sale to the buyer. This means if a buyer wants to buy a property for £100,000 he can pay no more than £90,909 + 10% commission. This automatically reduces the amount achieved by 9.1%.
However, this will not be recognised by the Land Registry (who consider it a trade sale), or the Halifax or Nationwide as they base their prices on mortgage approvals. Therefore, the indices will under report the house price crash.
Where it will be recognized is by the surveyor that values your house when you come to sell. There are increasing pressures on surveyors to take all aspects into the value of a house including the most recent sales in the local area.
Therefore, you may have been offered what you consider a fair price for your house, have a ready purchaser, only for the surveyor to say the house is worth up to 20% less, because others have sold in the same area for less. If you have an apartment in a new build flats you are likely to be stuffed. It has just happened to a mate of mine who accepted and offer for £360,000, the buyers had the money and a good deposit but the property was down valued to £310,000.
8. peter_2008 said...
britishblue @ 7, agreed. The 10% premium on the REDC sale to the buyer will also encourage lenders put up more properties, because the lenders do NOT pay anything whether they sell the properties or not. The lenders cannot be worse off! This is a huge financial incentive to the lenders. This effective passes all financial losses/gains to the buyers/sellers. An average British auction house charges about 4-5% for selling a house successfully, and 2-3% even it doesn't sell!!
9. drewster said...
@britishblue,
There is no hoodwinking of the Land Registry. Even in a buoyant market, a bank selling a repossessed home would have to pay agents or auctioneers fees. Given that REDC's fees are so much higher, it seems unlikely they would gain much market share - although I could be wrong.
Also bear in mind that the fees are usually a percentage - 5% of a £200k home is the same as 10% of a £100k home.
10. mark wadsworth said...
That article also contains a fine example of one-sided economics.
11. britishblue said...
Drewster@9. I may be wrong but my understanding is that even though the price of a repossesssed house will show in the Land Registry it is NOT used in calculating their house price index as it is deemed as a trade sale.