Friday, Jul 03, 2009
Avoids the wider issues, but a good read nonetheless
The Times: Housing is turning the corner
The housing bears say that the market is driven by first-time buyers and first-time buyers can’t get mortgages. Therefore, prices will slide. But the market could equally be said to be driven by last-time sellers — people trading down to smaller properties as their children leave home or they retire. It is this army of natural sellers who are declining to do the natural thing and trade down. Why? Perhaps because they can’t see a better place for their money than property.
Posted by devo @ 11:22 PM (1573 views) Add Comment
34 Comments
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1. Rimmer said...
I commented on that one in the blog - what a dredful article it shows no knowlege or understanding of wider economics at all.
I want to know what it is with "The Times" and house price hype articles every day
2. quiet guy said...
"Nothing is more important to economic recovery than stability in house prices. I am not one of those who believe that high property prices are a good thing; joy over the rocketing cost of shelter is one of the puzzles, and societal delusions, of the modern age. But having got here, the last thing the economy needs is a return to lower prices. Stability, with prices rising in line with wages, is what is needed."
Property owners cannor bear the thought that their meteoric gains of the last decade might be taken away from them somehow. Affordability doesn't matter. Credit contraction doesn't matter. the fact that almost every other country in the world that experienced a property boom is now experiencing a bust doesn't matter. We are different. We must be different - because the prospect of property prices correcting themselves is too unpalatable.
I await the next year with great interest.
3. peter_2008 said...
"last-time sellers"? You mean the ones that are going to die in about 5 years?
Oh, I see, they are going to live forever, because every time property price rises, it gives them magic power, so as long as property price ever goes up, they will live forever.
Stupid me!!
4. devo said...
@quiet guy "the fact that almost every other country in the world that experienced a property boom is now experiencing a bust doesn't matter. We are different."
Not different in my opinion, just later. The UK has watched events unfold in the US and acted accordingly.
Too many sectors of society have a vested interest in house prices remaining stable - beggar the consequences. It's as simple as that.
5. novice pete said...
"But the market could equally be said to be driven by last-time sellers — people trading down to smaller properties as their children leave home or they retire."
But who are they selling to?
6. novice pete said...
"Housing Market Is Turning The Corner"
codswallop!
7. novice pete said...
oops!
"Housing is turning the corner"
Codswallop!
8. Chapmania said...
The reporter is saying that a housing price stabilisation would be very welcome right now as long as prices now only rise inline with salaries.
House Prices where I am in mid sussex are still at least 6x average salary for a standard three bedroom semi. So how is it ok for prices to stabilise now with rises in the future?
As it keeps being said, with people paying stupidly huge monthly repayments on housing, where is the money to buy cars and holidays to keep other industries afloat?
People writing the articles are those that already have a home or an affordable mortagage, so have no idea how bleak the market is for those of us wanting to buy our first property. Makes me sick.
9. voiceofreason said...
Bit unethical I know, but what if there was a massive outbreak of Swine Flu over the winter ... ?
10. debtfree said...
Maybe they have to downsize because of the losses in BTL, rising energy costs, pension shortfalls and devaluation of sterling ?
11. Neil B said...
But who are they going to sell their houses to? You cant just go into cash convertors and dump a 3 bed bungalo on the counter.
12. alan said...
"Nothing is more important to economic recovery than stability in house prices. I am not one of those who believe that high property prices are a good thing; joy over the rocketing cost of shelter is one of the puzzles, and societal delusions, of the modern age. But having got here, the last thing the economy needs is a return to lower prices. Stability, with prices rising in line with wages, is what is needed".
"Stability" ....Mmmn....Availability of Funds and Interest Rates have a big influence on what will happen next in the housing market. These drivers are devilishly hard to predict !
13. japanese uncle said...
The Lord gave, and the Lord hath taken away.
Those silly souls who squandered what did not really belonged to them in the form of equity release, will be asked to refund it to the coffer of Heaven, sooner rather than later.
14. mrflibble said...
The UK housing market reminds me of the Branston Bridge in the film, The Good, The Bad and The Ugly...
Quotes from the Alcoholic Union Captain:-
"You'll all turn to dust, but one thing is sure, boys... Branston Bridge will stand unbroken."
"It's a court-martial offense to imagine... to dream of blowing it up."
"A serious crime. Even to think of destroying that bridge is just..."
Fortunately with have Tuco & Blondie:-
Blondie: "Why not really blow it up, captain?"
Tuco: "Yeah, captain, it's nothing. Let's scare the hell out of them!"
Captain: "If I could do it... I could save many thousands of men."
After the bloody battle commences Blondie comments :-
"I've never seen so many men wasted so badly."
The inflated UK housing is that bridge and it needs blown up so people can find better things to do with their hard earned money than spend a lifetime slaving away to put a very basic roof over their heads.
Through my lifetime we have moved from buying a house needing one salary, then two salaries, then borrowed/gifted deposits, then bank of Mum and Dad, now Government Equity loans, what's next?
We have destroyed society by driving prices up through greed, now the plan is to destroy what is left of our economy by keeping them up at all costs. The hand that feeds the housing market has been well and truly bitten, i.e. the FTB, so where we go from here is down, unless we want to destroy everything else just so housing can maintain it's 'value,' which sadly seems to be the way we are heading. Let's pray the market is allowed to find it's true bottom...
15. Gschaltung said...
Patrick says:
"February will prove to have been the low point for the residential property market (average selling price £147,700)" ???
The HPI average selling price for February was £153,928..
What does he mean ?!
16. Nicowens72 said...
If you want a laugh look at the comments by sybil13 underneath - if ever a more amateur attempt has been made to ramp prices, I've not seen it: "The bears are deluded if they think increased supply will drive down prices" - ummm ok...
Also: "I too was a bear of little brain but now I know better....we should have bought in feb" - priceless!!!
17. inflation is eating my savings said...
mrflibble- do you know where the unmarked grave is?
18. uncle tom said...
If this guy had done his homework, he would realise that there are huge numbers of people trying to trade down, but cannot because no-one is buying.
They are slowly conceding on asking price, but only very slowly. Many have no urgency to move, and believe that the market will rebound given time, so they are biding their time and waiting.
This delusion will be shattered when the market makes it's next descent - probably this autumn.
The market will probably be driven, not so much by FTB's or down-sizers, but by the sale of property left vacant by the death of the occupier.
Those seeking to liquidate their inheritance are likely to be the most impatient players, and, therefore, the primary market drivers.
19. James In London said...
It's articles like this that make me think HPC should really push itself onward and upward as a political lobby group.
The rationale behind lower house prices is morally and intellectually sound.
How do we turn a popular website and forum into a bona fide movement?
20. techieman said...
UT - although you may be right im just wondering if you have any numbers to back up what you say?
We know of the pathetic volumes and we know that prices are determined at the margins but have you done some homework re death rates / how many deaths are survived by a spouse / how many deaths result in an asset to be disposed of / how many beneficiaries will hold or move into the place rather than sell etc. etc. I doubt there is enough data around to prove what you say is able to be correct. Im not saying its wrong im just saying im not sure you can prove it to be right!
21. mrflibble said...
> mrflibble- do you know where the unmarked grave is?
Right next to Arch Stanton :-P
22. bleakhouse said...
Uncle Tom is right, " there are huge numbers of people trying to trade down, but cannot because no-one is buying."
And if you trade down your differentials are really squeezed in a bear market.
Forced sellers are the 3 Ds, Death, Divorce, and Distress. I wonder if there is a correlation between numbers of divorces and house sales?
23. Nicowens72 said...
If you want a laugh look at the comments by sybil13 underneath - if ever a more amateur attempt has been made to ramp prices, I've not seen it: "The bears are deluded if they think increased supply will drive down prices" - ummm ok...
Also: "I too was a bear of little brain but now I know better....we should have bought in feb" - priceless!!!
24. techieman said...
bleakhouse - if there is a divorce then wouldnt there be 2 dwellings needed where previously there was one? Extra demand? Downsized demand maybe but extra demand all the same.
25. uncle tom said...
techie,
Roughly 17,000 properties per month are sold as a result of the death of the occupier, or their moving into permanent nursing care.
Divorce or separation tends to result in one party moving to live with parents, relatives or a new partner. Negative equity tends to dissuade couples from splitting - with no equity to pocket, and many having insufficient income to set up home alone, putting up with someone you don't really like any more is often the only practical way forward.
There has been a trend for more single adult households over the last few decades, but whether that is a continuing trend is uncertain - the last time I looked, the ONS data was a few years out of date.
My expectation is that the recession will actually result in a modest growth in mean household size, and contraction of housing demand, although the biggest single cause of demand contraction will be the exodus of migrants (and some natives) from these shores.
26. bleakhouse said...
Actually, I meant that because it was so hard to sell a house 'divorcing' couples were being forced to kiss and make up, or at least continue to live under the same roof, thus reducing the number of housing transactions. Divorcing couples can rarely afford to buy 2 places, as techie says one spouse usually goes back to parents, but is there room? Perhaps other siblings have got there first! Perhaps this will cure some ofsociety's ills, with fewer children from broken homes.
27. techieman said...
Thanks UT I take your points. Personally im not sure which would be the biggest catalyst for the falls - out of the "death, Divorce, and Distress" and emigration.
It certainly feels like we are in the eye of the storm and i suppose the distress will be felt by the BTLrs which are forced to provide more equity through non compliance with LTVs or Rent cover on existing places (although surely that would be an own goal by the lenders) OR if there is an upward break in rates. So distressed BTLrs could be the big losers but not quite yet.
28. techieman said...
Bleakhouse - i think you mean "as uncle Tom says". Interesting points.
The divorcees either
1.sell the 1 place and buy 2 smaller places; - effect = +1 dwelling demand purchase
2.one lives in the matrimonial home and the other co-habits with someone else - no additional demand
3.one lives in the matrimonial home and the other rents - +1 dwelling demand rental
4.one lives in the matrimonial home and the other moves back with parents / friends etc. - no additional demand
5.they both live in the matrimonial home for financial reasons. - no additional demand
6. They sell up and both rent. = -1 sale +2 rent.
All in all im not sure this would make a big difference (figures?) surely its the general economic contraction that causes most of the falls - either directly or via these logistics?
29. techieman said...
sorry i mean demographics - at least i think i do!
30. bellwether said...
the trend to people living alone was another feature of the bubble, I know a lot of mates who live alone and who were afforded the luxury of buying and livign alone because of loose credit - remember that initially loose credit makes houses more available, until it drives prices because of competition and the fear of being priced out. At the other end of the scale my Dad's family (7 children) grew up in a 2 bedroom flat with all the children in one room.
Anyway most in that position have lost jobs, are being paid less or feeling more vulnerable to part time work or unemployment, some are already renting out rooms and others are considering sharing.
Also like religion marriage is more common as people become poorer. The whole notion of divorce is in most cases consumerism - the belief in getting/buying something better, a sense of privilige and alternatives.
31. mark wadsworth said...
@ Mr Flibble comment 11, that is an excellent final paragraph. The whole thing makes me sick when they talk of 'the housing market recovering'. A market is where there are lots of buyers and sellers and stable prices. What they really mean is 'house prices going up again to create the illusion of wealth'.
@ Bleak House comment 16, there are a lot more D's than that - how about death, divorce, debt, drugs, drink, disability, dole (I can't think of another word for losing your job that starts with D).
@ Uncle Tom comment 18, the precise figures are nigh impossible to pin down, but we know that we have a top heavy age pyramid, so in the grander scheme of things there are roughly as many people who die as there are people who reach the first-time buyer age bracket. But older people who die and whose house is sold are usually already widowed (by definition) and first-time buyers tend to buy as couples, surely. So demographics suggest that first time buyers have the whip hand.
32. Tpbeta said...
Try posting a comment below the article on the Times site pointing out the preponderance of articles in that paper talking up house prices. See if it actually then appears in the comments section below the article. None of mine have. Says it all really.
33. techieman said...
Nicowens72 - very strange. We have a sybil13 here - and shes a bit of an uber bear. i thought also that she had the same name on other sites including the Times. How slim shady would the real sybil13 please stand up, please stand up!
As for "CEBR said the crash is almost over, as did Lloyds bank, and now also Prof Miles from the BOE MPC. A Reuters poll of economists too.. Sorry, it's over, we should have bought in feb."
Thats quite comical - there is actually a Daily Sentiment Index that measures the bullishness of folks and you fade that (with a confluence of other factors) once it reaches extremes. I am always reminded of some people from Goldman Sachs in 2001 telling me that their economics dept had advised them not to buy ar UK property was 30% overvalued. Maybe it was but, as they say, the rest is history. My advice to this sybil then if she feels that way is to go on buy now before you miss out on any perceived gains!
34. Nicowens72 said...
Techieman - yeh you're right about HPC's Sybil13. Oh well at least it shows bulls haven't lost their sense of irony!!