Wednesday, Jul 29, 2009
Comedy club replay (The only way is up)
Times: Live debate: Has the housing market bottomed out?
Times Money’s panel of experts will debate with readers the question on everybody’s lips: has the housing market bottomed out? GUESS WHO? - a property adviser and developer. He is an active property investor himself with a large property portfolio including new-build student accommodation, buy-to-let, overseas and UK holiday-let properties and commercial offices.
Posted by jack c @ 04:24 PM (1367 views) Add Comment
17 Comments
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1. paul said...
Well what a waste of an hour that must have been for everyone.
2. techieman said...
I fought ze law and ze law did not win?
3. techieman said...
most of the comments look quite sensible and then i found this:
"Onwards and upwards now with prices i do believe. You just have to realise we have supply and demand issues in this country, people pay the price to what they believe houses are worth, and people are still buying. You must stop comparing prices to years ago, back then it was unusual to have 2 persons earning in a household - not anymore.
Posted by: William Ponsonby-Smythe | 29 Jul 2009 12:59:18 "
he must be "verwy verwy dwunk"
4. gone-to-colombia said...
I gave up on the Times ages ago, they are part of the problem, they have lost their once great reputation.
Once the 'thunderer' now a sniveling Quisling rag. A view most have come to accept.
Such institutions as the Times once represented all that was great and best about Britain, now they have become signposts for a lesser future.
5. jack c said...
I must admit I lost interest after one whole minute into the debate based on this exchange alone :-
[Comment From Joe]
What affect do you think foreign lenders like Bank of China will have on the market?
Stuart Law - Assetz: Joe, it could be a tremendous boost to both the homeowner and BTL markets reason being is that they have huge capital to invest and they are trying to diversify away from the dollar. They will however have tough criteria to start with at least
6. quiet guy said...
To be honest, compared with some of Law's previous offering over the years, this was much more down to earth. This quote from Law caught my eye, however:
"Interest rates and hence interest actually payable is far more important that earnings - we live in long term low interest rate times and hence outdated measures like house prices top earnings do not apply at old assumed ratios."
Now he may turn out to be right but that is a BIG bet considering that cheap money has been identified as a major cause of the boom and we have have been warned about possible problems with our national debt by the rating agencies and the IMF.
7. Cynical_man said...
"we live in long term low interest rate times and hence outdated measures like house prices top earnings do not apply at old assumed ratios."
So what happens when everyone becomes overborrowed at the low rates? It will happen...like someone once said to me about the roads, no matter how many new ones you build they will fill up with cars and you will get traffic jams.
8. inflation is eating my savings said...
agree with QG @ 6 (I suppose also Mr Law). These traditional multiples were fairly meaningless 100 years ago- when the lower middle classes first bought their little houses with their stained glass windows at the front.
I'm not sure we'll see more than 40% falls, maybe only 30% from peak. I cannot see rates rising anytime soon. The markets have priced in a currency collapse, I though they did that. However, I would welcome >40% falls, at a personal level at least.
9. Imminent_plunge said...
Dear God, Stuart Law has replied:
Hi Chaps
Pity we didn't get the chance to talk live with most of you commenting below on the live debate. Assetz primarily recommends investment in income properties so the house price growth part of the market is of far less interest to our clients, and myself, than you imagine and hence being a Vested Interest for price growth is not the given that several of you state. The Vested Interest many of you have in house price falls as home owners in waiting is painfully clear and I completely sympathise.
Prices halving from today as some of you wish would deliver stunning investment yields but that is precisely why they can't do that. Income generation is a true investment and hope of growth is speculation, we fall in the former camp in terms of advice but are happy to comment on prospects for capital values nonetheless, and frankly these prospects look positive.
Lower prices are in investors' (and homebuyers) interests if they are still planning to buy more property for their portfolio and make a good income on purchase price but I feel there is little chance of that happening with the weight of money voting that residential yields are at more than fair levels at current pricing. We are also seeing growing numbers of homebuyers voting with their deposits and buying in, as are many House Price Crash forum members I note.
I sympathise with the difficulty in getting on the housing ladder but we still live in a reasonably free state and price control/ fixing of house prices as suggested below to make property affordable would be in breach of numerous EC laws and would create tremendous misbalance of demand over supply that the planners would never permit delivery of through their approval processes.
Anyone genuinely looking to get on the housing ownership ladder had a chance, subject to status, for several years to get in with a 100% mortgage and live in their property for a number of years until greater equity and growth in income would allow a move up. Delaying this purchase, as many did, to hope for price falls in such a strong supply/demand imbalance situation was effectively hoping for the credit crisis that we now have but clearly 100% funding is no longer a choice and large deposits are now required. Nothing new exists in this world and one hand gives and another takes away, such is the way of the world. If all those years of renting were not capitalised upon to save deposits whilst waiting for the current situation then we now have an unfortunate position of potential buyers being locked out of the market at a time of good buying opportunity.
The clear economic truth is that at any given time demand and supply create a fair price for goods, sentiment and credit falls have created a new reality and a new price but this has only taken an average of 15% from peak house pricing which is a low fall versus other asset classes. That tells you the raw demand behind this asset class and is a message you ignore at your potential peril if you are a near term possible buyer.
We are where we are and we may well be at the best price point / buyers negotiation position that will ever be seen again. And perhaps we are not. It is your call as to whether you agree with that or will gamble your entry on the future family home ladder by waiting longer. A difficult decision that I would relish making as a potential first time buyer in today’s market. If your wish is to do so then the very best of luck in your decision as to the timing of when to get on the ladder.
Posted by: Stuart Law, Assetz | 29 Jul 2009 22:21:41
10. quiet guy said...
@inflation is eating my savings
"The markets have priced in a currency collapse"
I respectfully disagree. The problem is that the most extreme events, like borrowing from the IMF, would involve a discontinous and severe change e.g. base rate going from .5% to 10%. The market cannot really price for that because there is no useful average. To pursue the example, we go to the IMF or we don't; the difference between one or the other is enormous. The market has to try to factor predictable events - it cannot price for all contingencies (echoes of Taleb?)
11. Cheekie Charlie said...
When the currency collapse is followed by earnings collapse and employment collapse you have a problem!
12. Roubinisworstnightmare said...
Tut, Tut, Tut....
For those who do not believe house prices can roll back 50% please consult the case shiller index.
For those who do not believe that house prices can roll back to Jan 2001 please consult the case shiller index.
For those who do not believe that a combination of broken banks and broken local macro-employment factors (Detroit auto = London finance/service) can cause a catastrophic roll back in real property prices please consult the case shiller index.
It's going to be bad folks - really bad. I'm currently predicting a 60% fall in reals from peak to trough over about 5 years, but it could be more. I'm obviously something of a fatal optimist. :)
ps I really think London and the south east is going to get completely creamed - creamed.
13. inflation is eating my savings said...
QG- I defer to your greater knowledge of these things- I don't know how much is included into valuations by these smart chaps in their suits who walk across London Bridge every morning. I guess there would be a "feeling" in the present valuation about whether the IMF is likely or not? But yes, I see your point, being close to the cliff is very different from being over it.
14. quiet guy said...
@inflation is eating my savings
"greater knowledge"
Well that should carry a Health & Safety warning! My friends who know me might laugh so much they hurt themselves. Thanks for saying so anyway.
On a slightly more serious note, I suspect that "these smart chaps in their suits who walk across London Bridge every morning" are mostly practically obliged to dance to short term market pressures.
15. Soldinjune07 said...
What happens if buyers go back into property now? They obtain a mortgage at a very low rate, possibly fixed, and move in to their new pad. There is one certainty... The only way interest rates can go is up!! Any growth in property prices/sales at the current time is being fuelled by speculators who are riding on the back of promises and reassurances being made by vested interests and a Government who will do everything in its power to try and postpone any further falls until they have lost the election and can start blaming somebody else.
16. Cynicalsoothsayer said...
Mr Law is trotting out the usual guff about "Supply and Demand", when it is credit availability that sets the price. Much of the rest of his post is ramping to get turnover which earns him fees. I sense a note of insecurity in his sympathising yet blustering side by side, I wonder if he's about to go bust.
QG @10: Real mortgage interest rates offered by lenders are now around 6% which is nearer 10% than 0.5%. The markets are pricing in the future and ignoring the "official" interest rate that the gov would like you to think of, cos there's an election coming soon.
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