Saturday, Aug 01, 2009
Look at who has come out of the wood work...
FT.com: Foxtons founder says slump close to an end
Wow - Look at this! This is the man who called the top by selling off Foxtons. And he is back... As we now have proof that he correctly called the top, he can only be right in calling this the bottom.
Let's not question his well prepared re-appearance. He must be right. And it must be for the greater good.
Posted by trough2010 @ 02:13 AM (2787 views) Add Comment
30 Comments
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1. hpwatcher said...
he can only be right in calling this the bottom.
Let's not question his well prepared re-appearance. He must be right. And it must be for the greater good.
Well, go and buy a house then trough2010 - if you believe that!
2. bidin'matime said...
Trough – look at this grpah and then at this grpah, then tell me where you think we are on the first graph….
If this guy is as clever as he is being held up to be then I’d guess he’s trying to offload property, not buy it. Do you think he was talking openly about an impending crash while he was selling Foxtons..? – come on, do try and keep up…!
3. bidin'matime said...
This grpah!..?! I meant to say grhap. Well at least my hyperlonks work this time...
4. robh said...
Wasn't trough just being ironic?
By the way, isn't the graph looking good! I hadn't seen it for a while and it's really taking shape; the shape predicted by HPCers anyway
5. uncle tom said...
'grpah' #2 I take slight issue with, as it carries a trend line that suggests we are back to sustainability.
The trend line represents a real 2.9% p.a. growth in house prices, yet there is no economic or social argument to support such a trend.
When sustainability is finally reached, and the trend line is re-drawn, we may well see that prices in the mid nineties never dipped below trend.
6. Chubby said...
Bidin, i saw the headline and was going to link to the exact same chart. Its clear that we are experiencing the 'back to the norm' phase of the bubble.
The trend line in the second chart is misleading... but correct at this point in time none the less. i guess we have to wait until.... within the next twelve months....... the winter sets in, a few more estate agents go bust, a ton more people lose their jobs due to the continued downturn, tories get in and sack half the public sector workers, interest rates are forced up, real taxes are forced up. Then we should be heading well toward the despair phase of the chart IMO.
That is unless something worse happens. collapse of the pound. iran war. bird/swine flu. move toward global currency. another run on the banks. we join the euro. or the banks get away with creating endless credit again somehow...... take your pick.
7. paul said...
Yes, trough2010 is being ironic.
I think it's actually you two, bidin'matime and hpcwatcher who are not keeping up!
Nice graphs.
8. greenshootsandleaves said...
He sold at the right time, no doubt about that, but did he actually 'call the top of the market'? Someone who definitely did was 'that guy with the Greek name who made a lot on BTL' (to quote uncle tom from a post a couple of months ago).
9. str 2007 said...
What these people are saying is that the bottom (for them at least) is near enough. IE their numbers with regard to rental returns are starting to add up again.
In the 90's crash their simply weren't many property investors and hence prices trickled down slowly after the initial falls, largely based on the sentiment from the man on the street who in most cases had had a severe battering from 15% interest rates.
This time around I can see that investors could start to put a floor under prices and in addition the man on the street has been cosseted in cottonwool with regard to his mortgage payments (so far).
I believe that what we're starting to see are people returning to the market as the (as the graph shows in post 2) prices are returning to the longterm trend line.
Catching the absolute bottom of course would be nice, but once past it the ability to negotiate that extra 5-10% from asking price quickly diminishes.
Therefore I guess alot of investors see it as better to be a bit early while you can still drive a hard bargain rather than just past the bottom when you have to compete with other buyers.
Don't worry I haven't turned into a bull overnight, I'm still bearish and expect further falls come the Autumn.
So far we haven't seen (as far as I'm aware) many investors getting into trouble yet either, despite their somewhat diminished equity levels.
The 'holiday let' property investors have also likely had a bumper year this year for bookings, with people opting for UK holidays basing their decisions on recession, green and swine flu reasons (well I for one wouldn't fancy sharing a 5-6 hour plane ride with 300 others at the moment).
However afetr this summer I imagine bookings for uk holiday lets may be a little thin on the ground as everyone remembers why they started going abroad in the first place.
So in my opinion there have been too many City jobs lost and still too much bad news about to see a full recovery just yet.
10. bidin'matime said...
Paul / robh - we get some nuts on here, it's sometimes hard to tell... Then there's the hysteria seen here following the recent data - were never sure if people are about to jump or not - can't afford to take chances.. A bit of reality check never did anyone any harm.
And Tom, I agree with you, but I just love showing those two graphs to property bulls and posing that question - if I started speculating about where the trend line was really going then it would cloud the issue and detract from the impact.
Incidentally, if you want to show people something that is not a link to HPC.co.uk (which they may consider to be biased..), you can show them LA Times from June 2007 and Nationwide July 2009 report (point to the headline on page 1 and the graphs on page 3). (I couldn’t find the other graph on the Nationwide site – anyone know where I can find this..?)
11. bidin'matime said...
str2007 - you are probably right, in that low interest rates and apparently low prices will draw in the 'professional investor' (now I'm being ironic..), but they haven't noticed the sterling crisis brewing - we all know that property prices have got to fall by about half, to get them back in line with incomes, and the question is 'how?' - well the government is hell bent on stopping it, so we have to look at what is outside their control - and we have overseas lenders, who don't give a stuff about UK property prices - they will eventually demand a risk premium for their sterling loans and it is my firm belief that is will be this that finally brings it all crashing down - 'professional investors' included...
12. quiet guy said...
@str 2007
"I guess alot of investors see it as better to be a bit early while you can still drive a hard bargain rather than just past the bottom when you have to compete with other buyers."
I see what you're getting at but there is a simple counter argument:
If I jump in now, because I'm afraid of missing the bottom, I risk instant negative equity and serious losses in the future due to potential rate rises and weak economic fundamentals.
If I wait until there is a clear sign of recovery (the recent news doesn't cut it for me), I've lost a bit of theoretical profit but should be able to exit the market by selling if I have to due to redundancy or other misfortune.
If I was rich, my attitude might be different but buying a house will be the biggest financial decision of my life and I'd rather keep the risks under control as much as possible. The current government is doing everything it can to help those who speculated in property but how much more help can the government afford to give? We're nowhere near the 'capitulation' phase on bidin'matime's chart but we've handed over in excess of £1000bn to our banks so far.
(Oh silly me, I forgot. It's going to be 'different this time' :D )
13. techieman said...
actually i read an FT interview with Johnny boy who basically admitted he was lucky in getting out where he did and only did it because he got a bit of a nonsense offer - such is the mania in a bull market! If you give him the benefit of the doubt perhaps he was just being humble - as would i be with 300 bars in my back pocket for rolling out a few minis and fleecing the maximum number of people i could!
In addition he then went and invested some of it in a US Estate Agency that went belly up.
So there are market timers and businessmen who are sometimes lucky. Credit where due though he was astute in getting that amount for it....
14. bidin'matime said...
Yes, you're right - the 'real house price' graph from Nationwide does appear on page 3 of their report - the one on the top right is close enough to the one on the HPC link - just the recent bounce not very clear on it.
15. Philip9134 said...
I guess that like most of the people reading this article I am wondering is this the bottom ? In my area Brighton, the drop has not been as huge as I would of liked. Naturally like most of you I have spent some time thinking about why the drop is not as expected.
I would of expected that the real estate agents would be pushing for buyers but this has not been the case, the reason for this is I suspect is that they are connected to the letting market therefore a steady drip of funds has kept them afloat.
the Government has played a very large part in keeping the bubble inflated firstly by using the BBC to keep the hype about houses, secondly by forcing the banks to over stretch.
The will the houses drop 30, 40 or 50% obviously not in these conditions, however, brown has pushed so much money into the housing that the money has to run out sooner or later. Small and medium sized businesses are having a huge problems securing loans from financial institutions, to this effect we can see the unemployment rate rise significantly.
with a rising unemployment and a falling tax base, this or future governments will have to tax whoever is making money. I believe that the buy to let will be hit very hard. If this is the case the estate agents will no longer be able to rely upon the steady trickle of money to survive.
Is it possible for the pound to survive with out a dive, or perhaps the credit rating? I feel that the question we should be asking is, not if or when, the drop will come, but how much money we can print or borrow in the hope that the drop does not come. my gut feeling is after the next election.
16. mander said...
I guess the market has bottomed for estate agents, investors and banks but not for genuine buyers who still count for only 11% of a 40% housing market.
Inflated houses are going back to the banks: In the US through huge numbers of repossessions and in the UK through investors using bank's money to buy up any stock to create the impression of housing shortage. But while US market will vindicate reaching the bottom making houses affordable UK will be at the opposite poll. Unemployment and slower immigration will probably result in there being no housing shortage.
Anyone prepared for the times when there will be no housing shortage?
17. alan_540 said...
2015 till we reach some sort of a bottom in prices I reckon.
18. str 2007 said...
bidin my time
you said : If I jump in now, because I'm afraid of missing the bottom, I risk instant negative equity and serious losses in the future due to potential rate rises and weak economic fundamentals.
Investors certainly don't look at life this way (not with the housing market anyway) and I'd hesitate most geneal public don't either. And to date they've all been lucky (or proved right as they'd say)
The attitude is can I afford it now - Yes
Will house prices recover - Yes
Will the Government to all in it's power to maintain the price of my house - Yes
I don't think people think any further than that - hpc company excepted.
19. hpwatcher said...
I don't feel that it's the right time to buy. The UK economy is in a shocking state, and I think will decline further.
20. European-bear said...
Read the LA Times article posted by Bidin....It is becoming clear that the last 18 months was denial. Now everything is back to normal, and cash rich buyers are jumping in and pushing up prices on low tiurnover (having convinced it is the bottom). And they must be cash rich as we know the banks are demanding big deposits to get a competative loan. This is NOT a normal matrket. The tunrover is too small by historical standards. If the turnover was x 3 it is now, then recovery would be on the cards. Out of interest read the comment below that was made in response to the LA Times article. It is typically delusional in the denial phase. And since the LA Time artic;le was written, California house prices have halved.....(note the argumments - lack of land in metrapolitan areas, loads of immigrants - sounds so so familiar). Oh yes, and the rental yields are too low to makle BTL economic sense (needs 8-10%)
"Okay, but how does simple supply and demand fit into all of this? Sure, prices have dropped and might drop some more, but people still need a place to live. People still want to upgrade houses and/or neighborhoods. People still have to move because of a job or bad commute. Eventually, all the illegals who will eventually get amnesty will want to buy a house. Prices can ,and probably will come down, but to say we're going to have a bubble-NASDAQ-like-.com-in-2001 sell off in SoCal housing misses the basic point: lots of people want to live here, no one is building new houses inside the core metropolitain area, people have kids and need that extra bedroom, and so on. I suppose for a true bubble scenario to play out, wouldn't most buyers sit on the sidelines as prices come down? So, using the above example, no one, or very few people are going to buy houses in 2008-2013? Of course, the silver bullet is interest rates, ever increasing interest rates would kill the market. That said, if people see a steady increase in interest rates they might just decide to buy now as their mortgage just gets more expensive the longer they wait.
Anyway, way too many variables but the basics of supply and demand really don't point to some catastrophic bubble. Sure, the days of 20% annual appreciation are over for now."
21. bidin'matime said...
str2007 it was quiet guy who said that, but I do agree with him.
Investors, public, the lot of them, havent yet fully appreciated the trap they are walking into - if the economy is on its knees with 0.5% interest and BoE printing money, then what is going to happen when the cost of money is returned to normal...? All Hell will let loose, that's what. You wont be able to sell a house for half today's price - no one will be able to buy - except those who have kept their powder dry...
22. str 2007 said...
bidinmatime
Sorry about that.
Difficult to keep your powder dry in this weather without a roof over your head LOL
You'd think by now that the first signs of over extended trouble would be showing. Just been on Auto Trader where I was expecting some price drops in 4x4's etc. Nothing so far as I can tell. Not even a whiff of 'best dump the Range Rover while we still can', prices are virtually no different to a year ago in fact.
I guess people are still able to rustle up chunks of money.
I do agree that IF the cost of money is returned to normal levels there could well be some problems, particularly if the banks maintain their current margins (and why wouldn't they) that things will get tighter and above all sentiment could start to change.
But even at higher rates which may not be implemented for quite some time yet, will the majority of people be able to get by without having to sell the house for another couple of years - probably IMO.
There should be some cheaper vehicles around by that point though.
Long live dry powder.
23. Adarmo said...
Just a note that Nationwide have twice increased the trend rate of growth, from 2.4% to 2.8% and now to 2.9%. Lack of continuity there. I wish I could move my clients benchmarks whenver performance suited to make my advice look better!
24. gone-to-colombia said...
It seems to me that we are seeing a kind of Indian summer, a swan song of a recovery in prices.
Such rises that have happened have occurred against the wider contrary economic current. They are, therefore, unsustainable.
Could it be that a national mindset takes a long time to be changed? Belief in rising house prices had become a kind of act of faith, the HPC denial a form of heresy. Those who hold beliefs do so disregarding contrary evidence. I suggest in an economy where manufacturing output has crashed, debt levels, both national and personal, seem unsustainable, loan provision has declined to miniscule levels and unemployment is rising dramatically that the only way property prices can go is down.
25. Drumhead said...
try this. I'm not an expert here and I don't pretend to be one. But the fact is that UK has got very limited land for housing and that's a problem. When there's a problem, there'll be an opportunity. Someone who's smart enough will capitalise on it. House price down, I don't think so.
26. greenshootsandleaves said...
Would he be willing to buy back the business and, if so, at what price? Guesses, anyone?
27. Roubinisworstnightmare said...
Gents,
I don't think investors are likely to put much of a floor under housing. I certainly wouldn't be taking leverage in sterling even if my global outlook was for growth in leverage and thus asset prices that leverage was collateralised against.
My personal view is that we have just (thankfully) seen the warehousers of money call time on a ridiculous leverage cycle that was allowed to extend well beyond anything in recent economic history. The leverage cycle is retracting and house prices must follow.
I wouldn't bet the cost of a beer on sterling over the next few years, let alone the next 30.
I won't even get into employment likelihoods. Basically, i think the only thing that will hold employment up is young skilled people (especially expats) fleeing the country in massive numbers as labour wage arbitrage becomes a driver. That'll free up jobs for those who remain - but there will be a serious skills shortage - not for the first time.
Basically, another 15% movement in sterling and the next bubble will be in airline tickets.... lol.
Happy hunting people - i'll be hunting a cheap airline ticket - lol.
28. Phil S said...
There may only be small falls in property prices from here, but its easy to envisage prices bouncing around the bottom for many years.
So in nominal terms probably not much drop,but in real terms more significant.
29. techieman said...
"Drumhead said...
try this. I'm not an expert here... " Most sensible thing you said.
"House price down, I don't think so." then with your logic :"UK has got very limited land for housing" why have they fallen at all?
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