Monday, Sep 14, 2009
BBC report on Item Club forecast
BBC Business: 'False dawn' in UK housing market
An economics forecasting group has said that the recent rise in UK house prices is a "false dawn". The Ernst & Young Item Club also says that property values will not return to their 2007 peak for at least another five years. It says "a small number of cash-rich buyers have supported prices".
Posted by jack c @ 09:15 AM (1364 views) Add Comment
21 Comments
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1. str 2007 said...
Surely this will just encourage Gordon Brown to relax lending in his state owned banks still further.
2. alan said...
Interesting statistic:
"Moving house, as opposed to buying one for the first time, continues to be the preserve of the middle-aged. The average home mover is still 40, the oldest since these records started in 1974".
3. 51ck-6-51x said...
heh - won't return to their 2007 peak for 5+ yrs - they're already there in some sub-markets ( specific property types / areas... )
( Don't get me wrong, I agree in aggregate! )
4. str 2007 said...
666
No you're right, South Hampshire they're at 2007 levels. Well in my area of South Hampshire anyway.
5. smugdog said...
They've all ready PAST it is many prime markets.
6. flashman said...
smugdog: I'll write you a check for a grand if you can name five prime markets where prices have passed 2007 levels. We'll look them up
7. mark wadsworth said...
I like this bit from the article:
"The continued rationing of mortgages means that first-time buyers still have to put down an average deposit of 25%."
How many FTB couples are there with £40,000 tucked away to buy an average home costing £160,000? I'd guess none, they must be relying on the bank of mum and dad. That money has to run out sooner or later.
8. voiceofreason said...
str @4 and MW @ 7
I agree, South Hampshire prices are storming ahead.
A friend from Surrey says they are having bidding wars over there.
There are obviously lots of people around with £40K in the bank.
9. ben said...
Mark,
Typically a FTBer wouldn't buy an average home, they would buy a below average home and then climb the ladder up to an average home in another step or 2, and then continue to climb the ladder to an above average home as they get older.
10. str 2007 said...
It's funny, back in 2003, I was selling a really nice apartment in Berkshire (11' high ceilings etc.) Another friend was selling a nice 3 bed semi in Hampshire and 2 more friends were selling houses in Buckinghamshire.
If you looked at a chart things were supposedly booming then. Yet we all struggled to sell, took all of us a good 6 months.
Yest somehow now, when all is potentially doom & gloom (save for some QE and low base rates) everythings walking out of the door like there's no tomorrow.
Personally I just don't get it.
Interest rates are no more than about 1-2% less than they were then, I think I was paying about 6.5% interest rates back then.
Anyone with savings is getting next to zero return, yet somehow all is rosy.
11. flashman said...
I am house hunting in Surrey so I keep a close eye on prices. Last time I checked average Surrey prices were down about 11% from peak. There is no data available for this month so lets assume a generous 2% for September. That is still a 9% drop from peak.
I have cultivated a decent relationship with a few estate agents and they are more or less candid. They laugh at the suggestion that we are only down about 10% from peak. There is definitely something a bit ‘iffy’ about the calculation methods
12. mark wadsworth said...
@ Ben comment 9 that's true as well of course, but one or other of these articles said FTB's were borrowing 3 times income, so a 25% deposit means they have one year's GROSS income saved up in cash, a rather staggering amount of money.
13. nomad said...
In the South Hampshire/Dorset area IMO houses are being bought by boomers who are making their final move and downsizing. So, they have either been renting for a while and have become frustrated by the market, or they are renting out their larger property until it "sells for an acceptable price".
I have no stats to support this, just observation - my being in that neck of the woods. But there is lots of money around amongst the oldies, no pressure and life is sweet. But this activity cannot support, let alone boost, a housing market.
14. ben said...
@Mark 12, indeed one years gross income as a deposit would difficult for anyone to save.
15. luckyjim said...
This report suggest that house prices will reach peak (2007) levels again in five years time.
So if you can find a place thats selling for 80% of its peak value now you can expect it to increase in value by 25% over the next five years. If you have to cash to put down a 25% deposit on such a place (and get a decent buy-to-let mortgage) for the balance. You could double your capital in 5 years.
I know there's more to than that but you get my point. Things may be tough for FTBs but for potential BTL landlords the numbers are starting to look attractive.
16. flashman said...
luckyjim: Firstly you'd have to believe the item clubs' forecast. Then you'd have to ignore 5 years worth of inflation (it might only look like its achieved 2007 values). Finally you'd have to ignore 5 years worth of possibly calamitous interest rates hikes
Part of this report is a forecast for unemployment to top out at 2.76 million. Credible????
17. europeanbear said...
Luckyjim. And the rent has to cover your costs and we all know on this forum, BTL mortgages are probably 6-7% plus even with your 25% deposit. You will be waiting for capital gains and in the meantime having to subsidise the rent. You could go bankrupt waiting for the capital gain (see the recent posts on the maths teachers selling up). No! BTL makes no financial sense at the present price level even if there is some prospect for modest capital gain (and the capital gain is taxable of course)
18. need-a-crash said...
@12. + 14. I have more than 1 years gross income saved and its in cash but as I live in London and don't have rich parents I may as well be penniless, in fact if I was, the state would probably give me a free house!
19. Ads said...
Can someone explain top me, if for example last month there was only two properties sold in the whole of the UK, both for 500k, would this be reported as "average house price is £500k"? It's just seeing as volumes have dropped so much with less FTB'ers and all transactions with people selling and moving up the ladder (where price falls dont matter as its all irrelevant as the next place you buy will have experienced falls) it makes sense that the average selling price of a property should be far higher than when the market is made up of lots of FTB'ers?
20. luckyjim said...
Flashman and Europeanbear.
I wasn't talking about my personal circumstances but thanks the advice anyway. The point I was making is that 'not returning to 2007 levels for five years' is not as gloomy as it sounds when you start breaking down the numbers. The gloomy part is that BTLers can and will enter the market long before it becomes affordable to FTBers.
21. titaniccaptain said...
A bit of bear food is like spinach to Popeye when it comes to your mood you bunch of lightweights....where was your fight last week?
When the TUC came out and said that unemployment may hit the 4 million mark ...do you think they weren't away of the consequences for such a statement which in truth was talking down the economy but in reality it was shedding light through their estimations of the imposition of public sector cuts.
What happens when QE is over?.......the banks will tighten lending and increase their interest rates on products!!!!
What happens when interest rates go up?...... the banks will tighten lending and increase their interest rates on products!!!!
What happens when the Banks see that unemployment is turning rife 4million+) and the risk for lending is greater?.....the banks will tighten lending and increase their interest rates on products!!!!
No Deposit No Mortgage
No Job No Mortgage/Reposession