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House Price Crash Forum


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Everything posted by Van

  1. In my opinion, a crash is not just likely, its almost inevitable. Humans are psychologically programmed to maximize their wealth. That means getting the best value for their money. In a rising market, that means leveraging as much as possible, so we have seen the borrowing limit gradually increased to larger salary multiples. Why borrow x2 salary when you can borrow x4 and "make" twice as much money on your house? In a falling market, it means buyers holding off - waiting for prices to fall further, month by month, year on year, building their deposits so that they can buy the biggest house possible. Transactions dry up, and prices slip a little further, so buyers hold off more... a classic collapsing spiral. And an collapse in house prices will have a knock on effect on the economy. When the "feel good" factor evaporates, psychology changes from living beyond your means in every way conceivable, to issues like job protection, debt management and living costs - hardly conducive sentiment for housebuying.
  2. The mechanism for remortgaging to release equity as the deposit for the next BTL property is a Ponzi scheme that will end in tears. It doesn't work, except in a rising market, because it leaves you highly geared and exposed across the board when interest rates increase, as they have been doing for some time now. This BTL mechanism has fueled HPI for the last few years, but now BTLers have more or less realised the game is up. Rents no longer cover mortgage payments, and there is much anecdotal evidence that BTL has almost completely dried up since the spring.
  3. It's worse than that, ripperUK. The last CML report cited FTBs down to a staggeringly low 9% in London. I think we all agree that is a shocking figure. On the other hand, with the average house in London (£280k) at almost 8 times the average local salary (£36k ), this should not be surprising. Even the average FTB property (flat/masionette) is 6.6 times average salary - remember FTBs earn *below* average salaries! These figuresare taken from the the Land Registry and National Statisics Office, not Nationwide's watered down numbers. London salaries also have greater statistical variance - further compounding the problem when property ownership accounts for 70% of the population.
  4. I've been monitoring Rightmove numbers in my old postcode for the last 6 weeks. Supply was steady for the first 4 weeks, but has increased by a net of 10% in the last two weeks alone. The number of new instructions is increasing, while the number of houses coming off is slipping. Hardly conclusive stuff, but there you go.
  5. 84% expect BTL to "continue to grow" in the next 12 months and 82% plan to increase their portfolio. This one's a bit of a no-brainer, I'm afraid. And BBB, can you stop TYPING ALL IN CAPS, pllease!
  6. My hunch is that if there is a full-blown property market crash, rents will also take a dive for a year or two, reflecting the general malaise in the economy. If landlords think they will be quids in while the rest of us are being crucified with negative interest and rising unemployment.. that's just wishful thinking. As happened in the last crash, people started renting rooms to friends, or moving back in with parents, and the average household size increased - the aggregate demand for housing fell. A lot of landlords will be faced with empty properties (if they are finding it hard to let their properties now, just wait for the crash to hit full swing). Yields will improve a little, simply because average properties will lose staggering amounts across the board, but in terms of actual nominal rent, I expect this to stay flat or dip even further. When it looks like the worst is over, I can then see rents beginning to recover a year or two ahead of a general upswing in the housing market. People need to feel richer before they begin buying houses again, and my hunch is that the evidence for this will be in the rental sector before the owner-occupied sector.
  7. Don't worry. Nice houses in good areas will always attract interest. It's the dross that's going to be difficult/impossible to shift. The health of a market is not determined by the prices commanded by the top end stuff, it's looking at how much the dodgey houses sell for that give you a clue what sort of a state the market is really in - flats above shops, houses on busy road, ex-council, etc. In my hunt for rented accomodation, I have now seen about 15 places, and would say that about 3 or 4 of them I could actually bear to live in. The others varied in quality between boring, to unloved, to total dumps. It's these places that are going to halve in price.
  8. 5th week. Supply is definitely on the increase: number of houses for sale is up to 480, 10% up on this time last month. Average asking price is steady at £249k.
  9. Best of luck, Gavin. I have to say I'm so envious! Don't forget the postcards from time to time. You can address them to "Rat Racers, c/o HPC".
  10. Just to update everyone from last week's poll. Looks like at least a few of us had our ears to the ground!
  11. I know this property. Used to pass it on the bus a lot. 1st try: Offers in region of £128,950 Hmm. Must be finding it hard to shift. Try another agent. Knock a bit off the price, too. 2nd try: £128,500 Still no interest. try another agent. 3rd time lucky.. maybe. £127,995 Right, this is getting silly. 4th attempt. £127,000 Someone, PLEASE take this off my hands. 5 not out - still £127,000 Is this number six? £126,500. Still awaiting photo!
  12. TTRTR, Read it in the business pages of the Evening Standard yesterday - (in their report about Nationwide's 0.1% august figure). Hardly quality journalism, admittedly, but hey, I didn't just pluck it out of thin air
  13. Am I the only one who sees the irony in this? After accusing HPC of illegal insider trading and scaremongering, her bruv then gets busted for some proper illegal activities. Get your house in order, Allsop! Van (from the top of his ivory tower!).
  14. An envious position to be in! I would wait until Nov/Dec when your and landlord plans to sell - he'll have to give you two month's notice, and maybe you could negotiate with him to pay reduced rent while the house is on the market. By then you should have a much clearer picture of what the market is likely to do. A recovery in the spring? Nah........
  15. The obsession with micro movements in rates is pointless and amusing. 4 weeks ago, City "analysts" (or should that be "speculators") thought for certain that there would be another hike this year following on from the August increase, if not in September, then certainly in October/November. Now I read that many are predicting that the next movement could well be DOWN, following the latest data re mortgage lending, house prices, consumer spending and industrial output. It just enforces my belief that half the time these so-called experts don't know their a**** from their elbows, and lose sight of any horizon beyond a few months away. In any case, it won't save the property market. Sentiment takes a long time to build, and is destroyed in an instant - once something is broken, you can't just "unbreak" it!
  16. May have seen this already: http://news.bbc.co.uk/1/hi/business/3618650.stm Just confirms what we already know. Wonder if there is going to be a fly-on-the-wall about it similar to the EA scandals we saw recently. - "Many advisers concentrated more on selling protection insurance than on giving advice, the magazine said." It's particularly interesting that the mortgage advisors promote this so heavily. I suspect that they get as much comission from selling insurance as on the mortgage itself - similar to car salesmen who actually get more comission from selling overpriced finance deals than selling the cars themselves.
  17. Good stuff, Sledgey. My investing career is off to a steady start. Up 7% overall after 3 weeks and 5 different stocks! I think the smart money is now leaving real estate and slowing finding its way back into equities. Will be interesting to see how a real estate slump hits the FTSE - my own opinion is that there is some sort of long run balance, but not a strong short term correlation.
  18. good call statscats. Terms like "Neutral rate" are Greenspan-ish in that you have to read very carefully between the lines in order to decipher what they are really getting at. Neutral in this case means, I guess, a rate which makes the relative attractiveness of borrowing about the same as that for saving; neither stimulating or slowing the economy. Bright whizzes in the City then punch a load of figures into a large and complex spreadsheet and come up with an arbitary number to this, eg 5.5% given the current macroeconomic conditions. They're more than likely wrong. It has been commented that using IRs to control the economy is like using an elastic band to pull a brick out of a wall. The tension but with no discernable effect, until suddenly it reaches a critical point and the brick flies out and hits you in the face. I think that you cannot model this sort of reaction; consumers are irrational debt junkies. Higher rates will be the shrugged off until a critical overload level is reached, by which time we are well past the point of no return, and the whole thing will come crashing down.
  19. You know what they say: ignorance is bliss! I think that if someone were to do a study, they would find a high correlation for the general population between economic knowledge/understanding, interest in property the market (beyond "my house is now worth x amount"), and bearishness - that is to say the average Joe doesn't who doesn't consider himself knowledgeable about the workings of the property market, are likely to be most bullish. The more economically savvy someone is, the more bearish they will tend to be.
  20. I think it all depends on how you interpret "15% growth in 2004%". To me, I interpret this to mean house prices being 15% higher at the end of the year than at the start of the year. This provides Bannister with some creative leeway - if prices have already risen 15% in the year to date (compounded monthly) then he's effectively saying prices will be static for the rest of the year. If prices have already risen by more than 15% in the year, it allows him to put a spin on it by covering falling prices in the last quarter with a yearly figure. Notice how they are starting to quote a weighted 3-month average to "show" that prices are still growing by 1%!
  21. Don't you mean rising yields will reflect FALLING capital? Property yields will rise either if rents rise, or house prices fall. Given the downward pressure on rents at the moment, rising yeilds will be largely a reflection of falling capital value. So if rents aren't rising, cashflow is the same, while capital value is falling - ie wealth is decreasing.
  22. Around my way, an end of terrace, extra bedroom and a garage would add about 25% on the price. I'll add 5% for "all in one" premium and another 5% for rarity, so go for... 101k. Having said all that, differences between houses can vary a lot from one place to another. In one location a 4 bed detached can be valued at 50% more than a 3 bed EOT, while in another location the difference might only be 30% for an identical comparison. It depends a lot on the local economy and the housing stock of a particular area.
  23. BT, good to see you are still around with us. Hmm. I was thinking about doing a poll asking the same question. Given my uber-bearish stance, I think that from peak to trough, the market will lost 50% in real terms. Rates will go higher than we forecast: 5.25%-5.5% next year, but what about 2006-2009? Hand on heart, do people really believe that rates will not breach 7 or 8% in the next 4-5 years? Historically, it would be remarkable for rates to stay that low for so long.
  24. statscat, you're so right. The worsening ratio of buyer:sellers is what will ultimately drive the market down. Hometrack's last monthly survey showed that there had been a 6.3% swing from buyers to sellers (something like 5% decrease in buyers and 8% increase in properties on the market). When there is oversupply, vendors have to compete against each other to chase buyers, successively undercutting each other. This is all self enforcing; decreasing prices, leading to fewer buyers, leading to more oversupply... an exactly reversal of what has fueled the bubble (ie buyers competing with each other and bidding prices up).
  25. I agree, BP. Nationwide/Halifax lend to mugs who think the best mortgage deals are on the high st. Nationwide's ludicrous x4 joint income policy is also surely propping their figures up. I still think it quite likely that the drop in prices will catch up with these lenders' indices in the next month or so and we might see a "surprise" drop this month or next.
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