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sophtaylor

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Everything posted by sophtaylor

  1. ok she's a bull but it is true that the us economy has withstood those things - it's just likely that some of the things on that list won't be shaken off so easily as two wars, a terrorist attacks and a bunch of corporate accounting scandals - namely too much debt and too little saving, and the budget and current account deficits.... plus there is still a bubble in housing, high yield and emerging bond markets... there will be some ass-biting, to be sure.
  2. U.K. Buy-to-Rent Market May Hit Rough Patch Increase in Interest Rates And Drop in House Prices Could Hurt New Investors February 25, 2005 Financial markets are getting nervous about an end to so-called carry trades. So, too, should investors in the U.K.'s buy-to-rent property market. They have engaged in the mother of all carry trades. Imagine you paid £200,000, or about €290,000 ($382,328), for a London house in early 2003, borrowing 80% of the property's value. Suppose the house now is valued at £250,000. The £40,000 of equity you injected now would be worth £90,000 -- a 50% annualized capital gain. Furthermore, you might have paid a 4.75% interest rate on your mortgage. But you could have achieved a rental yield of perhaps 5.5% of the property value, after deducting costs. The difference would be valued at £6,000 a year. This is an additional 15%, increasing your total return to 65%. So much for the good old days. For entrants to the market, the math no longer looks so enticing. Capital appreciation appears to have ended. But the earlier rise in prices has depressed net yields to more like 4.5%. And rising interest rates have pushed up mortgage rates to about 5.75%. On this basis, somebody buying a £250,000 London house to rent on an 80% mortgage today actually would lose £250 of cash a year. OK, this may be small change. But what if interest rates rose by another half a percentage point? The hapless buy-to-rent investor then would be losing £1,250 a year. This assumes house prices don't actually fall. But suppose they drop by 10%, taking a house that was valued at £250,000 down to £225,000. For an investor who bought at the higher price on an 80% mortgage, that would cut his £50,000 of equity in half. Of course, for an investor who got in at £200,000 two years ago, things wouldn't look so bad. His £40,000 of equity still would be worth £65,000. Moreover, he wouldn't be suffering a cash-flow loss yet because his mortgage would be lower than a more recent entrant to the game. This analysis is a tad simplistic. It assumes rental yields don't respond to price falls. In reality, they would rise. Furthermore, it uses London prices and yields. U.K.-wide figures are kinder to buy-to-rent investors. But the wider message is clear. Buy-to-rent has become a misnomer. Investors really have been buying for capital appreciation. But if interest rates rise and house prices fall now, the Johnny-come-lately buy-to-rent investor will be taken to the cleaners.
  3. I've seen the release (not the raw figures). There is nothing crazy in there. Wales leading, London lagging. Info becomes public 0001 GMT Monday. I will say no more. but really - nothing to get excited about.
  4. Bank of America's take on the numbers: House Prices Turning South, Quickly The Halifax index of house prices declined 1.1% mom in October, with the 3m/3m falling 0.4%, the first negative reading since the end of 2000. This comes after a sharp rise in September (1.3% mom), and therefore should partly be taken as a correction. Enhanced volatility in data is typical of turning points, however. In August, we saw the first negative mom reading (-0.5% mom), and with the October reading the more stable 3-month rate is now softening significantly. The yoy rate is still up 18.5% (it was above 20% in the previous 5 months), but is likely to moderate quickly over the coming months. The Halifax report seems to match with other signs of weakening in the housing market. Last week, we got the first monthly decline in the Nationwide index. The ODPM indices for September and October are not yet available, but once they are out they should show some easing as well, despite the difference in the recording method. The combination of a very high level of prices and rising interest rates has constrained affordability. New mortgage lending fell recently. Mortgage approvals, which is a leading indicator for the housing market, have declined in September to levels not seen since August 2000. It is a further sign that the 5 interest rate hikes delivered by the BoE since November 2003 are starting to bite. We think the housing market is at a turning point, which will likely soften consumption growth over the coming months and drag the overall economic performance down. We confirm our view that GDP growth is likely to decline from an expected 3.2% in 2004 to 2.1% next year. The MPC will find some comfort in today's figures as it has been trying to engineer some moderation in house prices for quite a while. Still, it may also start getting worried as the correction could become more pronounced than what would be desirable. With this in mind, the MPC is probably done for the current interest rate cycle. This will likely become more evident in next week's Inflation Report and the minutes of today's MPC meeting to be released on the 17th. The next BoE rate move will likely be a cut (2H 2005).
  5. I love this: Looking forward, Halifax said there is evidence that homes may become more affordable for first-time buyers, as there are signs that the ratio of house prices to earnings may have peaked at 5.63 in July, with a slight decrease to 5.57 in August. "Further downward movement in this ratio would start to ease the difficulties faced by first-time buyers," Ellis said. ------------------- also, the numbers were released at 0800 GMT to all the wires, etc. They certainly are not leaked each month to Dow Jones - Halifax is just slow to update their own site I reckon.
  6. sorry i posted the wrong info yesterday. Halifax numbers will be out Thursday. Definitely.
  7. I'm hearing Halifax numbers won't be out until Monday.
  8. BBA data are due out in a few minutes... gross mortgage lending +GBP16.3B in Sep vs. +GBP16.6B in Aug. Lower than +GBP16.9B in Sep 2003, the first year-on-year fall since November 2000. Average approval price GBP111,100 Vs Aug GBP112,100.
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