Interview With The Estate Agent

[Timm]

Yesterday I popped into the E A that I worked for until 2005. Much of the following information is based on actual evidence that I saw yesterday rather than hearsay. For this reason I cannot identify the agent other than to say it operates in the Oxford mid market.

1. Buyers are coming back to the market. These are often cash / investment buyers, with FTBs still in fairly short supply. The reason cited is that cash in the bank is earning little interest and is considered by some as no safer than cash invested in property.

2. The level of sales has picked up dramatically since last year and seems to be around three or four a week. This is an order of magnitude higher than what the RICS has been reporting recently.

3. Supply of new instructions (except flats) is low, and inventories are shrinking. I don't have figures on this, but the above level of sales is not sustainable if the trend continues. That (amazingly) would put an upwards pressure on prices. However:

4. Current sale prices are way down. In the range 20 –25% off peak. While prices seem to be stabilising at this level, these falls are not yet showing up in the indexes, particularly in Oxford so further reported falls can be expected. Some of the fall in prices is visible as asking price reductions, but offers of 15% below already reduced asking prices are being treated seriously, both by EAs and vendors.

Looking beneath the surface, the underlying issue is low interest rates, both because they are driving money out of savings, and because variable rate mortgages are so low there are few people being forced to sell. New mortgages are also relatively affordable now compared to renting. It therefore seems to me that whilst the pressure on prices is still down, low interest rates are lending real support to the market in this area. Of course, if rates go up again for any reason, the market will take another (and very sharp) step downwards.

Please note, all of the above is what I saw yesterday in one office and will, even if replicated across the country, not show up in the figures for a while. If it is replicated, I would expect to see the price indexes continue to show substantial falls over the next quarter, while transaction levels pick up, possibly dramatically. Also, mortgage advance figures may be less important for a while, as a fair amount of the activity seems to be coming from cash buyers.

[GrillsBears]

Yesterday I popped into the E A that I worked for until 2005. Much of the following information is based on actual evidence that I saw yesterday rather than hearsay. For this reason I cannot identify the agent other than to say it operates in the Oxford mid market.

1. Buyers are coming back to the market. These are often cash / investment buyers, with FTBs still in fairly short supply. The reason cited is that cash in the bank is earning little interest and is considered by some as no safer than cash invested in property.

2. The level of sales has picked up dramatically since last year and seems to be around three or four a week. This is an order of magnitude higher than what the RICS has been reporting recently.

3. Supply of new instructions (except flats) is low, and inventories are shrinking. I don't have figures on this, but the above level of sales is not sustainable if the trend continues. That (amazingly) would put an upwards pressure on prices. However:

4. Current sale prices are way down. In the range 20 –25% off peak. While prices seem to be stabilising at this level, these falls are not yet showing up in the indexes, particularly in Oxford so further reported falls can be expected. Some of the fall in prices is visible as asking price reductions, but offers of 15% below already reduced asking prices are being treated seriously, both by EAs and vendors.

Looking beneath the surface, the underlying issue is low interest rates, both because they are driving money out of savings, and because variable rate mortgages are so low there are few people being forced to sell. New mortgages are also relatively affordable now compared to renting. It therefore seems to me that whilst the pressure on prices is still down, low interest rates are lending real support to the market in this area. Of course, if rates go up again for any reason, the market will take another (and very sharp) step downwards.

Please note, all of the above is what I saw yesterday in one office and will, even if replicated across the country, not show up in the figures for a while. If it is replicated, I would expect to see the price indexes continue to show substantial falls over the next quarter, while transaction levels pick up, possibly dramatically. Also, mortgage advance figures may be less important for a while, as a fair amount of the activity seems to be coming from cash buyers.

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

[HAIR BEAR CRUNCH]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

OH MAN ARE THEY GONNA GET THEIR ARSES SLAPPED.

[@contradevian]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

Good post. I agree. We could be entering the "bull trap" phrase. Then again these are the people that can't do anything else but tart up property, probably small time builders and works a bit quiet at the moment.

[shindigger]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

Heres hopin.

This is all before yesterdays repo/arrears figures hit i take it.

If they're that easily spooked that they chuck cash in to btl now, then i would imagine yesterdays figures will spook them right back out again.

See how many complete, of those that do proceed, they'll be gazundering like hell.

[Hip to be bear]

EXCELLENT NEWS THIS IS GREAT.....................

But I would say that as I am trying to sell my house at the moment!!!!!!! All I want is one good offer...please......After that roll on affordable houses for all at sustainable prices please, but hold the cataclysmic global economic armageddon. Not today thanks........

[futurepaul]

I am I right in thinking the kink in the downward curve is coming;the false bottom; sucker punch? before we plunge another 20-30%?

Just seen prices drop even more on a really nice house, must resist!!!!!!!!!!!! (pretty girl with STD!!!!)

[swissy_fit]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

Will they?

This is more like the 70s. Cash not that great anymore. Prices of everything that's imported(ie most things) will be rocketing again soon due to the weak pound, I daresay they'll fiddle the figures but everyone will know the truth.

The second leg down in housing will be redundancy-driven not credit-driven and therefore slower to kick off.

We've had the fastest bit already(though the figures will continue to drop as the indices catch up).

Cash buyers will continue to buy as 1 million more unemployed this year will release more forced sales. There won't be many good properties in these forced sales.

Up to June the falls that have already happened will appear in the indices, then the index falls will slow IMO. In nominal terms, of course. End 2009 still looking like a good time to me.

I think it'll be tricky to get a quality property at a really cheap price for a while longer.

Show me a QUALITY property in the south in a good area near good schools at 50% off. I haven't even seen one with more than 15% off peak. Lots of cheaper rubbish about.

Edited January 23, 2009 by gleeful_expat

[Bjørn]

In 12 to 18 months from now those sad sods who got suckered into buying now are going to feel like they've been bitch-slapped by Shiva.

[HAIR BEAR CRUNCH]

just got the nod on my rental gang last rented for 3250 pcm to a high ranking us official2005/2008 . just signed it for 1900 pcm. laverly job gordon cheers son.

[Gone baby gone]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

Yep, it's the suckers rally, property style.

Although there is going to be some degree of interest from people holding large amounts of Sterling and looking for something to put their money into. Have spoken to an elderly relative with a fairly large lump of cash and they have been looking at getting into BTL, despite my protestations.

[Rosepetal]

Excellent post. Thank you for the info.

It resonates with what I am seeing - quite a few properties under offer since the New Year but only at the higher end of the market. I too have thought about buying because leaving my money in the bank does worry me quite a bit. But I can't bring myself to buy, I know where the market's heading and there can only be so many people willing to jump in at this early stage.

[sbn]

Yup - know a few doing presicely this..... there's not many of them though -and when they have all gone into brick who will be buying then?

Plus when the rentals drop further and they are all out of cash - they'll be back in the EAs windows again.

I'm trying my best to talk them out of it.

[Guest X-QUORK]

Oxford's a microcosm of London and in many ways quite apart from the markets in most parts of the country. Is it possible that there's economic flight from Chelsea/Kensington to Oxford, and this in turn has a trickle down effect to the mid-market?

[0q0]

I confirm that roughly half or more of the cheap end repo flats are shifting, according to my checks, this is Gtr London and better off South East.

Whether they complete is another story.

Of course, any plateau in prices now may be short-lived with the grim news around.

Gordon's attempt to devalue the £ and reinflate HPI would probably succeed to some extent if banks allowed lower deposits, but of course just saving up trouble for later if buyers take on these additional debts now. The party's over, some are slower to realise than others.

Gordon said on the radio that previous recessions came about from inflation, this one's different he said, because it's a global banking problem. Doh! It came about because of house price inflation caused by lax lending and it fed upon itself until it brought the stupid lenders and the rest of us down with it.

Edited January 23, 2009 by The Last Bear

[mew too]

Yesterday I popped into the E A that I worked for until 2005. Much of the following information is based on actual evidence that I saw yesterday rather than hearsay. For this reason I cannot identify the agent other than to say it operates in the Oxford mid market.

1. Buyers are coming back to the market. These are often cash / investment buyers, with FTBs still in fairly short supply. The reason cited is that cash in the bank is earning little interest and is considered by some as no safer than cash invested in property.

2. The level of sales has picked up dramatically since last year and seems to be around three or four a week. This is an order of magnitude higher than what the RICS has been reporting recently.

3. Supply of new instructions (except flats) is low, and inventories are shrinking. I don't have figures on this, but the above level of sales is not sustainable if the trend continues. That (amazingly) would put an upwards pressure on prices. However:

4. Current sale prices are way down. In the range 20 –25% off peak. While prices seem to be stabilising at this level, these falls are not yet showing up in the indexes, particularly in Oxford so further reported falls can be expected. Some of the fall in prices is visible as asking price reductions, but offers of 15% below already reduced asking prices are being treated seriously, both by EAs and vendors.

Looking beneath the surface, the underlying issue is low interest rates, both because they are driving money out of savings, and because variable rate mortgages are so low there are few people being forced to sell. New mortgages are also relatively affordable now compared to renting. It therefore seems to me that whilst the pressure on prices is still down, low interest rates are lending real support to the market in this area. Of course, if rates go up again for any reason, the market will take another (and very sharp) step downwards.

Please note, all of the above is what I saw yesterday in one office and will, even if replicated across the country, not show up in the figures for a while. If it is replicated, I would expect to see the price indexes continue to show substantial falls over the next quarter, while transaction levels pick up, possibly dramatically. Also, mortgage advance figures may be less important for a while, as a fair amount of the activity seems to be coming from cash buyers.

What you didn't mention was at what levels the sales were going through, I had a similar conversation with a local EA too, who said sales were still suppressed but october - december they sold more than for the whole of 2008 at 2004/2005 levels.

This is good news IMO for the bears as it shows a psychological shift that sellers who want to sell are actually admiting lower prices, it may put a base in mortgage approval numbers but house prices should continue to decline back to affordable levels

[deflation]

just got the nod on my rental gang last rented for 3250 pcm to a high ranking us official2005/2008 . just signed it for 1900 pcm. laverly job gordon cheers son.

Good reduction! It shows you there's still a North, well Midlands / South divide.

Hope its nice, you can rent a detatched house near here for 3 months for that.

[Godley]

Do agree with this to an extent.

In last two days my 'stupid' offers now being taken very seriously taken another phone call from EA this morning house I was interested in taken off the market now back on the market and would like to talk to me about it. Vendor now prepared to take 20% off from peak still not budging from my 30% take it or leave it.

Put another offer in on a property today 20% reduction (they have already come off from peak). Told EA to tell vendor accept today or the offer will be reduced by Nationwides published indices every month from here on in. EA has taken this very seriously effectivley they will have to cut their losses and I will take the risk on the downside (but I aint).

However remember cash buyers and people with big deposits are a rare breed and the offer prices these two catogories are putting in are 30% + from peak.

But there is diffinate momentum the capitulation is beginning in earnest...........

[It is different this time]

The reason cited is that cash in the bank is earning little interest and is considered by some as no safer than cash invested in property.

You are right the cash in the bank is earning very little interest but not depreciating like houses, so I can't see the point why someone with cash would invest in property knowing that it'll be worth probably 20% less at this time next year.

New mortgages are also relatively affordable

Only affordable if buyers have 25% to 40% deposit..

[tomfoolery]

must resist!!!!!!!!!!!! (pretty girl with STD!!!!)

All too common these days.

[spivT]

Certinaly, i've noticed transactions completed in Q4 of last year consistently 10-12% off initial EA asking prices, and EAs were pricing based on 2007 pie-in-the-sky valuations. And the figures for December and January aren't even through, so i can see house prices further depressed and that the increasing interest is indeed predominantly bargain hunters with a lot of cash.

So i can believe totally that 15% below offeres ARE being taken seriously, particularly as those offers are coming from cash buyers or people with 60% down atleast. EA's might even start pricing in these trends in the asking price, but i'm not holding my breath. I expect to see peak 2007 asking prices for the rest of the year, a lot of properties coming on the market in the summer and buyers to be negotiating between 12 and 15% off the asking price depending on the property consistently.

interesting times, very interesting.

[Luke Skywalker]

I believe exactly what you say.

These people jumping in with cash are the same as the people that jumped into stocks in 1929-30. They have not aseessed the risks correctly. When rents start falling and their assets depreciate they's wish cash was still in the bank.

I agree.

Definitely a sucker's rally.

History does repeat itself (sometimes)

[Timm]

(...)

I am trying to sell my house at the moment!!!!!!! All I want is one good offer...please......After that roll on affordable houses for all at sustainable prices please, but hold the cataclysmic global economic armageddon. Not today thanks........

The message I get is that selling just now is easy, but not if you hold out for a good offer.

I confirm that roughly half or more of the cheap end repo flats are shifting, according to my checks, this is Gtr London and better off South East.

Whether they complete is another story.

(...)

Now that is a damn good point.

You are right the cash in the bank is earning very little interest but not depreciating like houses, so I can't see the point why someone with cash would invest in property knowing that it'll be worth probably 20% less at this time next year.

(...)

Perhaps they see the loss of perhaps 20% as an acceptable cost of insurance (against losing the whole lot overnight)?

[Visa Steve]

Gordon as a history student did not study the seeds of the 1929 crash

Debt and Banks going under after bubble burst.

Its not different this time, just a alternative instrument as root cause of the problem.

Banks lending to anyone to buy Stock. 1928

Banks lending to anyone to buy Property. 2003

Same result when assets go down.

Depression. Fingers crossed we get away with it this time.

[Hip to be bear]

The message I get is that selling just now is easy, but not if you hold out for a good offer.

Agreed. When I say a good offer I mean 20/25% off peak . Please don't accuse me of being a bull. I might get upset!

Edit to add:

I would be happy to take that hit. What I don't want is to be trying to find a buyer in 6 months at 50% off peak. I am a realistic seller

Edited January 23, 2009 by Hip to be bear