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The Bottom In Uk House Prices Is No Bottom At All

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http://www.telegraph.co.uk/finance/economi...tom-at-all.html

The bottom in UK house prices is no bottom at all

It is still too soon to call the bottom for UK house prices.

By George Hay, Breakingviews.com

Published: 5:58AM BST 03 Jun 2009

After a 75pc drop in mortgage approvals, record low transaction volumes and a 22pc fall in average values from their 2007 peak, some indicators suggest a floor has been reached. But the signs aren't yet conclusive. Further lurches downward cannot be ruled out.

The evidence of stabilisation looks convincing. April saw an increase in buyer enquiries for the sixth month running, according to the Royal Institution of Chartered Surveyors. Mortgage approvals climbed to 43,200 in May, the fifth monthly rise in a row, according to the Bank of England. In November they stood at 27,500.

The main housing index, the Nationwide, rose 1.2pc during May. The rival Halifax index, due this week, is likely to show a much milder decline than April's 1.7pc fall.

But it would be a gamble to assume prices are now locked into an upward trajectory. In the last twenty years, house prices have regained positive momentum only when mortgage approvals have exceeded 75,000, according to Capital Economics.

Skittish changes of demand in very thin markets probably explain the erratic behaviour of the two main price indices. On a month-on-month basis, Nationwide's rose in March, fell in April, then climbed again in May. Halifax's rose in January, but has been falling ever since. Such yo-yoing is a feature of housing downturns. The same thing happened between February and August 1993. But prices did not stabilise until late-1995.

If both indices move upwards together for three consecutive months, then a sustained recovery would almost certainly be underway.

But two things need to happen. First, the macroeconomic environment must stabilise. That seems a long way off: unemployment is predicted to rise from its present 7pc to over 10pc. Second, first-time buyers need improved mortgage terms. Securing a loan over 75pc of the value of a property has become much harder, according to the Bank of England's Credit Conditions survey. That suggests a £37,000 downpayment on the average property.

House prices need to fall another 17pc to get back to their long-run average of 3.7 times average income. Sanford Bernstein predicts a similar fall, based on the relationship between forecast GDP and last year's house-price changes. At most, the current "floor" is likely to be a very bumpy plateau.

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Yeah, but what he has left out is the prospect of permanently low IRs, Irs that CANT rise as Government borrowing is set to be so high....if they raised them, the whole country would be in trouble.....that aint gonna happen.

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Yeah, but what he has left out is the prospect of permanently low IRs, Irs that CANT rise as Government borrowing is set to be so high....if they raised them, the whole country would be in trouble.....that aint gonna happen.

+1

Interest rates to stay low to protect hard working families. We can look forward to a golden era of high house prices, low low interest rates and never ending prosperity. It's fantastic news for everyone.

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Yeah, but what he has left out is the prospect of permanently low IRs, Irs that CANT rise as Government borrowing is set to be so high....if they raised them, the whole country would be in trouble.....that aint gonna happen.
+1

Interest rates to stay low to protect hard working families. We can look forward to a golden era of high house prices, low low interest rates and never ending prosperity. It's fantastic news for everyone.

:P

http://www.guardian.co.uk/money/2009/jun/0...-interest-rates

Get ready for interest rates to rocket

It's one of the oddities about this recession. Why haven't more companies gone bust? Our banks are virtually all bankrupt. But corporate Britain seems in much better shape. Yes, Woolworth's is no longer. Vauxhall Motors teeters on the edge as its parent group, General Motors, goes into administration. But compare the FTSE250 this year with last year and the names (minus the foolhardy mortgage lenders) are nearly all the same.

It's been puzzling Tom Dobell, manager of the venerable £3.1bn M&G Recovery fund, which celebrated its 40th anniversary this week.

These are the best of times for a fund manager able to buy companies whose share prices have been in freefall, but which will survive and eventually prosper. Dobell reckons he has ­opportunities galore. But he appears not to share the green-shoots mania that has gripped the media.

Some stockmarket pundits are excitedly talking about a V-shaped recovery, and a bounceback in growth that could be even faster than Alistair Darling predicted.

Maybe so. But I'd rather listen to a fund manager whose fund has been through several major recessions since its launch in 1969 and has still given investors a decent return.

There's almost a hint of bitterness when Dobell talks about how Britain's policymakers have squandered our industrial and commercial heritage.

He believes we will have to accept a protracted decline in our living standards, as we rebalance the economy after the excesses of the last decade. We have all been over-consuming, he says.

It's a view shared by Neil Woodford, manager of Britain's two biggest unit trusts at Invesco Perpetual. He sees few tangible signs of corporate health or improving personal balance sheets.

Our debts have not disappeared because of a few quarters of negative growth. So how are we going to get rid of them?

It's increasingly apparent that inflation will be the tool, and "quantitative easing" its master.

Two years ago I wrote that a tracker mortgage seemed like a no-brainer given the downward direction in rates as inflation subsided. Now you probably want quite the opposite.

Whether the shape of the recovery is V, W or VL, it's now evident that interest rates are on an upward trajectory. Some pretty extraordinary moves in US Treasury yields in recent weeks are signalling an almost inevitable rise in interest rates across the globe.

My own mortgage doesn't come out of its lock-in for another year. But if I could act now, I would be pegging it for five years at the sub-5% fixes on ­offer from the likes of HSBC. I'd be very ­surprised if they are still around in a few years' time.

Another oddity of this recession is that Japanese and German GDP (gross domestic product) has suffered more than Anglo-Saxon GDP. The people who make things, rather than those of us who borrowed to consume, have fared worse.

It's unlikely this will last. Paul ­Chesson from Invesco Perpetual, who runs the best Japanese fund available to small investors, reckons that Japan's world-class manufacturing companies have never been so unloved – and their shares are now trading at fantastically cheap levels.

Only a fool would throw all their cash into a single country fund with currency risk on top. But Chesson makes a compelling case for seriously considering Japan for the first time in decades.

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+1

Interest rates to stay low to protect hard working families. We can look forward to a golden era of high house prices, low low interest rates and never ending prosperity. It's fantastic news for everyone.

True. The future is looking great!

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course, the threat of Interest rate rises is the old VI trick....its to get savers into these guys banks with long bonds, say 2 to five years.

Elsewhere, the government is encouraging the banks to lend at very low rates....one follows the other in logical progression.

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+1

Interest rates to stay low to protect hard working families. We can look forward to a golden era of high house prices, low low interest rates and never ending prosperity. It's fantastic news for everyone.

I wondered when you would see the light Jack daw! Gordon is our saviour, he has protected the value of our properties. Just you rent losers wait until all those people who are made unemployed this year are given mortgages to keep house prices up! Don't say I didn't warn you all!

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I wondered when you would see the light Jack daw! Gordon is our saviour, he has protected the value of our properties. Just you rent losers wait until all those people who are made unemployed this year are given mortgages to keep house prices up! Don't say I didn't warn you all!

look, unemployment wont rise further, we have numerous courses and sick plans they are going on...and there is the new mortgage advisorship course, with 40,000 places so people can train to be mortgage advisors.

the course will include how to use the price rise/profit indicator tool, setting up your Maidstone And Aberdeen international branches, and how to impress your lenders with the quality of the payslips and P60s you made for your clients.

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course, the threat of Interest rate rises is the old VI trick....its to get savers into these guys banks with long bonds, say 2 to five years.

Elsewhere, the government is encouraging the banks to lend at very low rates....one follows the other in logical progression.

The opposite surely - to tie people into long-term bonds they try and convince people that IRs will stay low for the longer-term.

IMPO the reason why there are so few 3 and 6 month bonds around now is that the banks want to tie people into long-term bonds because they know IRs are going to rise.

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The opposite surely - to tie people into long-term bonds they try and convince people that IRs will stay low for the longer-term.

IMPO the reason why there are so few 3 and 6 month bonds around now is that the banks want to tie people into long-term bonds because they know IRs are going to rise.

no no no....banks are responsible and wouldnt even think along those lines.

My current bank manager, FFion, is very well respected in her branch, and doesnt do lap dancing in the evening.

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look, unemployment wont rise further, we have numerous courses and sick plans they are going on...and there is the new mortgage advisorship course, with 40,000 places so people can train to be mortgage advisors.

the course will include how to use the price rise/profit indicator tool, setting up your Maidstone And Aberdeen international branches, and how to impress your lenders with the quality of the payslips and P60s you made for your clients.

You missed out 2 million loft insulators.

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You missed out 2 million loft insulators.

is that high voltage work?

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