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headmelter

The State Of Play...

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Okay, We're in crash mode and the consensus seems to indicate summer 2007 was the peak so the correction has nearly two years on the clock.

How long 'till the bottom ?

what do you reckon the 'final' percentage of drops will tally at on the Nationwide/Halifax figures ?

When do you reckon you'll buy ? (No airy fairy 'when it's good value' answers try and give a timeframe.)

When do you reckon sustainable steady growth will re-appear in the property market ?

All for fun it would be interesting to see how or when sentiment changes here at the teddy bears picnic.

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Okay, We're in crash mode and the consensus seems to indicate summer 2007 was the peak so the correction has nearly two years on the clock.

How long 'till the bottom ? 18 months

what do you reckon the 'final' percentage of drops will tally at on the Nationwide/Halifax figures ? 70% for NI

When do you reckon you'll buy ? (No airy fairy 'when it's good value' answers try and give a timeframe.)

When my landlord accepts RV -10%

When do you reckon sustainable steady growth will re-appear in the property market ?

When inflation is 6% +

All for fun it would be interesting to see how or when sentiment changes here at the teddy bears picnic.

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VI City vs HPC Wanders. The score so far VI's 0, HPC 1.

We have only just finished the first 45 minute play. With HPC giving the VI's a real hammering in first half and totally dominating the game so far. Though, VI City has shown some signs of a late rally in what was looking like a very one sided match. HPC are doing brilliantly well for such a small club of amateur players. They have often made the professional club of VI's look like complete fools. Things are certainly heating up. The fans are on the edge of their seat with anticipation. We are currently having a 15 minute half-time break. Will VI City be able to turn the game around after the break or will HPC Wanders continue to give VI City a good kicking? :D

Most of you know my predictions and intentions. The total fall from peak will be 60%-70% nominal over 3-7 years. Made a prediction similar to that about 2 years ago when I joined this website and it still looks like a good prediction.

Personally, I'm not even thinking about buying until the end of 2010.

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To imagine house prices can begin to rise in this environment is just insane. Unemployment is rising, wages stagnant (or falling), interest rates headed only one direction - all mean further falls in my opinion. The pace of price declines had to moderate - if it continued at recent rates they'd be giving houses away this time next year (sort of). This spring bounce will will evaporate and we'll be back to a long slow correction in prices. I'm guessing another 10-15 % off asking prices by years end.

But you know what? Even if this did make the bottom and prices re-bounded rapidly from here I wouldn't care. Even after 40% falls prices are no where near what could be regarded as reasonable and I'm a prospective FTB with a very substantial deposit.

Edit:Typo

Edited by HPCwhen?

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i think one had to sell early in 2007 to get the peak prices from experience from friends who sold then or tried to sell shortly after then. thats the reason even back then i highlighted march/april 2010 as i starting point for looking.

im fortunate enough that i should be able to buy a very nice first home for cash even if i only wait as long as we see properties across the boad fall to rateable value. also because i am a cash buyer i am only looking for a nominal bottom and do not really care about the real bottom.

im also considering renting a "£985k" :lol: property for a grand or so a month. i believe by going down this road of renting what I could not afford to buy it might keep me in rented accomodation that bit longer.

the way i see what is shifting in northern ireland is clearly all the 125k/150k/175k properties and because I will be looking at a price level of around £500k (yes i know im very fortunate) i think the drops here could be massive. (seriously how many £500k+ properties are for sale in northern ireland versus demand for them!)

was looking at house prices on the california coast yesterday. million £ buys you a 5000 square foot house right on the beach around Newport Beach/Laguna beach etc. (probably lower if you can delve into foreclosures) compare with what does a million get you in a desirable part of South Belfast. property here is still grossly overvalued (i think southern irish banks are to blame here a lot for the property ramping that happened) even with 40% falls.

when most of the maket is around RV then I will be interested unless I see inflationary problems which arent being matched by high interest rates.

Edited by getdoon_weebobby

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None of my friends/family believed me when I predicted the market would turn. In fact some of them even look at me now like it's my fault that it did, and they lost loads of money.

I've been quietly biding my time, saving what I can, and waiting for the right time. This is NOT it.

This fool's rally will end very soon, I'd say July/August. I don't think prices will fall as fast as they have in the last year, but they will fall slowly, for a long time. I think bottom in late 2010 is optomistic.

My predictions?

Bottom mid/late 2011, 50-60% from peak. And it will be years before we reach 2007 prices again.

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My position: on the cusp of buying a nice 1700 sq.ft house where I would be happy to live for next 10 years (or maybe forever). It's in a very pleasant area, close to everything I need (inc. good schools thinking ahead!), is in very good condition (well decorated, fairly new kitchen/bathrooms, nicely landscaped garden). It also has some potential for extension which could add a few hundred sq. ft more of living space - I doubt I'll need more than that.

I'm looking to buy at a touch over RV, around 45-50% off peak by my estimate. The property is in belfast which (correct me if I'm wrong) has been lagging the NI average for drops.

I think this takes me a little ahead of where the hpc curve is at present - the seller is motivated to some extent. I'm not sure he needs to sell, but he has been trying to sell for the duration of the crash and has chased the market down so far and lost a few hundred grand in the process. Perhaps he has realised that he has to get ahead of it to get out. Perhaps he has started reading hpc.co.uk and is terrified.....who knows.

As for expectations, I think a real terms drop of about 60-65% will materialise. We have seen the steepest part of the fall already, the rest will be much slower and will be accompanied by a growth in the number of transactions (as transaction numbers increase the rate of price falls will slow). As transactions slowly recover the economy will slowly improve creating a virtuous circle of increasing confidence in the economy as more money circulates. I predict this will happen over the next 4-5 years. Inflation will account for some of this, overall I think 55% nominal falls from peak.

So for a nominal bottom I predict an average NI price (nationwide stats based) of around £110k to be reached in around 2 years time (6 years total crash time). That's about a further 20% drop in nominal from the Nationwide £138k number for Q1 2009.

Personally I am not prepared to wait 5 years for that sort of nominal fall. I can sit it out by buying now at 50% off peak. The value will drop I have no doubt (about 5-10% over next few years from my purchase price) then prices will stabilise for a few years, and then we will start to see inflation level rises as the real bottom is reached.

For me that is worth doing because I do not want to live with the lack of security of tenure that an AST provides, living at the whim of the army of accidental landlords who seem to be the major suppliers of decent rented accomodation (houses in nice areas in good condition). The professional landlords generally supply fleapits and don't refurbish because they want to keep cashflow as positive as possible.

My advice to anyone thinking of buying - bargain hard, make it clear that you will not budge on price - take it or leave it.

Eventually you will find the vendor you want, in time everyone will be reasonable I have no doubt.

In summary, it's all over bar the shouting. Prices near nominal bottom can be achieved at present, but they are not the average. Mr Slump sounds like he has negotiated his way to the bottom. I have spoken to a few people buying at the moment who are unaware of the concept of negotiation or how to value a property - this means that the average market value will always lag what is truly achievable in the market (especially in a thin market as we have at present where you can just move on to another vendor if one isn't interested - there are fewer buyers than sellers at present but this won't last forever).

I can also tell you that anything new coming on the market at a 2009 price (not the crud lying at boom prices!) gets a huge number of viewings and will almost certainly sell - based on my experience viewing recently.

I am a contrarian by nature, I question everything. A lot of people take that the wrong way, those who like to go with the flow. At the moment most people are walking in one direction but I think I have been at the front of this herd due to 4 years posting and reading here. Being at the front of the herd I can see the dead end up a head before the others and am now peeling away from the herd and going in my own contrarian direction - buying when competition is low and I can negotiate my way to a satisfactory price. It's certainly a less stressful way to buy a house! (I am not referring to the posters here as the herd, I'm referring to the general populace).

Good luck to you all - I think most of you could get what you want if you get out there and view and make offers that most people are too timid to make - remember, if the vendor isn't offended you offered too much!

Oh, and forgot to add - we're buying on a fairly low mortgage multiple of about 2.5x joint income to be on the safe side. If there are large nominal falls we can save our way out of it and move to a dream house in 5 years time.

Edited by Smell the Fear

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None of my friends/family believed me when I predicted the market would turn. In fact some of them even look at me now like it's my fault that it did, and they lost loads of money.

The first rule of HPC is do not talk about HPC. The second rule of HPC is do not talk about HPC. :D

I think bottom in late 2010 is optomistic.

... it is very optimistic ;) However, I think by then we may be within 10%-20% of the nominal bottom in Northern Ireland house prices. For anyone renting who is in a position to buy, rent may actually then become 'dead money'. For example: £6,000 a year rent for 2 years while waiting for the market to fall that last 10% and save maybe £10,000.

My predictions?

Bottom mid/late 2011, 50-60% from peak. And it will be years before we reach 2007 prices again.

Optimistic.... think decades ;)

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Optimistic.... think decades ;)

In terms of income multiples (real values), I don't think that Northern Ireland will ever see the like again. There were unique circumstances that led to here going particularly mad and the won't be repeated, in my opinion.

Anyone who sold at the peak here was very very lucky - once in a lifetime stuff.

Anyone who got greedy as the bubble deflated in the last couple of years - mainly the 'i'll take it off the market till I get what I want' brigade, will be kicking themselves for decades. Many refused offers that will be the most that will ever be offered for their house.

Anyone who bought at the peak, or near it, I feel truly sorry for. A measure of the insanity of the last few years is that, say, £100K now doesn't seem like a huge amount of money - a decade ago it would have bought probably the majority of houses in this country. But that's what many will have to pay off in addition to the value of their house - £200K extra over 25 years for nothing. Who could afford that, or even an extra £100K on an average salary?

Edited by shipbuilder

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Was looking in an EAs window at the weekend and I have to say that prices around East Belfast/Castlereagh are starting to look reasonable on lower end houses like 2 and 3-bed terraces. They would be around the level that I would consider reasonable.

3-bed semis and detatched are still definitely too high.

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Was looking in an EAs window at the weekend and I have to say that prices around East Belfast/Castlereagh are starting to look reasonable on lower end houses like 2 and 3-bed terraces. They would be around the level that I would consider reasonable.

3-bed semis and detatched are still definitely too high.

I've been noticing that too, as thats the area I'm looking at, (Dundonald). There are a few mid terraces now on property news few a shade under £100K, but at the end of the day, it's still an ex council property in a housing estate. Not what I would call 'reasonable' for that price.

I'm not prepared to pay 5x salary for a 30+ y/o council house, and I doubt many others are.

Edit: typo.

Edited by Darxide

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I'm not prepared to pay 5x salary for a 30+ y/o council house, and I doubt many others are.

Things are looking more affordable sure but even back in 2003 when I bought my place I still thought it was expensive for what it was and sane locals agreed, really tbh at that price it might still be too expensive. Must not fall for the looks more affordable than three years ago therefore its good trap :)

Bottom, prob 2011/12, will start looking next year if situations ok though as only so I long can live in a semi.

60% down by 2012.

As above, mid/late 2010, if things have not improved I'm leaving the country.

Growth at inflation levels shortly after its bottomed out, which makes it flat and the way it should stay.

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Renting until May 2010, might start lookng next Spring but probably will rent for another year and buy mid 2011. The market is being incredibly sticky on the way down, with a lot of sellers not reducing at all or very little.

I suppose until we start making offers for houses, we won't know the real state of play out there. Its a pity really but c'est la vie.

Bottom not until 2012, with 70% off, with prices staying flattish subsequently. Depends on the inflation monster too

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Bottom not until 2012, with 70% off, with prices staying flattish subsequently. Depends on the inflation monster too

indeed.

whilst i don't think this will be an issue for a while yet where HPs are concerned (say next 12-18 months), this is the biggest unknown which could completely change everything.

I personally believe that ag. land prices will be hit by inf. first, so if you're worried about the effects on inf. on HPs, then imho you should keep a close eye on the ag. land prices.

likesay, on the horizon but not here yet.

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the way i see it an inflation shock will help us in our quest for a cheap house as it will lead to an interest rate hike. only a lot later once prices have fallen to take into account this high interest rate/inflationary environment will the inflation eventually carry house prices along with it (by which point we will all of jumped in and bought ;):D

im going to view some rental apartments on thursday (so thatll hopefully keep me in a rental to the start of my planned first property looking expeditions in march/april 2010

Edited by getdoon_weebobby

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What about this -

1. Average fall from peak of 65%.

2. Distressed sales to increase with unemployment in the Autumn marking the start of the second phase of the crash. Until then "green shoot" stories will continue over the summer.

3. Second phase of crash to be marked by the dramatic fall in prices of middle/higher end properties. Speculative "holiday home" properties falling as well.

4. Cramped and badly located apartments will fall in price by 75% - i.e. most of those in Belfast!

5. Gordon loses 2009 election. Surge in FTSE.

6. Interest rates rising (perhaps substantially) in 2010 causing nominal prices to fall well into 2011.

7. Real price bottom of market in 2012/2013. Sales volumes unlikely to return before 2014.

8. Return to 2007 prices in real inflation adjusted terms - 15 years.

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the way i see it an inflation shock will help us in our quest for a cheap house as it will lead to an interest rate hike. only a lot later once prices have fallen to take into account this high interest rate/inflationary environment will the inflation eventually carry house prices along with it (by which point we will all of jumped in and bought ;):D

Thats a great point, the bite of inflation will be met by rising interest rates, however pay rises will probably lag especially in the public sector due to the massive budget shortfall to be inherited by the conservatives.

No doubt about it, we have a 10 year "age of austerity" ahead of us, with higher inflation, clipped salary rises and rising interest rates.

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What about this -

1. Average fall from peak of 65%.

2. Distressed sales to increase with unemployment in the Autumn marking the start of the second phase of the crash. Until then "green shoot" stories will continue over the summer.

3. Second phase of crash to be marked by the dramatic fall in prices of middle/higher end properties. Speculative "holiday home" properties falling as well.

4. Cramped and badly located apartments will fall in price by 75% - i.e. most of those in Belfast!

5. Gordon loses 2009 election. Surge in FTSE.

6. Interest rates rising (perhaps substantially) in 2010 causing nominal prices to fall well into 2011.

7. Real price bottom of market in 2012/2013. Sales volumes unlikely to return before 2014.

8. Return to 2007 prices in real inflation adjusted terms - 15 years.

Hard to argue with most of this. 65% from peak seems an extraordinary high figure. Two years ago I would have said the same to 40%. But 'from peak' is the problem as in the 2 quarters before that houses rose so fast and will half of the volume before. The other problem with that drop, as it bring the average house to £80k is the difficulty in building it for that. I have discussed that at length before and the saving in labour cost (which is more than I thought at the moment) is not sufficient to offset the increase in what I call red tape costs.

Interesting balance (or battle) to be had between what the Market will dictate Ver the cost to produce to be had.

But another interesting point is this whole issue about averages. At the moment I believe new-build is trading below the average which is not its tradititional position. Looking at the £80k average house. The last time we had that as an average was 2001. In that year our average sales price was £114k. That house, assuming the same land cost, would have to be sold at £135 to £140k today just to cover building Regs and red-tape cost increases. Labour may fall back to what it was then but that is self defeating too as you actually need wage inflation to come out of a recession.

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Looking at the £80k average house. The last time we had that as an average was 2001. In that year our average sales price was £114k.

Where are you getting data for 'sale prices' ?

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Hard to argue with most of this. 65% from peak seems an extraordinary high figure. Two years ago I would have said the same to 40%. But 'from peak' is the problem as in the 2 quarters before that houses rose so fast and will half of the volume before. The other problem with that drop, as it bring the average house to £80k is the difficulty in building it for that. I have discussed that at length before and the saving in labour cost (which is more than I thought at the moment) is not sufficient to offset the increase in what I call red tape costs.

Interesting balance (or battle) to be had between what the Market will dictate Ver the cost to produce to be had.

But another interesting point is this whole issue about averages. At the moment I believe new-build is trading below the average which is not its tradititional position. Looking at the £80k average house. The last time we had that as an average was 2001. In that year our average sales price was £114k. That house, assuming the same land cost, would have to be sold at £135 to £140k today just to cover building Regs and red-tape cost increases. Labour may fall back to what it was then but that is self defeating too as you actually need wage inflation to come out of a recession.

I agree a drop of 65% does seem to be an extraordinary amount. But it satisfies the demand of a return of house prices to the historical x3.5 income multiple. It also would be the natural consequence if prices continued downward on their current trend. Just as in a bubble there needs to be a trigger to stop the upward spike, there also needs to be a trigger to stop the fall in the crash - I can't see any evidence of one yet. A fall of the magnitude suggested may seem remarkable but not any more so that if prices were to suddenly level off (or start rising) for no apparent reason in the midst of economic uncertainty.

I appreciate the paradox you have identified that the cost of building a house will rise above the price it can be sold for. But could it be possible? Given that most property sold is "second hand" it is this market which determines the price - not the cost of a new-build. It wouldn't be the first time in economic history where the price of a product was less than the cost of producing it. As a consequence most house building would cease (or government would cut red-tape), creating a housing "shortage" and triggering the next phase of the cycle. A painful but genuine bottom.

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Where are you getting data for 'sale prices' ?

Nationwide

Q1 2001 £72,797

Q2 2001 £76,376

Q3 2001 £76,635

Q4 2001 £73,697

Q1 2002 £76,074

Q2 2002 £82,548

Q3 2002 £83,152

Q4 2002 £85,289

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I agree a drop of 65% does seem to be an extraordinary amount. But it satisfies the demand of a return of house prices to the historical x3.5 income multiple. It also would be the natural consequence if prices continued downward on their current trend. Just as in a bubble there needs to be a trigger to stop the upward spike, there also needs to be a trigger to stop the fall in the crash - I can't see any evidence of one yet. A fall of the magnitude suggested may seem remarkable but not any more so that if prices were to suddenly level off (or start rising) for no apparent reason in the midst of economic uncertainty.

I appreciate the paradox you have identified that the cost of building a house will rise above the price it can be sold for. But could it be possible? Given that most property sold is "second hand" it is this market which determines the price - not the cost of a new-build. It wouldn't be the first time in economic history where the price of a product was less than the cost of producing it. As a consequence most house building would cease (or government would cut red-tape), creating a housing "shortage" and triggering the next phase of the cycle. A painful but genuine bottom.

Interesting discussion. I agree with what you are saying and I do feel that the red tape will be cut. i.e. the Planners and Roads service will realise that they cant expect the developer/house purchaser to continue to fund that they have failed to do over the years - upgrade the road & sewerage system.

But if the cost of producing a house is more than the Market will meet then the production of new housing, like the production of new cars will cease. This will create a shortage and start an artificial boom - only this time the banks are not full of Chinese money to fund it. But I am somewhat comforted by the point I discovered in my last post that when the NI average was at £80k (2001/2002) we had an average sale price of £114k/£125k. I.e the new-build house was trading above the average price. That is not the case at the moment.

Sudden levelling off. I'm not so sure that can't happen. A soft landing only happens at the bottom, it can never happen at the top as the 'experts' try to claim because people were only buying as they were sure they would continue to rise. Once you remove that illusion the sales evaporate.

On the way down prices continue to drop until they reach a level where people start to buy again. Whilst the numbers buying are low it will be noted and the pressure to continue down will be removed. This will not happen at the same time in every place so there will be staggers. Why drop further if people are buying at the prices you are at. If the stop buying again you have to review that position. But I can see how the levelling off can appear sudden. We all have data from the 92 crash but has anybody got any data or graphs of the numerous other crashes around the world. I know Japan is particularly extreme, and who's to say this wont be the same, but it would be grate to view graphs of perhaps 10 others.

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But if the cost of producing a house is more than the Market will meet then the production of new housing, like the production of new cars will cease. This will create a shortage and start an artificial boom - only this time the banks are not full of Chinese money to fund it. But I am somewhat comforted by the point I discovered in my last post that when the NI average was at £80k (2001/2002) we had an average sale price of £114k/£125k. I.e the new-build house was trading above the average price. That is not the case at the moment.

Interesting points BelfastVI , imo

1. Production will not cease but will be are a fraction of the boom levels until current supply is used up.

2. The cost of production will fall as the price of building land continues to fall , i'm sure builders were making a good living in 2001/2002 at the figures you quote.

3. Don't take too much comfort from the motor trade , GM etc have been losing money on each car for many years

4. Totally agree that second hand houses on average should be 20-30% cheaper than quality new builds , once the market wakes up to this the crash will get it's second wind ;)

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