How Exactly Will The Property Market Recover Any Time Soon?

[othello]

There is a lot of bullish excitement going on at present. Would anyone who thinks that the market is in for a sustained recovery explain where the money is coming from? QE is not an answer as it is only a short-term measure and will be withdrawn as easily as it was applied.

Edited June 12, 2009 by othello

[GrillsBears]

There is a lot of bullish excitement going on at present. Would anyone who thinks that the market is in for a sustained recovery explain where the money is coming from? QE is not an answer as it is only a short-term measure and will be withdrawn as easily as it was applied.

Er why will it? QE is acheiving exactly what the Government and the Bank of England want it to. What pray tell will force them to turn the tap off?

[interestrateripoff]

Er why will it? QE is acheiving exactly what the Government and the Bank of England want it to. What pray tell will force them to turn the tap off?

Inflation perhaps?

Bond Market collapse?

The reality hits home that they are idiots?

[GrillsBears]

Inflation perhaps?

Bond Market collapse?

The reality hits home that they are idiots?

Despite all of the noise to the contrary it's not happening though is it? The Bond Market is not collapsing, rates are rising a minimal amount and the stock market sentiment has undoubtedly turned. As someone ponted out the other day 10K invested in Bank of Ireland at their low would now be worth 180K this money can be spent. Stupid people will spend it on property. This will support prices.

This site used to be good but there's a hell of a lot of denial now days. This may be a bump but it is happening. Where I live stock is scarce and good properties priced at 15% off peak are going SSTC within a week.

[Rinoa]

There is a lot of bullish excitement going on at present. Would anyone who thinks that the market is in for a sustained recovery explain where the money is coming from? QE is not an answer as it is only a short-term measure and will be withdrawn as easily as it was applied.

You could easily have said that 6 months ago ~ and probably did.

You certainly wouldn't have believed 6 months hence that approvals would be up 55% and indices would be showing positive gains?

Proof of the pudding etc...

[Moo]

Er why will it? QE is acheiving exactly what the Government and the Bank of England want it to. What pray tell will force them to turn the tap off?

Somewhat OT, but it's something that's bugging me...

When it is said that QE is 'working', what exactly does that mean?

[blankster]

I don't think the question is 'How will the property market recover any time soon?' so much as 'Why is the property market recovering at the moment against all the odds?'

[othello]

Er why will it? QE is acheiving exactly what the Government and the Bank of England want it to. What pray tell will force them to turn the tap off?

OK, so you think printing money is the solution to a sustained recovery?!

[othello]

I don't think the question is 'How will the property market recover any time soon?' so much as 'Why is the property market recovering at the moment against all the odds?'

Is it recovering? Let's see in 6 months!

[blankster]

The reason it's recovering is because fewer people are being forced to sell their houses because mortgage payments are much lower for a lot of people.

If mortgage interest rates remain low, then the market is likely to continue recovering. Low mortgage rates reduce the price paid for a house over the mortgage lifetime. So the big house price drops are not in the asking prices but in the overall amount paid during the mortgage term.

But interest rates can't remain low indefinitely........or can they?

Edited June 11, 2009 by blankster

[othello]

You could easily have said that 6 months ago ~ and probably did.

You certainly wouldn't have believed 6 months hence that approvals would be up 55% and indices would be showing positive gains?

Proof of the pudding etc...

I would actually, but that doesn't represent any kind of sustained recovery!

[GrillsBears]

OK, so you think printing money is the solution to a sustained recovery?!

Nope but I don't think that the government care about "sustainable" very much do you? This is about giving the appearance of recovery. This is undeniably working. People are still spending frankly ludicrous amounts on housing. It may be stupid. I may be in direct contradiction to underlying fundamentals but it is happening. Sentiment is very powerful and it has changed. It may be snuffed out when the nights draw in and interest rates climb but through the mechanism of QE IRs may stay low for a while.

[Executive Sadman]

I can only assume they look at things opposite to how we would. They must see the housing market in the period 1991-1997 as abnormally cheap, rather than the period 1999-2009 as abnormally expensive.

[othello]

Nope but I don't think that the government care about "sustainable" very much do you? This is about giving the appearance of recovery. This is undeniably working. People are still spending frankly ludicrous amounts on housing. It may be stupid. I may be in direct contradiction to underlying fundamentals but it is happening. Sentiment is very powerful and it has changed. It may be snuffed out when the nights draw in and interest rates climb but through the mechanism of QE IRs may stay low for a while.

So you don't have an answer then?

[GrillsBears]

So you don't have an answer then?

Do you need big print books or pictures?

QE continues and IR's remian at historic lows. Sentiment turns and houses look "cheap" compared to the past few years. People use money made available to buy houses off the back of QE funding and this provides market momentum. Securitisation returns as it works in a rising market and away we go.

You're hoping that sense is going to win. A bad bet in my book. We wouldn't be where we are if everyone was sensible

[PotNoodle]

PRICES

We have seen a blip in prices in Spring 2009.

Cash buyers snapping up properties doesn't explain it as cash buyers invariably

buy for less than market price.

I think it is younger people, desperate (as they always are) to get on the ladder

and to pay any price for it. Such purchases usually occur in Spring, and are totally

explainable by hormones.

The real test will come during the quieter months of June, July and August

when Jack and Jill turn their attention from nesting to holidays, leaving the rest of the

population to carry on more sane property investment.

SALES VOLUMES

I have not yet seen any proof that sales volumes are up.

Approvals, yes.

Interest - yes, yes, yes (anecdotally).

But sales ?

Prove it, bulls.

[othello]

Do you need big print books or pictures?

QE continues and IR's remian at historic lows. Sentiment turns and houses look "cheap" compared to the past few years. People use money made available to buy houses off the back of QE funding and this provides market momentum. Securitisation returns as it works in a rising market and away we go.

You're hoping that sense is going to win. A bad bet in my book. We wouldn't be where we are if everyone was sensible

I am not sure I should bother replying to sarcasm but can I reiterate the question:

"Would anyone who thinks that the market is in for a sustained recovery explain where the money is coming from?"

Your answer is shallow and although the question was a simple one, it requires more depth to answer in any credible way. QE is unsustainable. 'Securitisation' is always there but lending is going to be restricted for years to come. Have you thought about unemployment? Rising IRs? Toxic debt (it hasn't gone away)?

[puppee]

Nope but I don't think that the government care about "sustainable" very much do you? This is about giving the appearance of recovery. This is undeniably working. People are still spending frankly ludicrous amounts on housing. It may be stupid. I may be in direct contradiction to underlying fundamentals but it is happening. Sentiment is very powerful and it has changed. It may be snuffed out when the nights draw in and interest rates climb but through the mechanism of QE IRs may stay low for a while.

the boe base rate may stay low for a while, but the building societies are not listening mortgage rates are starting to rise (the nationwide is seeing to that) the boe rates are low so the banks and bs can recoup their massive losses ? (fsa would not declare how much they have lost) we the nation as a whole should pick one bank to be made an example of by withdrawing all our savings and then threaten to do this to each bank until boe base rates are returned to a fair level

[Rinoa]

PRICES

We have seen a blip in prices in Spring 2009.

Cash buyers snapping up properties doesn't explain it as cash buyers invariably

buy for less than market price.

I think it is younger people, desperate (as they always are) to get on the ladder

and to pay any price for it. Such purchases usually occur in Spring, and are totally

explainable by hormones.

The real test will come during the quieter months of June, July and August

when Jack and Jill turn their attention from nesting to holidays, leaving the rest of the

population to carry on more sane property investment.

SALES VOLUMES

I have not yet seen any proof that sales volumes are up.

Approvals, yes.

Interest - yes, yes, yes (anecdotally).

But sales ?

Prove it, bulls.

The CML data is for completed sales ~ not approvals.

So that's 16% up just in April.

[athom]

Somewhat OT, but it's something that's bugging me...

When it is said that QE is 'working', what exactly does that mean?

It means we have an economy based purely on lending and spending, the government is lending (funny money) and we are spending (thick as pig sh!t) now that those numbers are coming in what do we have? Recovery! Woohoo aint it grand

[athom]

Is it recovering? Let's see in 6 months!

Yeah exactly. Undoubtedly this is not over yet

[time 2 raise interest rates]

I don't think the question is 'How will the property market recover any time soon?' so much as 'Why is the property market recovering at the moment against all the odds?'

Gordons messing with it, Gordons trying to keep middle-class Tory voters in their house at all costs

stopping them getting repossessd and all that, don't know what he's doing for working class Labour voters.

Gordon are you going to let house prices fall so they can buy one too?

[abharrisson]

Despite all of the noise to the contrary it's not happening though is it? The Bond Market is not collapsing, rates are rising a minimal amount and the stock market sentiment has undoubtedly turned. As someone ponted out the other day 10K invested in Bank of Ireland at their low would now be worth 180K this money can be spent. Stupid people will spend it on property. This will support prices.

This site used to be good but there's a hell of a lot of denial now days. This may be a bump but it is happening. Where I live stock is scarce and good properties priced at 15% off peak are going SSTC within a week.

I'd agree with you that some seem to have lost their balance and have a view that if news isn't a bear's feast then its VI spin, and some are in a sense of denial faced with the more positive news thats now around rather than viewing it for what it is.

While I am no bull at the moment, I do think many bears forget that while unemployment may well rise to 10% and the wider economy may be suffering even further through short day weeks etc.... one thing that is often forgotten is that with say 90% still earning the same as they were in 2006/2007 or more and with some of their household budgets actually improved by redutions oin mortgage payments or rent some of the downturn (not all of it granted but a good slug nonethless I suspect) has been caused by a discretionary reduction in expenditure. We have seen this as well through the increasing repayments of debt that have been going on. I would think that some of this discretionary reduction in expenditure has been casued by some of the lowest levels in consumer confidence we have ever seen...... one thing I do think is that the current news and the length of time this has been going on has helped that consumer confidence return a little.... now bear in mind if we see improving confidence levels in a large part of the population who have at their discretion reduced expenditure then we may well see some sort of recovery.

Consumer confidence is only part of the picture, but an important one nonetheless. My view is that it is imporving amongst the vast majority of people who are still earning the same or more than they were in 2007/2006 or who have larger household disposable income levels due to lower mortgages or rents.

[Coolfonz]

I still want house prices to fall where im looking, E1, E2 in London, but the market is definitely more bouyant than it was.

A house i was following was on with one estate agent at £390,000 last November, it didn't sell. It went off. It was relisted with another agent at £385,000. It didnt sell. It went off and was immediately relisted by Foxtons about three weeks ago at £435,000 and they claim there is interest and "it will go under offer soon". They also claim diaries are full, more people are looking etc etc... (yes I know it's Foxtons).

Another place we were looking at went under offer in under a week.

Now I'm sure - in E1/E2 - there is a) not much supply (although it does appear to be slightly picking up) and cash buyers are playing a part (i'm one) but i think to deny whats going on is a mistake.

My bearish part says, how can this be sustained?

We are seeing oil at $75/bl (my industry), it is already forcing up food prices, commodity prices. If it goes up/stays here, interest rates will have to rise. If it falls it means the malaise is here to stay. We also aren't seeing the return to crazy mortgages (not yet anyway). The pound has recovered and may choke off any euro-speculators.

Ive gone from being very bearish in March to 50:50 today... my 2ps worth

[Sybil13]

Er why will it? QE is acheiving exactly what the Government and the Bank of England want it to. What pray tell will force them to turn the tap off?

This week they seemed to imply that any extension to QE currently will go to business not mortgage lending :

[

b]Bank broadens £125bn scheme to help business[/b]

In an apparent concession to critics, the Bank said it would expand its Asset Purchase Facility, under which it is buying £125 billion in corporate and government bonds so that it could purchase a wider range of commercial paper short-term corporate debts with a view to easing the supply of working capital finance to businesses

The BOE have already warned Darling "Not to Stop the Housing Crash":

A top Bank of England official today warned the Government against trying to prevent the housing crash.

In a controversial call, Markets Director Paul Fisher said it would be dangerous for policymakers to try to stem the relentless slump in the value of property.

In testimony to the Treasury Committee, Mr Fisher said: I think the most important thing for the housing market is that prices should be allowed to adjust to a level at which people can afford to buy houses.™

In recent years potential buyers were unable to get onto the property market because houses were just so expensive, he went on.

We have to allow the housing market to find a new level at which people can afford to enter it.€™

Britain has seen one of the deepest property slumps of any advanced nation since the onset of the credit crunch.

Prices have tumbled by 21 per cent from their peaks, compared with an average 10 per cent decline in major economies, according to International Monetary Fund figures.

There is a danger that policy intervention in the housing market stops these sorts adjustments from happening.

We have to be very careful with policy intervention that we dont actually make it worse.€™

Property prices are still 40 per cent above their historic averages, suggesting further declines are unavoidable...

]The BOE have said that the government hasn't given the banks enough to lend, overseas investors got a large chunk of the last batch of QE funding, looks like business will get the next .

The Bank of England is concerned that the UK's banking system is heading for a third wave of crisis that could snuff out fragile signs of recovery in the economy.

On Thursday the Bank surprised the City by announcing that it would pump an extra £50bn of new money into the economy despite recent stockmarket rallies.

Now the Guardian has learned that this increase in quantitative easing was driven by fears in Threadneedle Street that the credit crunch is still sucking the life out of the British economy and the banking sector remains in deep trouble.

The new mood of caution chimes with comments from business leaders yesterday, who warned that apparent green shoots in the economy had shallow roots.Bank of England officials are concerned that big banks now supported by the taxpayer, such as Royal Bank of Scotland and Lloyds Banking Group, are struggling to increase lending volumes, as they had promised in return for help from the government.

The governor, Mervyn King, and several other members of the Bank of England's monetary policy committee are said to be unconvinced by talk of green shoots that has helped propel the FTSE 100 share index up by more than 20% over the last month.

Fears of a false dawn echo the mood at the beginning of the year, when apparent recovery in financial markets was wiped out by a second wave of crisis led by RBS and Lloyds.Continued weakness at these banks may prevent the increase in lending that ministers are desperate to see, and dash hopes of a pre-election recovery for Labour.

The Bank of England is also worried that continued stresses in the global financial system will suck money out of the UK as cash-starved international banks bring money back home. Foreign banks are thought to be withdrawing funds from Britain once loans expire, rather than roll them over.

Mr King said: "There is a big difference in practice between the levels of capital banks need to be stabilised... and those required to persuade banks to exhibit normal levels of risk-aversion. How big that gap is is impossible to say... but it looks as if it will be quite big.

If the banks are going to continue as private sector entities they will naturally behave in a risk-averse way for a while... [The state] could put in more public sector capital but that has ramifications for the Governments' shareholdings in banks."

I think there isn't going to be the money their for mortgage lending, which as you know is already down nearly 2/3rds.

Surely this is why the BOE and CML have both said, "the green shoots have not roots," and why the BSAs Adrian Coles said œit is quite conceivable that lending will fall this year as funding evaporates." And why :

Homebuyers are being Left High & Dry As Lenders Cancel Mortgage Offers

Timms RMBS Chart is half way down this page:

Timms RMBS doc

Edited June 11, 2009 by Sybil13