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Foxtons Founder Says Housing Slump Close To End

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Guest Daddy Bear

http://www.ft.com/cms/s/0/a51b43a8-7e0e-11...144feabdc0.html

Foxtons founder says slump close to an end

By Daniel Thomas, Property Correspondent

Published: July 31 2009 23:37 | Last updated: July 31 2009 23:37

Jon Hunt, the Foxtons estate agency founder who picked the top of the housing boom in 2007, says he believes the 18-month property slump is close to an end.

Mr Hunt, who sold Foxtons for about £370m on what turned out to be the eve of the credit crisis in the summer of 2007, said he was starting to see buying opportunities in some areas again.

“Housing I think is probably there,†he said of the London market, which he believes has already dropped 20-25 per cent and is unlikely to go down any further.

He was not calling the bottom of the entire property market, because weaknesses could still emerge in some areas, but it was nevertheless clear that a turning point was being reached. “I have been waiting for this all my life,†he said. “At the moment, it is the property man’s dream, having cash in the pocket and a distressed market.â€

Mr Hunt, 55, is still sitting on more than £300m from the sale of the fiercely competitive Foxtons chain, which he sold to the BC Partners private equity group.

He dismissed speculation that he might return to estate agency, or Foxtons itself, but said he was planning a new serviced apartments operation in central London.

His comments come in a week when a range of data showed slight signs of improvement in the property market.

However, Mr Hunt warned that the poor economic outlook meant the market would not bounce back quickly and could take 10 years before recovering to near its peak again.

“I have never known a recovery where the market just bounced,†he said. “The past two downturns, the market just trawled along the bottom and we have to go through that stage first.â€

IHS Global Insight, an economic consultancy, reinforced the point this week: “Given still very tight credit conditions, poor economic fundamentals and the fact that affordability ratios are moving back up now, we suspect that house prices are highly likely to suffer relapses over the coming months.â€

Other industry players say that although confidence is returning, plummeting supply is creating an artificial floor to the market.

However, John Hitchcox, founder of property company Yoo, who has been investing in property for more than 30 years, said he also believed the bottom of the market was nearing. “The sword is now close to the ground. It is all about getting on the train at the right stop. We can’t be exactly sure where but [it is] close enough,†he said.

Sadly I have to agree with him

I too sold up in Aug 2007 (STR'd) and rented for nearly two years

I bought at 32% below peak in May 2009

_46088687_mortgage_lending_226gr.gif

_46130953_house_prices_30_jul09.gif

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I sold in September 2007 and have now purchased, I move in mid-September. I'm not really clear on whether it's a bottom or not, only time will tell however I prefer to have a tangible asset rather than digits on a server somewhere. The way the government has moved in to protect the banks (and essentially the housing market also) by recapitalisation and reducing rates to the floor makes me think they will interfere again if things start to go pear shaped in order to protect the banks.

Out of interest what mortgage have you gone for Daddy Bear?

Edited by Perishabull

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Guest The Relaxation Suite
Sadly I have to agree with him

I too sold up in Aug 2007 (STR'd) and rented for nearly two years

I bought at 32% below peak in May 2009

Housing slump not even half way through, as will become more apparent by the end of 2009.

Edited by D-503

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Sadly I have to tell you that you are a deluded person in need of education, proper research and a sense of history, but you obviously prefer the word of a ghastly spiv who happened to get lucky and whom now you seem to regard as being some guru despite the overwhelming evidence that tells even a six year old that this is nothing but a bull trap. But go ahead, buy buy buy.

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Guest The Relaxation Suite
Sadly I have to tell you that you are a deluded person in need of education, proper research and a sense of history, but you obviously prefer the word of a ghastly spiv who happened to get lucky and whom now you seem to regard as being some guru despite the overwhelming evidence that tells even a six year old that this is nothing but a bull trap. But go ahead, buy buy buy.

Thing is with Daddy Bear is that he is at least honest and open about having bought a place in the middle of the crash. What would you do after mistiming the market and buying a house half way through a crash? Simple - you'd spend the next year reinforcing that decision by posting about how it's all over, and searching the internet for material to confirm you'd done the right thing.

However, that he got 32% off from peak suggests to me that he won't lose too much money in the long run, because while another 40% is going to come off in the next 24 months, he will lose that 40% from a relatively secureposition compared to people that bought at peak.

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These are the experts that saw only continual boom forever, aren't they?

Lets be honest, the track record of "experts" is not enviable these days.

Still, we all see what we want to see, rather than the Truth.... which is the cost of a decent roof over your head in the UK is way too much in terms of labour required to fund same....

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Guest The Relaxation Suite
These are the experts that saw only continual boom forever, aren't they?

Lets be honest, the track record of "experts" is not enviable these days.

Still, we all see what we want to see, rather than the Truth.... which is the cost of a decent roof over your head in the UK is way too much in terms of labour required to fund same....

That's the bottom line. All over the West house prices are totally unaffordable for the average worker on the average wage. They are so high our entire economies have changed to deal with them (dual incomes, etc). Now, the market is crashing, because it always returns to trend, and yet we have the unedifying spectavle of governments all over the world colluding to keep prices artificially high and engaging in massive indoctrination campaigns to make people think this is a good thing.

Excessively high land prices are to blame for nearly all of our society's problems, and benefit no one except governments through the tax they can raise off them, and banks, through the interest they can raise off them. Now we see the truth behind such unaffordable land prices. But they cannot fight the market, any attempt to do so will simply make it worse. 40% coming off land in the next two years and no escape.

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Thing is with Daddy Bear is that he is at least honest and open about having bought a place in the middle of the crash. What would you do after mistiming the market and buying a house half way through a crash? Simple - you'd spend the next year reinforcing that decision by posting about how it's all over, and searching the internet for material to confirm you'd done the right thing.

However, that he got 32% off from peak suggests to me that he won't lose too much money in the long run, because while another 40% is going to come off in the next 24 months, he will lose that 40% from a relatively secureposition compared to people that bought at peak.

Yes, and I see that and kind of sympathise. But the trouble is that stories like his are picked up by others less wise and who see this as an encouragement to jump in JUST at the time when, had they not done so, they might have at last collectively gained real power to drive the market down much further. If you just want a roof over your head then it makes sense to hold back, not so you can make a killing, but to get housing at a decent price and be content.

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Guest Daddy Bear
Sadly I have to tell you that you are a deluded person in need of education, proper research and a sense of history, but you obviously prefer the word of a ghastly spiv who happened to get lucky and whom now you seem to regard as being some guru despite the overwhelming evidence that tells even a six year old that this is nothing but a bull trap. But go ahead, buy buy buy.

:D

you are welcome to your opinion

Why the Property market WILL crash

1. There has been an unprecedented global price rise in property since October 1995 of bubble proportions, not only in the UK but globally (Ireland, Spain, US, Australia, France etc.). These property bubbles have already began to burst or are deflating rapidly in these countries, the UK is likely to follow this pattern.

2. Interest rates have risen 10 times since November 2003 when they were at an all time low of 3.50%. (and 5x since Aug 06). Each time the rise has been 0.25 basis points. Interest rates are now (July 5th) 5.75% basis points and in my opinion are likely to rise to 6.00 or 6.25%. Some forecasters predict even higher rates of 7.00% within 12-18 months. This would be a 100% rise from 3.5 basis points (Nov 2003) to 7.0 basis points �€“ a doubling of mortgage payments. (equivalent of going from 7.0% to 14.0% as in 1990.

Whatever the outcome the trend is well and truly established, and sentiment has changed.

Higher interest rates raise monthly repayments, and more importantly limit the amount a buyer can borrow through a mortgage. Typically a .25 basis point rise reduces borrowing by 5-10K for the average earning couple in the UK.

3. High Interest Rates or Unemployment do not necessarily have to be a precursor to a HPC, all that is needed, is a change in sentiment. The expectation that one can buy a property and sell it on at a profit is the underlying driver to all bubbles, when this is no longer the case and sentiment changes demand will drop off the proverbial cliff and a collapse will occur �€“ the bubble will burst. An example of this happening at present is the Irish Property market, where IR�€™s are still low 4.0% (but have risen), and sentiment has changed �€“ prices are falling.

4. First Time buyers now only account for 8.9% of the market (July 2007). If there are not buyers buying the first rung of the ladder (80-150K) properties, then the owners of these properties are not able to trade up. The property market in the main is fuelled by First Time Buyers (FTB�€™s).

5. Many house owners have seen their equity increase from for example, £0 to £350k or more in the space of 10 years. When it becomes apparent that by Selling To Rent (STR) it will allow this 350K to earn 6.25% per annum gross, approximately 15K after tax and a similar house can be rented for £1000PCM or less in most cases, with no maintenance and repairs etc it looks prudent to do so.

Obviously they cannot all rush and get through the door to sell at once (as well as the BTL�€™ers!). This will cause property prices to fall.

6. There were over 100,000 bankruptcies last year (the highest since records began). Rising IR�€™s are having an effect. Homes are being repossessed; this will cause a fall in prices. Latest figures Q1 2007 show personal insolvencies climb to a record 30,075, a new quarterly record.

7. 8% of Mortgages in the UK are sub-prime (risky lending). This equates to £30bn, 200,000 mortgages since April 2005. A lot of these (62%) were fixed rate. These deals and thousands of other (safer lending) fixed rate deals are expiring (2 million by the end of 2007). The borrowers face hefty increase in repayments when they end. This will cause financial hardship, decrease spending power, and in some cases lead to insolvency/repossession. This will cause House prices to fall.

Latest figures (July 2007) show Q1 2007 mortgage repossessions stood at 33,715. This is up over 10% on Q4 2006, and again an all time record high.

8. Many Irish/foreign Investors have released equity from their own property market and have invested in the UK market, typically northern cities. As their property market falls they will need to liquidate their assets thereby putting their flats onto the market increasing supply, causing price falls.

9. Many UK Investors have released equity from their own property market and have invested in the foreign market. As these property market falls they may need to liquidate their assets thereby putting their properties onto the market increasing supply, causing price falls.

10. There has been an over supply of 2 bedroom flats. For example there are over 5000 units planned to be released in the Leeds city housing market by 2009. This over supply is causing prices to fall. This is also the case in Liverpool, Manchester, Birmingham etc.

Figures released (July 4th 2007) show only a 1.5% rise in the average flat price across the UK in the last 12 months, and the trend is to turn to price falls. This compares to 11.1% in the house market. This fall in prices will filter upwards through the higher rungs of the market.

11. Many BTL investors have bought purely for capital gain and not rental yield which is historically low (4-5% or lower in many towns), due to oversupply. The BTL landlords are also highly geared, and as IR�€™s rise they may need to liquidate assets to pay off debt. This may cause a flood of flats onto the market reducing prices.

12. If a BTL landlord can get a yield of 6.25% (July 2007) in a high interest savings account why bother BTLing when yields are lower and the hassle factor and overheads are much higher? As amateur landlords wake up to this and see their money tied up in asset form depreciating they may cut their losses and sell causing a flood of properties onto the market, causing property prices to further fall.

13. Aside from London/SE (where foreign investment and city bonuses as well as a low supply of property to a dense population has increased competition for housing) house prices have risen by only 4-5% in the past year. This is a marked slowing compared to previous years and if inflation is taken into account the value of the average house has actually leveled off and is some regions is falling.

14. Unemployment has been falling for a number of years in the UK but this trend is now slowing markedly and is predicted to rise in the future. Less jobs equals less money equals less demand for housing.

15. The % of UK earnings which is in savings is at an all time low (last 25 years), 1.9%. Consumers have no more cash to raid from their piggy bank to spend on housing and other goods. The consumer led boom has to come to an end. Higher interest rates will encourage people to spend less and save more. This will contribute to a downturn in the economy leading to job losses. (See previous point).

16. Latest figures (July 2007) show that the UK population has borrowed more then £1.38 trillion. A huge proportion of this has been secured on the rising value of their homes, in the form of Mortgage Equity Withdrawal (MEW), and has been encouraged as interest rates have been so low compared to history.

£13.2 billion was borrowed against properties in Q1 of 2007 (£13.3 billion in Q4 2006), for spending on holidays, home improvements, �€˜paying off debts�€™, and funding other investments. (This is worth 6.2% of disposable income). This money has been used to fuel the consumer led boom and is keeping millions of people in their service industry/luxury goods jobs (restaurants, hairdressers, new cars, retail etc). As interest rates rise and people realize they have to pay this money back the new cars and £30 haircuts every month soon stop, people lose their jobs and we get a domino effect, a positive feedback loop where people slow spending, people lose jobs, spending slows even more, more jobs lost and so on�€�.

Rising unemployment and a recession is the result. This will cause house prices to fall.

17. Apart from the consumer led boom based on credit card debt (unsecured) and MEW (secured debt) of £1.38 trillion, there has been massive borrowing by the government to pump money into the economy through public sector. For example an economy like Newcastle is mainly supported through government money. 60% of the working population is employed directly by the government and nearly all the rest depend on this money indirectly to keep their service industry jobs alive.

The government is running out of money and will have to reduce public sector spending dramatically over the next few years to balance its books. Many public sector jobs will be cut, this will contribute to a recession and unemployment and cause house prices to fall.

18. Due to the huge amount of cheap cash being pumped into the global economy there are asset bubbles in many areas e.g. the art market: With Monet's Waterloo Bridge fetching £17.9m and Warhol's Green Car Crash selling for $71m last month (June 2007) , it's no surprise that commentators are increasingly wondering if the art market is signaling a top in other markets. In 1990, the Japan's very own car crash was signaled when Japanese paper tycoon Ryoei Siato paid £50m for a Van Gogh. The wine market is another example of this phenomenon, as well as the huge growth in private equity and mergers and acquisition activity.

The �€˜wealth�€™ has been fueled by "a tidal wave of cheap cash" which has allowed them to borrow vast sums to fund "the most spectacular takeover boom for 20 years... All the most dangerously inflated bubbles today are spin-offs of this global credit binge." The housing market is supported by a PONZI Scheme of debt. There is the potential for the biggest global asset bubble collapse in modern times. The consequences could be far worse then the recessions of the past, and may even be worse then the 1930�€™s depression.

19. The UK economy has had unprecedented growth since 1994. This boom has been mainly consumption/debt led. The boom has been fuelled by a huge supply of money and global low interest rates. (UK, US, and Japan). This money has to be paid back.

As the tap of liquidity has been turned off the Boom will turn into Bust. Japan is increasing Interest Rates, and as the Yen Carry Trade unwinds it will have devastating consequences on Hedge Funds and global markets will collapse. There has always been BOOM and BUST, it is the nature of capitalism. Why should it be any different now? Bigger BOOMs should become bigger BUST�€™s. This boom has gone on for nearly 15 years and has been mainly debt/consumption led; the consequences may be far reaching. The Bust may become deflationary and a global economic depression may occur. Imagine paying back a £300K over 25 years when inflation has not eroded it�€™s real value, like it did in the 60�€™s �€“ 70�€™s and 80�€™s

20. The sentiment in the housing market has been very positive over the last 10 years of boom times (its called GREED), this has self perpetuated the boom. Sentiment is very important in a bubble scenario. The GREED may turn into FEAR and cause self perpetuating price falls.

21. The ratio of average earnings to average house price is now very high. A person on an average salary of £25K/annum needs 8x their salary to buy the average UK house £200K

Historically 3.5 times average salary has been the norm.

22. The % of monthly disposable household income, set aside each month to pay the mortgage is at a historically all time high figure of 41% of. This cannot continue and will be even more unsustainable if IR�€™s rise any further.

23. Due to high oil prices, currently $76 per barrel (July 2007) compared to $20 per barrel 5 years ago, high money supply, and low IR�€™s in Japan, inflation has the potential to rise rapidly over the next 12-18 months. It is seen as a threat and rising IR�€™s in the UK will be the main tool used to counteract it. High IR�€™s will cause a fall in property prices.

24. A generation of university graduates are leaving university with huge debt (£20K) and may be unwilling/unable to take on further debt in the form of a huge mortgage.

25. Credit lending has been extremely loose since 1997 when Gordon Brown changed the rules regarding the multiple of what a Bank has on deposit that it can lend.

A Bank used to be able to lend out 4x the amount of money it held on deposit, since the rule change it could then lend out 8x its deposit holding.

As the banks "had" much more money to lend they relaxed their lending criteria over the next 10 years:

a). They increased the multiple of earnings that they could lend to a mortgage borrower from an average of 3 x to in some cases 6 x joint earnings

B). They relaxed the rules regarding proof of income to certify a mortgage and self cert mortgages proliferated. (

c). As property prices inflated they had to relax lending criteria more and more to keep the Ponzi scheme going.

Daddy Bear (July 2007)

that was what I wrote and why i str'din Aug 2007

Edited by Daddy Bear

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Guest Daddy Bear
I sold in September 2007 and have now purchased, I move in mid-September. I'm not really clear on whether it's a bottom or not, only time will tell however I prefer to have a tangible asset rather than digits on a server somewhere. The way the government has moved in to protect the banks (and essentially the housing market also) by recapitalisation and reducing rates to the floor makes me think they will interfere again if things start to go pear shaped in order to protect the banks.

Out of interest what mortgage have you gone for Daddy Bear?

10 year fix at 4.99% overpayments allowed

Will pay it off in 10 years - small leverage.

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Guest Daddy Bear
The Receesion ends in 4th Q of 09........the DEPRESSION then starts!

Mike

Agreed

However it will be a HYPERINFLATIONARY DEPRESSION

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Guest Daddy Bear
I hope you bought with a chunky deposit.

I did

The benefits of buying in 1997 - upsizing on the way - and selling in 2007

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Guest Daddy Bear
Thing is with Daddy Bear is that he is at least honest and open about having bought a place in the middle of the crash. What would you do after mistiming the market and buying a house half way through a crash? Simple - you'd spend the next year reinforcing that decision by posting about how it's all over, and searching the internet for material to confirm you'd done the right thing.

However, that he got 32% off from peak suggests to me that he won't lose too much money in the long run, because while another 40% is going to come off in the next 24 months, he will lose that 40% from a relatively secureposition compared to people that bought at peak.

It's not when you buy

It's how you buy.

As I have said before some people will by "dogs" at the supposed trough in 2012 - 14 and others will bUy earlier or later and do better.

you'd spend the next year reinforcing that decision by posting about how it's all over, and searching the internet for material to confirm you'd done the right thing.

No - I know I made the right decision.

What fascinates me now is this has gone way beyond a HPC.

That's just "noise" now.

The destruction of global currencies is where its at now.

Edited by Daddy Bear

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Guest Daddy Bear
Can you name the provider?

C&G (Lloyds)

It's withdrawn now.

I organised it in Jan 2009 and the lass kept it open until I completed after further negotiations to get a price I was happy with.

I was prepared to lose the £700 or so (to organise mortgage) if I had not got the right completion deal in June

EDITED AS GOT YEAR WRONG !

Edited by Daddy Bear

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This Foxtons boy is interesting. He is forever being labelled as the 'Man who called the top'. Has anyone perhaps considered that he just happened to sell at a fortunate time ?

He didn't call the top. He sold his business at the top. Very imporant difference IMO.

Now perhaps he knew exactly what was coming, and sold just when he thought the peak was reached. However none of us know this for sure. Only himself and those close to him know if he is one smart guy - or just got lucky.

His chat is clearly worth listening too. However the whole 'He called the top of the market' is totally misleading IMO.

Unless of course someone can find me some chat just after the sale where he made his intentions clear ? I have never heard anything.

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http://www.ft.com/cms/s/0/a51b43a8-7e0e-11...144feabdc0.html

Sadly I have to agree with him

I too sold up in Aug 2007 (STR'd) and rented for nearly two years

I bought at 32% below peak in May 2009

_46088687_mortgage_lending_226gr.gif

_46130953_house_prices_30_jul09.gif

Having actually read the two Hunt articles in the FT at the weekend they were actually almost all about commercial property, with maybe one quote about residential in it (which is in red in the OP)

I don't know what everyone is getting so excited about really :blink:

The commercial market has fallen 40-50% in the UK, which is much more than any other substantial commerical real estate market (so far) so all sorts of people are calling the UK commercial property market interesting

And Daddy bear.... he's just trolling :P

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This Foxtons boy is interesting. He is forever being labelled as the 'Man who called the top'. Has anyone perhaps considered that he just happened to sell at a fortunate time ?

He didn't call the top. He sold his business at the top. Very imporant difference IMO.

Now perhaps he knew exactly what was coming, and sold just when he thought the peak was reached. However none of us know this for sure. Only himself and those close to him know if he is one smart guy - or just got lucky.

His chat is clearly worth listening too. However the whole 'He called the top of the market' is totally misleading IMO.

Unless of course someone can find me some chat just after the sale where he made his intentions clear ? I have never heard anything.

Most good investment decisions are based on luck or insider knowledge. I would have thought lady luck played a large part here.

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Jeez there are some loonies on this site. If any of you can get somewhere at 32% off peak, go for it. You may take a small hit but if you think that you would be better with money in the bank in the long (i.e.5+ years) run then you are delusional. I personally don't see hyperinflation but I do see a return to 70's style stagflation and in those circumstances the best place for your savings is in hard assets, not cash.

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Jeez there are some loonies on this site. If any of you can get somewhere at 32% off peak, go for it. You may take a small hit but if you think that you would be better with money in the bank in the long (i.e.5+ years) run then you are delusional. I personally don't see hyperinflation but I do see a return to 70's style stagflation and in those circumstances the best place for your savings is in hard assets, not cash.

I used to think that stagflation was a risk, but then I looked at what was in RPI:

http://www.statistics.gov.uk/articles/nojo...-Goods-2009.pdf

I couldn't see much that would lead to inflationary pressures over the next couple of years, barring another sterling collapse

Have a look and see if you disagree? ;)

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