Property Is Pouring Onto The Market

[david m]

You might be right, im not so convinced, a lot of the top-end house "owners" are fully (and i mean fully) leveraged up to the hilt, their purchases relied on bonuses/consistent business turnover/etc and when that isnt forthcoming the crunch bites, i know quite a few people who have properties worth in excess of 1 million and all of them are in exactly the same situation cash wise as normal people, because when their salary was clearing 250k they didnt do as you would think and pay it off the house, they instead bought 2 new cars and went to bermuda 3 times.

The way i see it is this, if your mortgage is 600 a month and you lose your job and get in trouble you could do whatever is needed e.g work in tescos, do 5 cleaning jobs (not to demean these jobs) to scrape it together. When your mortgage is 4.5k a month or 8 times a massive salary requiring a bonus pay off to keep you afloat where do you get it from when in trouble?

Last year my wife and I spent a bit of time looking at houses in the Richmond/Kingston/Wimbledon area. We viewed 25 houses over a period of say 2 months. We liked 3 of them ... those 3 sold very quickly for peak or above peak 2007 prices. Of the remaining balance of 22, 6 others have been sold for anything between 5% and 15% off the offered price. 6 are still on the market (some at higher prices than before) and the rest (10) have been taken off the market. And yes I am a geek and i do have spreadsheet with this stuff in!

The problem was that many of these houses were owned by people in their 50s+ looking to downsize. They weren't willing to cut their price and since they had no mortgage and a big pension they can and will wait. Of the 9 that sold, 7 were from families looking to upsize or leave the country/area. This year nothing has really changed.

Also I don't know anybody who is significantly levered on their houses. Most have paid off their mortgage or have the means to cover it. What always surprices me is how unlevered people are at the moment. I think unlike to late 80s/early 90s people have had a long boom period from the mid 90s through the 2000s where they have saved up.

Edited June 11, 2010 by david m

[dances with sheeple]

You might be right, im not so convinced, a lot of the top-end house "owners" are fully (and i mean fully) leveraged up to the hilt, their purchases relied on bonuses/consistent business turnover/etc and when that isnt forthcoming the crunch bites, i know quite a few people who have properties worth in excess of 1 million and all of them are in exactly the same situation cash wise as normal people, because when their salary was clearing 250k they didnt do as you would think and pay it off the house, they instead bought 2 new cars and went to bermuda 3 times.

The way i see it is this, if your mortgage is 600 a month and you lose your job and get in trouble you could do whatever is needed e.g work in tescos, do 5 cleaning jobs (not to demean these jobs) to scrape it together. When your mortgage is 4.5k a month or 8 times a massive salary requiring a bonus pay off to keep you afloat where do you get it from when in trouble?

Exactly, at that level you either have the income or you don`t, and I bet they won`t even be employing cleaners soon, especially one`s who have never done a days manual work in their life On a serious note though, I am noticing a LOT of older, well educated, obviously middle class type people here (Edinburgh) working the tills in Sainsburys/Waitrose/ especially.

[Rozza]

Also I don't know anybody who is significantly levered on their houses. Most have paid off their mortgage or have the means to cover it. What always surprices me is how unlevered people are at the moment. I think unlike to late 80s/early 90s people have had a long boom period from the mid 90s through the 2000s where they have saved up.

Interesting to hear a different experience on things, one thing from my observations would be a lot of people who outwardly have the means to cover the mortgage and savings in the bank actually dont but would never admit it. Where i work it has almost become the thing to do, i.e whine about just how bad things are as if none of it is your fault while still looking for holidays abroad due to the helpful piece of plastic. personally i think its idiotic but its their lives eh

As to whether a lot of people have savings in the bank, im pretty sure (obviously its all opinion) that the anser is no, these people had a long boom.. and lots and lots of people rode the wave to the max!

[Pent Up]

Last year my wife and I spent a bit of time looking at houses in the Richmond/Kingston/Wimbledon area. We viewed 25 houses over a period of say 2 months. We liked 3 of them ... those 3 sold very quickly for peak or above peak 2007 prices. Of the remaining balance of 22, 6 others have been sold for anything between 5% and 15% off the offered price. 6 are still on the market (some at higher prices than before) and the rest (10) have been taken off the market. And yes I am a geek and i do have spreadsheet with this stuff in!

The problem was that many of these houses were owned by people in their 50s+ looking to downsize. They weren't willing to cut their price and since they had no mortgage and a big pension they can and will wait. Of the 9 that sold, 7 were from families looking to upsize or leave the country/area. This year nothing has really changed.

Also I don't know anybody who is significantly levered on their houses. Most have paid off their mortgage or have the means to cover it. What always surprices me is how unlevered people are at the moment. I think unlike to late 80s/early 90s people have had a long boom period from the mid 90s through the 2000s where they have saved up.

almost everyone who bought in the last 10 years would be seriously leveraged!

[Bloo Loo]

Last year my wife and I spent a bit of time looking at houses in the Richmond/Kingston/Wimbledon area. We viewed 25 houses over a period of say 2 months. We liked 3 of them ... those 3 sold very quickly for peak or above peak 2007 prices. Of the remaining balance of 22, 6 others have been sold for anything between 5% and 15% off the offered price. 6 are still on the market (some at higher prices than before) and the rest (10) have been taken off the market. And yes I am a geek and i do have spreadsheet with this stuff in!

The problem was that many of these houses were owned by people in their 50s+ looking to downsize. They weren't willing to cut their price and since they had no mortgage and a big pension they can and will wait. Of the 9 that sold, 7 were from families looking to upsize or leave the country/area. This year nothing has really changed.

Also I don't know anybody who is significantly levered on their houses. Most have paid off their mortgage or have the means to cover it. What always surprices me is how unlevered people are at the moment. I think unlike to late 80s/early 90s people have had a long boom period from the mid 90s through the 2000s where they have saved up.

1.5trn in record borrowing says quite a few people are very levered up.

add in the 1.2trn in mortgages.

2.7trn in borrowings.

[dances with sheeple]

With interest rates so low many households are actually better off in cash-flow terms that two or three years ago. So you need either higher IRs or a fairly significant increase in unemployment levels (or wage cuts). You're not going to get significantly higher interest rates since the BoE will keep rates low for long in return for "fiscal austerity" from the governement ... that's the deal. So to bring those households in negative equity to market as forced sellers you're relying on two things: significant wage cuts or retrenchment and no savings to allow the owner to ride out the NE period.

The major job cuts / wage cuts are going to hit hardest where the public sector is large. A lack of savings is most likely for younger buyers (FTBs for example) and in poorer regions of the country. So basically the cheap houses are going to get hit harder than expensive ones. Where you have cash rich owners, foreigners or baby boomers on second or third houses etc you're aren't going to see any forced sellers.

So I think we should expect price differentials between starter homes and 4/5 bed detached houses too widen. Similarly price differential between richer (London/SE) and poorer areas (NE/Scotland) will also widen even further. In poorer areas we probably get more supply at the low end of the market forcing prices down but with decent sales volumes. In richer areas supply will be non-existant, especially at the top-end, since nobody will need to sell for a loss. Good houses will go for more than peak prices, mediocre houses just dont' sell and the price never comes down. Transaction volumes in better-off areas will simply collapse.

Lokking at SW London and Surrey over the past year that's exactly what is happening.

Sorry, absolute nonsense, who buys a "good" house for "more than peak prices" in what is fast becoming a depression? Not smart rich savvy investors IMO. The kind of dummkopf who would have tried to do this has had their credit supply cut off most likely?

[david m]

Sorry, absolute nonsense, who buys a "good" house for "more than peak prices" in what is fast becoming a depression? Not smart rich savvy investors IMO. The kind of dummkopf who would have tried to do this has had their credit supply cut off most likely?

Sorry but you're thinking too narrowly.

Someone can buy for peak Sterling prices but not peak EUR/US$/CAD/AUD/SAR//RUB prices etc etc. For most foreigners the HPC you all wanted happened last year. Many of my colleagues bought their first home last year ... most were Europeans and most bought with 100% cash. Many had been renting for 10y or more in this country waiting for the house market to show some sanity. It didn't. Instead when EUR/GBP went from sub 70 to above 90 they saw their chance to buy with a 30%+ discount and now all feel great, especially given whats happening to the Euro.

I think many of you are right about the bottom end of the market and about the UK in general... but when it come to prime property in London and the better suburbs I don't see any stress at all. Long-term I think prices may well stagnate and fall in real terms as the impact of things like a 50%+ tax, lower banking bonuses and downsizing boomers take their toll.

Right now though the biggest worry I hear is how people can protect their savings against inflation, how their savings are earning nothing with zero interest rates, and how they don't want to invest in any assets (equities, property or bonds) since they are all overvalued. Nonetheless, push those renting to say what they are going to do and they are all looking to buy property. It's overvalued but they'll do it just to save the cash-flow.

Edited June 11, 2010 by david m

[The Masked Tulip]

But right now the biggest worry I hear is how people can protect their savings against inflation, how their savings are earning nothing with zero interest rates, and how they don't want to invest in any assets (equities, property or bonds) since they are all overvalued. Nonetheless, push those renting to say what they are going to do and they are all looking to buy property. It's overvalued but they'll do it just to save the cash-flow.

+1

[dances with sheeple]

Sorry but you're thinking too narrowly.

Someone can buy for peak Sterling prices but not peak EUR/US$/CAD/AUD/SAR//RUB prices etc etc. For most foreigners the HPC you all wanted happened last year. Many of my colleagues bought their first home last year ... most were Europeans and most bought with 100% cash. Many had been renting for 10y or more in this country waiting for the house market to show some sanity. It didn't. Instead when EUR/GBP went from sub 70 to above 90 they saw their chance to buy with a 30%+ discount and now all feel great, especially given whats happening to the Euro.

I think many of you are right about the bottom end of the market and about the UK in general... but when it come to prime property in London and the better suburbs I don't see any stress at all. Long-term I think prices may well stagnate and fall in real terms as the impact of things like a 50%+ tax, lower banking bonuses and downsizing boomers take their toll.

Right now though the biggest worry I hear is how people can protect their savings against inflation, how their savings are earning nothing with zero interest rates, and how they don't want to invest in any assets (equities, property or bonds) since they are all overvalued. Nonetheless, push those renting to say what they are going to do and they are all looking to buy property. It's overvalued but they'll do it just to save the cash-flow.

Nah, to buy now on the cusp of such uncertainty is not good IMO, people with savings and people buying with cash are such a minority as to be irrelevant to the wider UK property market. Nothing would convince me to buy property at the moment.

[Rozza]

Sorry but you're thinking too narrowly.

Someone can buy for peak Sterling prices but not peak EUR/US$/CAD/AUD/SAR//RUB prices etc etc. For most foreigners the HPC you all wanted happened last year. Many of my colleagues bought their first home last year ... most were Europeans and most bought with 100% cash. Many had been renting for 10y or more in this country waiting for the house market to show some sanity. It didn't. Instead when EUR/GBP went from sub 70 to above 90 they saw their chance to buy with a 30%+ discount and now all feel great, especially given whats happening to the Euro.

I think many of you are right about the bottom end of the market and about the UK in general... but when it come to prime property in London and the better suburbs I don't see any stress at all. Long-term I think prices may well stagnate and fall in real terms as the impact of things like a 50%+ tax, lower banking bonuses and downsizing boomers take their toll.

Right now though the biggest worry I hear is how people can protect their savings against inflation, how their savings are earning nothing with zero interest rates, and how they don't want to invest in any assets (equities, property or bonds) since they are all overvalued. Nonetheless, push those renting to say what they are going to do and they are all looking to buy property. It's overvalued but they'll do it just to save the cash-flow.

I agree with the bottom paragraph, but IMHO the top one is a load of old tosh. Do you seriously expect us to believe all these people had in excess (in a lot of cases) of 2 or 300k sitting around and because currencies moved by 30% rushed out and bought even though they thought the prices were too high (in uk terms).

Not trying to be rude and call you a liar but seriously come off it.

As for the push those renting, im renting and im in a position to buy, why arent i ... simply because property is massively overvalued and as a rule i (and a lot of the people on here) wouldnt buy an overvalued asset. It has nothing at all to do with cash flow and it certainly wouldnt save cash flow as owning a property just brings a different set of costs.

I think youll find a few of the renters on here would say the same thing so your sweeping generalisation is wrong im afraid

[david m]

Let me be clear: I would love for house prices to drop off a cliff. It would be good for me and (in my view) good the country as a whole.

I just see many people with significant savings wondering what to do with a pile of paper money and, other than buying a bag of gold coins (I prefer Platinum or Silver myself), property at least saves them the rent.

So if houses prices drop 10% or so I just think you'll still get a lot of buyers appearing very quickly

Edited June 11, 2010 by david m

[Rozza]

Let me be clear: I would love for house prices to drop off a cliff. It would be good for me and (in my view) good the country as a whole.

Agree with you there

I just see many people with significant savings wondering what to do with a pile of paper money and, other than buying a bag of gold coins (I prefer Platinum or Silver myself), property at least saves them the rent.

So if houses prices drop 10% or so I just think you'll still get a lot of buyers appearing very quickly

If prices drop 10% youll get what the reverse of what happens when things go up it will be "ill wait a bit longer cos its all falling". The people with the cash (namely us) have waited this long, we can wait a bit longer.

I wouldnt mind a bag of gold coins actually, would be nice to make a jangly sound with

[The Masked Tulip]

I think everyone is waiting for the budget - if they do not increase CGT on BTLs and second homes I expect more people who do have cash to go into property because, rightly or wrongly, they see nothing back on their savings and rationalise property as something that is, um, bricks and mortar.

Also, houses have, long-term, proven to rise and rise in the UK so for many they will just jump on board that.

I don't see people jumping back into shares or gold or bonds because they are all considered high risk to the majority whereas houses, hey, look how they have risen in the past 10 years!

[Georgia O'Keeffe]

I agree with the bottom paragraph, but IMHO the top one is a load of old tosh. Do you seriously expect us to believe all these people had in excess (in a lot of cases) of 2 or 300k sitting around and because currencies moved by 30% rushed out and bought even though they thought the prices were too high (in uk terms).

Not trying to be rude and call you a liar but seriously come off it.

As for the push those renting, im renting and im in a position to buy, why arent i ... simply because property is massively overvalued and as a rule i (and a lot of the people on here) wouldnt buy an overvalued asset. It has nothing at all to do with cash flow and it certainly wouldnt save cash flow as owning a property just brings a different set of costs.

I think youll find a few of the renters on here would say the same thing so your sweeping generalisation is wrong im afraid

as a renter in switzerland,my UK housing funds have been in chfs since end 2006 when we moved here, they are currently earning about 2% which im quite happy with, buying hasnt crossed my mind and it wont until at least end of 2012/13 maybe longer, despite being about 35% up, the fact that they have fallen 30%+ in currency terms doesnt change the economic imbalance in the UK because the majority of buyers in the UK will always have to be err from the UK. Whilst the imbalance remains the economy goes further and further down the sh!tter because of further malinvestment.

I remain as confident as when i sold that prices will fall at least 50% in sterling, they may however fall as much as 70/80% in non sterling terms. Ultimately it is about a functioning economy, the uks economy cant and wont function until malinvestment is erradicated and it returns to real productivity. It would be stupid to buy whilst that imbalance remains even for someone not in sterling

Edited June 11, 2010 by Tamara De Lempicka

[non frog]

..... It would be stupid to buy whilst that imbalance remains ....

Never underestimate how many stupid people there are out there

[Tonkers]

So, Britain, a great place to own a house but I wouldn't want to live there.

[bear call spread]

Check your areas.

They think it's all over.

It is.

NOW.

Not round this part of London i am afraid just went for a nice walk to the heath to pick up the paper and loads of people in all the local EA offices at such a early time of day. Madness.

[Pent Up]

Not round this part of London i am afraid just went for a nice walk to the heath to pick up the paper and loads of people in all the local EA offices at such a early time of day. Madness.

Are they buyers or sellers though? Probably full of people desperate to get their houses on the market before the fun starts

[evictee]

On my usual rightmove search, I'd say it's up about 20%, but it could be that price decreases are bringing more 'into range.'

One thing I've noticed on rightmove recently is that more of the ads are including the street number in their address field, and if anyone else has been spending their time copying and pasting that into houseprices.co.uk like me they might like to know that the GreaseMonkey script PropertyChimp now adds a link from the Rightmove search results pages to a houseprices.co.uk lookup. Works best if you're searching by post district. For the uninitiated you need to be using Firefox, install the GreaseMonkey plugin and then the PropertyChimp script.

[Alfie Moon]

Are they buyers or sellers though? Probably full of people desperate to get their houses on the market before the fun starts

Yes, exactly. Certainly up this way in Worcester the number of propertiews on the market has increased dramatically. For example in postcode WR4 in December 09 there were just over 100 properties on the market - it is now over 200, with plenty new ones coming on each week with hardly anything at all going SSTC (particularly since the end of March). Estate Agents are busy, but with putting new property details together, not with selling. Similar story to be told for the whole of Worcester, Birmingham, Lichfield, and other towns close to B'ham.

Edited June 12, 2010 by Alfie Moon

[AteMoose]

I agree with the bottom paragraph, but IMHO the top one is a load of old tosh. Do you seriously expect us to believe all these people had in excess (in a lot of cases) of 2 or 300k sitting around and because currencies moved by 30% rushed out and bought even though they thought the prices were too high (in uk terms).

Not trying to be rude and call you a liar but seriously come off it.

As for the push those renting, im renting and im in a position to buy, why arent i ... simply because property is massively overvalued and as a rule i (and a lot of the people on here) wouldnt buy an overvalued asset. It has nothing at all to do with cash flow and it certainly wouldnt save cash flow as owning a property just brings a different set of costs.

I think youll find a few of the renters on here would say the same thing so your sweeping generalisation is wrong im afraid

My new neighbour is Spanish, she got a good discount in the trough and a bigger discount because of the crashing euro. UK prices are cheaper than most of Europe, uk prices are cheaper than japan even though they have had 25 years of falling prices.

Edited June 12, 2010 by AteMoose

[Pent Up]

My new neighbour is Spanish, she got a good discount in the trough and a bigger discount because of the crashing euro.  UK prices are cheaper than most of Europe, uk prices are cheaper than japan even though they have had 25 years of falling prices.

Uk prices are only cheaper than Europe if your paid in euros. Doesn't help us.

What's the price to earnings ratio in japan then?

[AteMoose]

Uk prices are only cheaper than Europe if your paid in euros. Doesn't help us.

What's the price to earnings ratio in japan then?

Just using figures ive found on the internet

http://www.globalpro...n/Rental-Yields

http://www.payscale..../Salary/by_City

an 80 sqm apartment in tokyo $996,320 USD, median wage in tokyo $65,526 USD. 15x income? A small 1 bedroom apartment 40sq m, 435,000 usd? London prices are less, but so are the salary multiples...

http://www.finfacts.ie/costofliving.htm

London is only the 16th most expensive city...

Edited June 12, 2010 by AteMoose

[pie-eater]

Just using figures ive found on the internet

http://www.globalpro...n/Rental-Yields

http://www.payscale..../Salary/by_City

an 80 sqm apartment in tokyo $996,320 USD, median wage in tokyo $65,526 USD.  15x income? A small 1 bedroom apartment 40sq m, 435,000 usd? London prices are less, but so are the salary multiples...

Thank god for that. You've persuaded me to offer 2007 +10% on the house I'm interested in.

Just need a decent pen to falsify the application form now.

[AteMoose]

Thank god for that. You've persuaded me to offer 2007 +10% on the house I'm interested in.

Just need a decent pen to falsify the application form now.

Pahh, I'm not that bullish but I am attempting to add some realism. I think prices in the UK are over valued but I see external risks and I know what a currency crash does to property prices (causes them to rise). I know your taking the mick but if you were serious I would never recommend anyone to pay over offer, there are always struggling sellers, IMHO you could get a 30% discount from the right seller and a good rate IF you have the savings... The UK is more at risk if the currency recovers strength...

Edited June 12, 2010 by AteMoose