Story on EA Today ---This Is Why You Wont See An Hpc For Years

[cypher007]

1) im not a VI, im actually hoping for a HPC, but after three years of you guys going on about what will make prices fall, and saying oh this will definitely start prices tumbling. i think some reality needs to be bought back into the equation.

2) where i live prices have barely budged, but rents have gone up by £50 a month on one 3 bed semi thats near me in the last year, and it is let.

3) most of the poster on this page have explained the same thing e.g. most people dont "NEED" to sell. even the ones where the kids have left home dont need to sell, if anything they probably have more cash available now than when there kids were at home.

4) the only light at the end of the very long tunnel is something i hadnt realised and thats that SMI wasnt paid for ever.

[Bruce Banner]

1) im not a VI, im actually hoping for a HPC, but after three years of you guys going on about what will make prices fall, and saying oh this will definitely start prices tumbling. i think some reality needs to be bought back into the equation.

2) where i live prices have barely budged, but rents have gone up by £50 a month on one 3 bed semi thats near me in the last year, and it is let.

3) most of the poster on this page have explained the same thing e.g. most people dont "NEED" to sell. even the ones where the kids have left home dont need to sell, if anything they probably have more cash available now than when there kids were at home.

4) the only light at the end of the very long tunnel is something i hadnt realised and thats that SMI wasnt paid for ever.

[leicestersq]

1) im not a VI, im actually hoping for a HPC, but after three years of you guys going on about what will make prices fall, and saying oh this will definitely start prices tumbling. i think some reality needs to be bought back into the equation.

2) where i live prices have barely budged, but rents have gone up by £50 a month on one 3 bed semi thats near me in the last year, and it is let.

3) most of the poster on this page have explained the same thing e.g. most people dont "NEED" to sell. even the ones where the kids have left home dont need to sell, if anything they probably have more cash available now than when there kids were at home.

4) the only light at the end of the very long tunnel is something i hadnt realised and thats that SMI wasnt paid for ever.

Hmm, SMI is paid forever if you are retired. It is like getting a free home upon retirement.

Reasons why house prices wont fall include,

1) Positive Net Immigration

2 ) SMI

3 ) Banks not repossessing due to political rather than financial concerns

4 ) Super Low interest rates

5 ) Falling pound means that the nominal value of a house wont fall.

Reasons why house prices will fall.

1) Credit availability for banks is tight

2 ) Borrowers have to pay higher rates as banks are able to impose higher margins due to less competition in the mortgage market,

3 ) House prices are already too high for most to afford on safe multiples.

Thats about it. Change any of the above, and it will have an affect on prices.

I am hoping that interest rates start to rise soon, when that happens, not only will it cause a direct effect on the housing market, but cause indirect effects too. Governments will be forced to cut borrowing, SMI will go, and banks will no longer be able to hold up repossession.

Government policy is delaying the crash, but in so doing, making the crash or the more violent when it comes.

[dissident junk]

47,000 approvals says no.

lets not forget builders are buying peoples places in P.Ex deals....offering top deals and other incentives to move that newbuild...these are cash buyers....just wondering how many buyouts these builders make sit on the books for months?

Mate of mine just done this and he says his old place is already sold...he hasnt moved in yet, but methinks HE could have made more money selling it himself and negotiating hard with the builder....

still, its only borrowed money.

We live in one of these. Our place was a part-ex for a new property built by a small building company. They came in, gave it a bit of spit and polish and tried to sell it, back in 08. No luck, so they rented it out to us (and tried to get us to buy it after they said they were builders, not property managers).

Then ... guess what happens? Building company collapses in the credit crunch and all the letting stock gets sold onto someone else.

[Neverland]

Hmm, SMI is paid forever if you are retired. It is like getting a free home upon retirement.

Reasons why house prices wont fall include,

1) Positive Net Immigration

2 ) SMI

3 ) Banks not repossessing due to political rather than financial concerns

4 ) Super Low interest rates

5 ) Falling pound means that the nominal value of a house wont fall.

Reasons why house prices will fall.

1) Credit availability for banks is tight

2 ) Borrowers have to pay higher rates as banks are able to impose higher margins due to less competition in the mortgage market,

3 ) House prices are already too high for most to afford on safe multiples.

Thats about it. Change any of the above, and it will have an affect on prices.

I am hoping that interest rates start to rise soon, when that happens, not only will it cause a direct effect on the housing market, but cause indirect effects too. Governments will be forced to cut borrowing, SMI will go, and banks will no longer be able to hold up repossession.

Government policy is delaying the crash, but in so doing, making the crash or the more violent when it comes.

Nice summary

But I can't see a catalyst for interest rates rising for at least 12 months, maybe even 2 years

The BoE has no problem with redistributing wealth from prudent savers to feckless borrowers

[Blod]

So why then are prices still dropping.

[Neverland]

So why then are prices still dropping.

Because houses are overpriced?

[cypher007]

because there not dropping in all areas.

[cypher007]

Hmm, SMI is paid forever if you are retired. It is like getting a free home upon retirement.

Reasons why house prices wont fall include,

1) Positive Net Immigration

2 ) SMI

3 ) Banks not repossessing due to political rather than financial concerns

4 ) Super Low interest rates

5 ) Falling pound means that the nominal value of a house wont fall.

Reasons why house prices will fall.

1) Credit availability for banks is tight

2 ) Borrowers have to pay higher rates as banks are able to impose higher margins due to less competition in the mortgage market,

3 ) House prices are already too high for most to afford on safe multiples.

Thats about it. Change any of the above, and it will have an affect on prices.

I am hoping that interest rates start to rise soon, when that happens, not only will it cause a direct effect on the housing market, but cause indirect effects too. Governments will be forced to cut borrowing, SMI will go, and banks will no longer be able to hold up repossession.

Government policy is delaying the crash, but in so doing, making the crash or the more violent when it comes.

+1

[pete.hpc]

this comment basically sums up what ive observed:

"However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest. In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture. Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market."

So why did they crash in 2008?

And why are they falling now?

I wonder which one this is? Columbo? Sibley?

[Blod]

All these VIs statements trying to talk the market up are now just making things worse, they are actually drawing attention to the problems mentioned already in this thread. Sadly the only way for the VIs to console themselves is to keep talking which just highlights the deteriorations in the market.

[babesagainstmachines]

Who's that crossing my bridge?

[PopGun]

I believe that for the earliest recipients, SMI comes to an end soon, and then I imagine they will have no choice but to sell or be repossessed.

Where's Girly Girl?!?

Seriously though, it's much cheaper for the state to pay the mortgage interest rather than find temporary and long term housing for another homeless family.

Besides, kicking families out of their homes will only serve to line BTLer's pockets further. Nope I'm afraid we're down to relying on affordability and new lending Risk to feed the HPC fire.

Doesn’t matter if sellers keep their houses off the market or not, as they’re only worth what people can afford or are willing to pay regardless.

The foundations of sand are being washed away, and unless both job security and bonkers lending returns, HPI is stone dead.

[cypher007]

Where's Girly Girl?!?

Seriously though, it's much cheaper for the state to pay the mortgage interest rather than find temporary and long term housing for another homeless family.

Besides, kicking families out of their homes will only serve to line BTLer's pockets further. Nope I'm afraid we're down to relying on affordability and new lending Risk to feed the HPC fire.

Doesn’t matter if sellers keep their houses off the market or not, as they’re only worth what people can afford or are willing to pay regardless.

The foundations of sand are being washed away, and unless both job security and bonkers lending returns, HPI is stone dead.

not saying we'll have HPI, but as my boss said two years ago when i said the HPC was on, he said he thought prices would not crash but slowy fall and level out, kind of whats happened so far.

Edited December 2, 2010 by cypher007

[winkie]

not saying we'll have HPI, but as my boss said two years ago when i said the HPC was on, he said he thought prices would not crash but slowy fall and level out, kind of whats happened so far.

They are slowly falling simply because interest rates are the lowest they have been in recent history.....it will only take a small rise in interest rates and the slow fall in prices will fall faster....think about it, if you shop around you can get 3% or more interest on savings.....why would someone invest in a property when their capital outlay would be depreciating in value....renting it out incurs costs, net yield for the hassle is small.

Prices have not leveled out there was a bounce simply because people still do not believe house prices can fall....all those with some cash spent it....now that cash is gone the reality of the real situation will take time to sink in the clever will sit it out....a new and better boat is not that far away from docking.

[Xurbia]

this comment basically sums up what ive observed:

"However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest. In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture. Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market."

<sarcasm on> Totally agree. With rising employment, interest rates going lower, growing optimism and huge economic growth it's all going to turn out well. With the Spanish economy booming I anticipate Brits will pull equity out of their foreign homes to lavish on their kids. <sarcasm off>

Anyone would think that mortgage approvals are terrible, public jobs are being lost, the EU is toast and there's no more MEW sloshing around.

What I'm seeing, as an ex-pat, is a market that is stagnant, long term unemployment is up and a government trying to stop the whole show collapsing. It all feels very much like the late 80's without the high interest rates. Even a half percent shift in rates is going to kill the market off.

I'd like to see evidence that the VIs are buying property themselves. There are lots of fixer-uppers on the market at the moment, evidence, in my opinion, that the market will tank. We will find out in 3 months.

Edited December 2, 2010 by Xurbia

[cypher007]

<sarcasm on> Totally agree. With rising employment, interest rates going lower, growing optimism and huge economic growth it's all going to turn out well. With the Spanish economy booming I anticipate Brits will pull equity out of their foreign homes to lavish on their kids. <sarcasm off>

Anyone would think that mortgage approvals are terrible, public jobs are being lost, the EU is toast and there's no more MEW sloshing around.

What I'm seeing, as an ex-pat, is a market that is stagnant, long term unemployment is up and a government trying to stop the whole show collapsing. It all feels very much like the late 80's without the high interest rates. Even a half percent shift in rates is going to kill the market off.

I'd like to see evidence that the VIs are buying property themselves. There are lots of fixer-uppers on the market at the moment, evidence, in my opinion, that the market will tank. We will find out in 3 months.

as another poster said "net migration to the UK is continuing to go up", and while were stuck in the EU will carry on to do so. in areas like Boston they arive by the bus load every week, and just as the Poles are now leaving, as did the Portugese, the Lithuinian/Latvian's are now arriving. result: huge appartment and house building programes in and around the town centre, no HPC, and BTLers buying four bed detached places and filling them with 6+ people. property in this area is cheap, by national standards. i think if we had not had the migration of half of eastern europe to this area, and the British stopped wagging off work for hang overs and a like. thus not giving the local employers an excuse to employ EU workers, we would probably have prices in my area maybe 2x the 1999 levels not 3x.

Edited December 3, 2010 by cypher007

[cypher007]

it seems Realist Bear has also realised the situation.

[LetsGetReadyToTumble]

So why did they crash in 2008?

And why are they falling now?

Exactly, and why did they drop 33% numerically in the 1990's yet probably 50% in value when including inflation that was high then.

Just a reminder that in 2008 they dropped 25%.

[cypher007]

Exactly, and why did they drop 33% numerically in the 1990's yet probably 50% in value when including inflation that was high then.

Just a reminder that in 2008 they dropped 25%.

most of the 25% fall has been reclaimed, here it seems like all of it if you have a detached. no we havent bought yet, i bought in 1999, and we need a bigger place now. trouble is the semi/terraced market is BTL repo land at the moment and the detached we want is uber 2007 prices and still selling .

Edited December 6, 2010 by cypher007

[babesagainstmachines]

most of the 25% fall has been reclaimed, here it seems like all of it if you have a detached. no we havent bought yet, i bought in 1999, and we need a bigger place now. trouble is the semi/terraced market is BTL repo land at the moment and the detached we want is uber 2007 prices and still selling .

You'd better buy now before you miss the boat then. Or move to an area where prices are falling - you have many more to choose from than where you are looking.

[Si1]

as another poster said "net migration to the UK is continuing to go up", and while were stuck in the EU will carry on to do so. in areas like Boston they arive by the bus load every week, and just as the Poles are now leaving, as did the Portugese, the Lithuinian/Latvian's are now arriving. result: huge appartment and house building programes in and around the town centre, no HPC, and BTLers buying four bed detached places and filling them with 6+ people. property in this area is cheap, by national standards. i think if we had not had the migration of half of eastern europe to this area, and the British stopped wagging off work for hang overs and a like. thus not giving the local employers an excuse to employ EU workers, we would probably have prices in my area maybe 2x the 1999 levels not 3x.

as a rule I hope not to be a grammar nazi

but i never trust bulls who can't use apostrophes, suggests their logic is flawed elsewhere

[MississippiJohnHurt]

as another poster said "net migration to the UK is continuing to go up", and while were stuck in the EU will carry on to do so. in areas like Boston they arive by the bus load every week, and just as the Poles are now leaving, as did the Portugese, the Lithuinian/Latvian's are now arriving. result: huge appartment and house building programes in and around the town centre, no HPC, and BTLers buying four bed detached places and filling them with 6+ people. property in this area is cheap, by national standards. i think if we had not had the migration of half of eastern europe to this area, and the British stopped wagging off work for hang overs and a like. thus not giving the local employers an excuse to employ EU workers, we would probably have prices in my area maybe 2x the 1999 levels not 3x.

Re your specific example above, BTLers finding it very hard to get mortgages now without large cash reserves. Logical to assume that the BTLers with cash reserves are the more successful ones, ie the ones who actually understand yield and who wd therefore want a large discount on the (still ludicrous) offered prices of new build.

So even if - and it's a big if - net migration is massively outsripping property supply, and new houses need to be built to cope, there would, IMO, still be significant downward pressure on the sold prices because the buyers aren't from the same group as the amateur BTL army that we saw in 2005/6/7. I think the amatuers are done with property for a generation, they've have either had their Minsky moment, or are quietly hoping that rates don't change for the next 20 yrs.

Anyway this seems kind of immaterial - BTL activity to support immigration is a micro market. Looking at the market as a whole, every sign says prices will continue to fall with no support underneath. Rates will accelerate or decelerate this decline IMO, which is why it's fairly gentle at the moment. But I can't see that we're approaching any equiilibrium soon.

[Tired of Waiting]

it seems Realist Bear has also realised the situation.

http://www.moneymarketing.co.uk/mortgages/coalition-ready-to-let-property-values-fall/1015197.article

It probably means 25% real prices. And they wouldn't want it going until their GElection in 2015. So, I estimate 3 years, 10% inflation + 15% nominal falls.

.

Edited December 6, 2010 by Tired of Waiting

[James Wyatt]

There has been academic research to suggest prices are 'sticky' downwards as owners will not lower their prices below a certain level. This level is normally around the cost of purchase. The problem the market has at the moment, and one I raised in the Moneyweek roundtable, is the fact owners can afford to stay put as servicing costs are so low. These interest rates are likely to stay low as raising them quickly to where they should be (RPI at 4.5% so interest rates at 5.5-6%) would cause a signiciant correction and a debt deflationary spiral (Irving Fisher's piece in Econometrica 1933 is worth a read).

However, in these uncertain times events will drive the market i.e. Euro or $ collapse, China imploding, North Korea or Iran exploding etc. The fundamentals still suggest property remains well above historic trends (Keynes "Markets can stay irrational longer than you can stay solvent).

James Wyatt FRICS