Land Registry July

[Brave New World]

I don't think 160k is a market floor. It's a consequence of government policies. But it is unsustainable. See my chart below. It cannot be sustained. The government won't have money or credit enough to keep this price level for many more years, not in real terms. And if they keep printing and inflation goes up, then higher IRs will crash the market as well.

And what surprised me the most in this chart was that London has the highest local prices in relation to local earnings. You cannot have so many foreign millionaires, enough to keep (median) prices up in a city of 8 million people. It can't be. Prime London? Sure. But London as a whole? No way.

It is un-sustainable.

Great post. The plates are spinning and we are giving far too much credit to the banpots in Office that they can carry on for years to come, they don't strike me as being in control. The ever decreasing circle of record low IRs, money printing and the counter of inflation and (sterling linked) imported inflation on goods is getting closer and closer to a mighty collision. Chuck a Euro shaped grenade in for good measure and i see it as 30 minutes into a 90 minute match, this was always going to take time.

[zugzwang]

Just relax (and swing)

Mick Karn R.I.P.

[The Masked Tulip]

There was an article on zerohedge today about US growth in the economy, some figures, forget what... but the zerohedge article was basically questioning why US inflation was not going up in official figures but, for example, the price of gas at the pumps had.

I try not to be paranoid, but I am beginning to wonder whether some of these official UK figures are being rigged. It is an open secret that UK unemployment figures are manipulated all ways to show the economy and govt in a positive light... so why not housing sale figures... especially if you are trying to kick-start the housing market?

Edited August 15, 2012 by The Masked Tulip

[Bruce Banner]

I try not to be paranoid, but I am beginning to wonder whether some of these official UK figures are being rigged. It is an open secret that UK unemployment figures are manipulated all ways to show the economy and govt in a positive light... so why not housing sale figures... especially if you are trying to kick-start the housing market?

You mean like omitting repossessions and forced sales on the grounds that they are not representative of the true market value?

[The Masked Tulip]

You mean like omitting repossessions and forced sales on the grounds that they are not representative of the true market value?

Exactly.

[Bruce Banner]

Exactly.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=178987

[scottbeard]

I don't think 160k is a market floor. It's a consequence of government policies. But it is unsustainable. See my chart below. It cannot be sustained. The government won't have money or credit enough to keep this price level for many more years, not in real terms.

But surely the key is what happens in NOMINAL terms?

If the fall is only real, you might as well buy a house now. If the fall will be nominal then you should buy a house later.

I agree that real prices will come down, but that alone doesn't really matter - nominal prices do.

[Guest_FaFa!_*]

I can't understand Japan. I really don't get it.

A peace offering to aid your understanding

http://bilbo.economicoutlook.net/blog/?p=20607

Here's a chart to start you off which might aid your understanding

Edited August 16, 2012 by FaFa!

[FLASH_2007]

I put LR right about a £100K 'overpricing' of a house near me last month. They remnoved the listing the same day.

Just how many of these wrongly recorded prices are there on LR, I wonder.

I've noticed quite a few myself which are way out on what they should be, some far too high others too low, unless there are some sort of underhand deals going on such as house way below value plus the rest in cash or similar.

[Dithering Dad]

As far as I can see, all the Indices are pointless anyway, no one buys an 'average' house in an 'average UK location', it just seems to be a device that allows the red tops (the Daily Mail being a good example) to publish screaming headlines about 'surges' or 'crashes'. A clued-up prospective buyer will know his/her target area inside and out and know exactly what is happening with house prices in that area. Does it matter to someone looking to buy in Manchester what house prices are doing in Richmond?

I also don't understand the problem about the Land Registry and forced sales. If you are looking to buy a house via the traditional estate agent/mortgage method then you would surely want to examine the LR figures for your target area (rather than nationally or regionally) to see prices for houses that are sold in the traditional manner. If you are looking to buy via auction then each house will be unique and your offer price will be based on a survey/inspection and would bear no resemblance to what other properties in the area would sell for - hence you wouldn't look at LR figures.

[Democorruptcy]

And what surprised me the most in this chart was that London has the highest local prices in relation to local earnings. You cannot have so many foreign millionaires, enough to keep (median) prices up in a city of 8 million people. It can't be. Prime London? Sure. But London as a whole? No way.

It is un-sustainable.

Isn't it a ripple effect though? If the foreigners buy at the top it realises equity for who they buy from then that creates chains spreading all over the place? For example one seller could downsize and buy two BTLs so one foreigner purchase could start three chains.

There's one foreign firm here rumoured to by buying 10,000 houses

http://www.ipe.com/realestate/swedens-akelius-closes-third-uk-residential-property-deal_44336.php

[InlikeFlynn]

I'm also looking to buy a decent sized detached family house at the going rate (2005/6 nominal prices round my way).

The trouble is that there are no sellers at these levels, they've all been seduced into believing their house is still worth its pre-crash value by EAs desperate for new instructions. There are also no buyers. The result.... stalemate. No sales at all. Nevermind, we can rent until something gives.

Flynn

[Dithering Dad]

My sentiments too. It's all very well telling EAs etc that the indices point to something or other, but this doesn't mean that anyone has to sell you their house at these prices, and with 0.5% IR, what's the problem for vendors?

Why would I get a house at these interest rates? It's like buying a guaranteed time-bomb.

Would you be able to get a mortgage at such low rates anymore? I know there are a few lucky souls with those super low trackers, but they were withdrawn from the market shapish once the credit crunch unfolded. The best lifetime trackers I can see with a quick google are around the 3% mark but with 25% deposits.

If you had such a large deposit and if house prices in your target area were static (and had been for a while), then a 3% tracker would help you through the first 2 or 3 years of home ownership which are traditionally the most financially difficult, as your personal finances get used to the new outgoings and you decorate & buy furniture for the new home.

I agree with your view that if you could only just afford a mortgage on current rates, it'd be madness to buy (though if that was the case then I'd imagine you'd fail to get a lender to agree to give you a mortgage) but if you budget for rates around 8% but have rates around 3% for a year or two, surely that's to your advantage?

[19 year mortgage 8itch]

If you had such a large deposit and if house prices in your target area were static (and had been for a while), then a 3% tracker would help you through the first 2 or 3 years of home ownership which are traditionally the most financially difficult, as your personal finances get used to the new outgoings and you decorate & buy furniture for the new home.

You sound like my dad and he doesn't have a clue either.

[Bruce Banner]

Would you be able to get a mortgage at such low rates anymore? I know there are a few lucky souls with those super low trackers, but they were withdrawn from the market shapish once the credit crunch unfolded. The best lifetime trackers I can see with a quick google are around the 3% mark but with 25% deposits.

If you had such a large deposit and if house prices in your target area were static (and had been for a while), then a 3% tracker would help you through the first 2 or 3 years of home ownership which are traditionally the most financially difficult, as your personal finances get used to the new outgoings and you decorate & buy furniture for the new home.

I agree with your view that if you could only just afford a mortgage on current rates, it'd be madness to buy (though if that was the case then I'd imagine you'd fail to get a lender to agree to give you a mortgage) but if you budget for rates around 8% but have rates around 3% for a year or two, surely that's to your advantage?

If you were a cash buyer would you buy now?

[Tired of Waiting]

A peace offering to aid your understanding

http://bilbo.economicoutlook.net/blog/?p=20607

Here's a chart to start you off which might aid your understanding

Thanks.

But the actual puzzle is why interest rates on Japanese government bonds have remained so low for so long, and if they will stay low, how low, and for how long. The author does not address this questions satisfactorily. His belief (and that is what it is) that governments' debt don't matter (because governments can print) is (frankly) not rational. Because a currency depends on credibility, and it can be lost.

Frankly, that guy is ... well, bonkers! Don't believe him FaFa. He is wrong.

Look at this chart, and notice how interest payments have been increasing recently:

It can't go on forever, as lenders will lose trust. And they can't keep printing it, as money is not wealth.

[Tired of Waiting]

Isn't it a ripple effect though? If the foreigners buy at the top it realises equity for who they buy from then that creates chains spreading all over the place? For example one seller could downsize and buy two BTLs so one foreigner purchase could start three chains.

There's one foreign firm here rumoured to by buying 10,000 houses

http://www.ipe.com/realestate/swedens-akelius-closes-third-uk-residential-property-deal_44336.php

Maybe, but ripples lose power away from the centre. How can ... say Croydon (!) be so expensive?!

(Your link didn't work.)

[Dithering Dad]

You sound like my dad and he doesn't have a clue either.

Sorry, I don't understand which part of my post you had a problem with?

[bendy]

Thanks.

But the actual puzzle is why interest rates on Japanese government bonds have remained so low for so long, and if they will stay low, how low, and for how long. The author does not address this questions satisfactorily. His belief (and that is what it is) that governments' debt don't matter (because governments can print) is (frankly) not rational. Because a currency depends on credibility, and it can be lost.

Frankly, that guy is ... well, bonkers! Don't believe him FaFa. He is wrong.

Look at this chart, and notice how interest payments have been increasing recently:

It can't go on forever, as lenders will lose trust. And they can't keep printing it, as money is not wealth.

Meh, there's a lot of plebs, and them plebs breed ever more plebs. As long as that happens, it'll continue.

[Guest_FaFa!_*]

But the actual puzzle is why interest rates on Japanese government bonds have remained so low for so long, and if they will stay low, how low, and for how long. The author does not address this questions satisfactorily. His belief (and that is what it is) that governments' debt don't matter (because governments can print) is (frankly) not rational. Because a currency depends on credibility, and it can be lost.

I believe Prof Mitchell explains satisfactorily in other parts of the website that a government in control of its currency (such as Japan) can control the yield curve without any problems indefinitely by having the bonds bought in sufficient quantities to raise the price and lower the yield. This could have an effect on the currency, but given the yen has risen enormously against the dollar/pound/euro in recent years and its export industry is screaming, a drop in the yen would probably be highly desirable.

The chart shows that the payments are now at a level that they were in the mid-80s. Perhaps you can dig up the articles from the mid-80s saying Japanese public debt was out of control, I'd be interested to read them. Mitchell clearly demonstrates in his article that the deficit is cyclical and was dropping in the early part of the 2000s as the Japanese economy recovered (you are doubtless aware that Japanese GDP per capita increased more than in the US and Europe froom 2000 - 2010). The point is that the deficit will ultimately take care of itself. The point is to support the economy and go for growth and employment in a balanced economy, not cut away like a mad axeman and hope for the best. If you achieve that then deficits etc won't matter. We are letting the tail wag the dog (ie concentrating on the symptoms - a high deficit and not dealing with the disease causing it, high employment, low growth and high private debt which has been transferred onto the public sector balance sheet).

I'd recommend you have a look around his website, it is very interesting.

[Dithering Dad]

If you were a cash buyer would you buy now?

Well the discussion when I made the point you quoted had very tight parameters. Namely whether to buy a house while mortgage rates we so low, knowing that rates are bound to climb. The other criteria that come into a decision on whether to buy (mortgage vs rent, nagging partner, etc.) were not factored in because you wouldn't care about interest rates if you weren't looking to buy.

Your question about whether to buy now as a cash buyer is so open ended and full of conjecture as to be impossible to answer. Certainly if you were a cash buyer you wouldn't be worrying about interest rates, though you'd still have all the other criteria to work through (investment return on savings vs rent, house price movement in your chosen area, nagging WorG, etc).

I'd suggest though that as a cash buyer you would have access to properties at auction and as these are uniquely priced then you'd have to make a judgement call on whether you think you could get a comparable property at a comparable price in the traditional market (via estate agent) by waiting.

It really all depends what the 'cash buyer's' trigger is for buying. Everyone has their own unique reasons why they buy at a point in time.

[Bruce Banner]

Well the discussion when I made the point you quoted had very tight parameters. Namely whether to buy a house while mortgage rates we so low, knowing that rates are bound to climb. The other criteria that come into a decision on whether to buy (mortgage vs rent, nagging partner, etc.) were not factored in because you wouldn't care about interest rates if you weren't looking to buy.

Your question about whether to buy now as a cash buyer is so open ended and full of conjecture as to be impossible to answer. Certainly if you were a cash buyer you wouldn't be worrying about interest rates, though you'd still have all the other criteria to work through (investment return on savings vs rent, house price movement in your chosen area, nagging WorG, etc).

I'd suggest though that as a cash buyer you would have access to properties at auction and as these are uniquely priced then you'd have to make a judgement call on whether you think you could get a comparable property at a comparable price in the traditional market (via estate agent) by waiting.

It really all depends what the 'cash buyer's' trigger is for buying. Everyone has their own unique reasons why they buy at a point in time.

The way I see it, whatever I could buy today, at auction or through an EA will be available for a lot less in a few years time, so my money will stay in the bank for a few more years.

[Dithering Dad]

The way I see it, whatever I could buy today, at auction or through an EA will be available for a lot less in a few years time, so my money will stay in the bank for a few more years.

Well, only you know how prices are moving in your area and so if they are moving down, your rent is less than the return you get on your house savings, and your other half isn't nagging you, then it does seem to be the right course of action.

I would put one caveat around that comment though. Often if you keep an eye open you can bag a bargain at either auction or estate agent sale that could knock years off your waiting time. I bought my first house in the 90's crash that was up for sale because the owner had died (in hospital thank god) and his niece and two nephews had inherited the place. The house was a mess, but structurally sound and was 'priced to sell' at £50k. I offered £40k with the idea that as the money would be split 3 ways, they would concentrate more on the £13.33 they stood to gain than the £3.33k they stood to 'lose' (remember it wasn't their house so they had no emotional attachment to it). After initially rejecting my offer, they must have gone away and mulled over the £13k they stood to gain (and perhaps needed it in a recession) and the estate agent called me back to see if I were still interested. The market never fell below the price I paid for that house, and in the meantime I took advantage of the recession to get the house renovated by desperate workmen at virtually cost price.

Rather than looking at an index it's better to become pally with estate agents (if you can stand to) and let them know you're a serious buyer - but at the right price. That estate agent told me all about the niece and nephew situation that I based my decision on. You might be waiting around for a particular house price index to hit a certain level when there are already properties out there that beat it out of hand.

Good luck though with your house hunting.

[19 year mortgage 8itch]

Sorry, I don't understand which part of my post you had a problem with?

The bit I quoted?

Which seems to ignore that price inflation is outstripping wage inflation at a fair rate of knots and that the risk on retail borrowing, even against property seems to be more against higher costs than continued falls in borrowing costs. I'm just not seeing how it 'will be easier' in 2 to 3 years than it is now. Do you expect 2012 vs 2015 to be as fortuitous as 2008 vs 2011?

Unsurprisingly neither are the general public.

[Democorruptcy]

Maybe, but ripples lose power away from the centre. How can ... say Croydon (!) be so expensive?!

(Your link didn't work.)

If Croydon is expensive it could be because as people breed in London if they cannot afford to buy they have to move outwards? HPI spreading like a cancer?

Re the link I googled "akelius london property 10,000" and the link was the second in the list and opens in a new tab