2013 Price Changes

[ronaldo]

Do any of you have any predictions for 2013 for the housing market. I think there is the potential for a 10-15% drop but feel there is an equal chance of prices being broadly similar in December 2013 as they are in December 2012. This is from a semi-detached/detached perspective.

I know that, as of the end of September, detached prices were 8% below their Q1 2005 levels. The comparable figure for apartments is 29% below Q1 2005 levels. However, I feel that apartments still have a way to go due, in part, to their exorbitant management fees.

At the moment, I'm starting to see value in some detached/semi-detached properties in my area. In my opinion, anyone buying at a 10% discount to what they believe to be current market values shouldn't do too badly - in particular if it's a home as opposed to an investment. However, I've been reviewing apartment prices in Belfast again today.

I don't view apartments as a long-term solution for a family but, rather, they're ideal for someone looking for the 'city life' whilst they're free and single. So, given this, it begs the question - why buy an apartment when the estimated costs of moving home are somewhere in the region of £5,000? You are likely to have a change of circumstances within 5 years - meaning average moving costs of £1,000 per year (this is solicitor, estate agents, removal company and other costs).

The above is true, in particular, for 1-bedroom apartments.

That being said, there probably is some logic in someone who buys a 2-bedroom apartment with the intention of keeping it as an investment when they move to a house - but only when prices come down a little more.

To put some figures to the above, lets assume that an apartment can be bought for a 25% reduction on current asking prices. This is pretty feasible considering you'd easily buy one today at a 10% discount to asking and there could, potentially, be another 15% drop next year.

With that in mind, you'd be looking at this apartment for £125,000 (below the stamp duty threshold).

If I were to buy something like this, I'd consider living in one room and renting out the other for £350 per month under the rent-a-room scheme. As someone that doesn't own a car, I'd consider renting out the parking space as well which would bring in at least another £50 per month. Add to this the £350 per month that I'd pay if I were to rent out a room in a similar apartment and you get £750 per month to throw towards the costs of ownership.

The monthly cost of the apartment management fees and rates would be about £160 leaving £590 for the mortgage. A 25 year mortgage of £112,500 (10% deposit needed) with Danske Bank costs £570 per month at the moment. After 5 years of this arrangement, your outstanding mortgage would be a little over £97,000 and, unless prices are further below current levels, on a nominal basis, you should be able to secure a pretty good rate on your mortgage (given the LTV).

In my opinion, the figures above make it a reasonably good venture - just about (and that's assuming a 25% discount to current asking prices).

[JoeDavola]

I'd have my doubts about buying an apartment at any price - Definatley think anything over 100k is too much for a two bed apartment - that's a nice flat you posted there but it's still far too expensive in my opinion and I don't actually like the location; not quite city centre, not quite suburbia - kind of a no mans land.

I think we'll see another 10% off semis this year easily. Which means renting still makes more sense than buying.

[nornironsi]

I'd have my doubts about buying an apartment at any price - Definatley think anything over 100k is too much for a two bed apartment - that's a nice flat you posted there but it's still far too expensive in my opinion and I don't actually like the location; not quite city centre, not quite suburbia - kind of a no mans land.

I think we'll see another 10% off semis this year easily. Which means renting still makes more sense than buying.

I personally think we will see a continued slow down of a price crash, the prices will still go down but perhaps 5% or so over tge next year as opposed to the bigger drops we have seen over the last few years. personally i think things wont change too much for another 2-3 years.

[2buyornot2buy]

Sorry I don't get this part

Add to this the £350 per month that I'd pay if I were to rent out a room in a similar apartment and you get £750 per month to throw towards the costs of ownership.

Your rates and management charges look out. The rates alone will be £1000 and around £1400 for management and obviously will rise over the next 5 years even if your fix rate mortgage doesn't.

Look at the recently repo Obel, Jame clow, St. Anne's etc. The flat market will be destroyed.

[2buyornot2buy]

I personally think we will see a continued slow down of a price crash, the prices will still go down but perhaps 5% or so over tge next year as opposed to the bigger drops we have seen over the last few years. personally i think things wont change too much for another 2-3 years.

And what evidence do you think points to this?

[ronaldo]

And what evidence do you think points to this?

There’s no point in talking about evidence because, obviously, noone has evidence – only opinions. The housing market will turn long before the evidence you are looking for is available. It’ll start with an increase in the quarterly NI RPPI, which, the bears will highlight as a blip as opposed to a turn in the market. It’ll be followed up by multiple quarterly rises at which point the question becomes – how many successive quarterly rises do you need before you would consider it verifiable evidence?

I’m not saying that the above is going to happen in 2013, or even 2014 – but it will happen. There is no question in my mind that, when the prices eventually do turn around, there will be people on this site for another 1-2 years arguing that we are not yet in a bull market.

If prices did continue to drop at current levels over the next 2 years, you’d probably be looking at a 75% or so drop from peak after inflation is taken into account. I know that prices were overvalued at the peak. My question is, do you really think that they were 300% overvalued?

[ronaldo]

The day of easy credit has gone. If the banks over here thought that the market had bottomed they would be dishing out plenty of 100% loans. Are they? I don't think so.

The fact that banks are, in a lot of cases, requiring 25% deposits is due primarily to the Basel II and Basel III requirements as opposed to their opinion on the future of property prices.

[2buyornot2buy]

There’s no point in talking about evidence because, obviously, noone has evidence – only opinions.

Of course we have evidence, what you are talking about is hindsight. We can obviously look at facts (not opinions) available to use now and previous bubble trends and try and map what we think will happen in the future. It's true we can't use this and come up with x% but we can use it to point to trend. It is all about trend. This is undoubtedly pointing downwards. I’m not talking about a crystal ball here and saying what do you think will happen in 10 years. The poster I was replying to is saying they think prices will drop 5% or just level off, I was asking what evidence they thought validated this opinion.

Edit - Spelling. Phone

Edited December 4, 2012 by 2buyornot2buy

[Belfast Boy]

All we have is hisorical evidence which indicates to me that houses are still over priced. Unless anyone thinks that history does not repeat and this time it really is different.

The definition of what is affordable is now constantly changing as so many economic bubbles burst at the same time as the recession continues - employment bubble, dual income bubble, disposable income bubble, cheap energy bubble, cheap food bubble, housing bubble... all of which were fueled by a massive credit bubble.

Doccyboy maybe right, the powers-that-be are trying to emulate Japan. Prices would have corrected much faster if the BoE interest rate was normal (around 5% average?) and the banks were acting normally (historically low repo rate in the worst financial crisis since 1930 ). Despite this house prices here continue to fall and it looks like the UK/London market might finally be turning again.

When we are near the bottom - indicated by economic history - I hope to be able to say so here, before it happens. However, there is no historical evidence that we are there yet.

[Shotoflight]

House prices currently are still way out of kilter with the fundamentals of (Inflation, income, interest rates) strikingly so in NI. We have Austerity to 2018 so that gives you a clue. The interest rates are supposed to be emergency and short term. The bottom will be when EAs tell the poly that the average selling price is not £140k in the face of a triple dip recession but £110k. But there'll be plenty of other more accurate evidence.

There are at least 5,000 vacant props for which builders have been granted a further rates exemption - they should cut their losses. Or rent - which will remove potential buyers from the market.

Prices fell last year by 12% (again) with forbearance, low interest rates, QE and some 41% of mortgages IO. The swan may be graceful on the surface (David Brent) but there is a lot of panic underneath. Our place our time flopped and recent news pictures don't help. Indications are that banks are focussing on non paying mortgage debtors.

Interest-only mortgages 'becoming niche'

http://www.bbc.co.uk/news/business-20497388

Northern Ireland: 41% of all outstanding morts IO

When the emergency is over, rates will go up (or if the markets decide GB is, after all a basket case manipulating money supply, debt etc .) Some banks have decoupled already with Danske & Santander at 4.79 SVR. NI will not benefit from any growth like other uk parts as the overreliance on a defenestrated public sector will drag it down and will pull private sector (overreliance) and construction down with it.

When prices eventually match the fundamentals of NI, then we can look for the undershoot.

Confidence and sentiment will not bounce back immediately, neither will kamikaze lending, even with the connivance of BOE.

The debt game is a busted flush yet all that many, who should know better, carp on about is get the banks lending - debt, debt, debt?????????

Money is still being sucked out of the economy - look out for tomorrows Autumn Statement and ROI budget

What may halt the drop in prices is that people stop buying houses, at all. Apart from that its as you were.

I'll be surprised if there's not another min 10-15% drop in the next 12 months

[2buyornot2buy]

Better than i could ever put it myself.

[nornironsi]

You could well be right however based on what I am seeing in my own area house prices are still going down but at a reduced rate. I stand by my opinion that the drops are slowing. I feel they will continue to fall but at an increasingly slow rate. That's just my own opinion of course.

[BelfastVI]

The fact that banks are, in a lot of cases, requiring 25% deposits is due primarily to the Basel II and Basel III requirements as opposed to their opinion on the future of property prices.

Basel II was published in June 2004. It didn't seam to affect lending criteria or L2V ratios in the years that followed.

[BelfastVI]

House prices currently are still way out of kilter with the fundamentals

Could you expand

There are at least 5,000 vacant props for which builders have been granted a further rates exemption.

I hadn't heard this-not saying you are wrong. Have you a reference for this

What may halt the drop in prices is that people stop buying houses, at all.

Can you expnd on this as I simply dont understand.

I'll be surprised if there's not another min 10-15% drop in the next 12 months

My opinion on this is if the trend during 2012 continues into 2013 then Q2,3 & 4 will show drops of 6% yoy

[2buyornot2buy]

Quote

There are at least 5,000 vacant props for which builders have been granted a further rates exemption.

Quote

I hadn't heard this-not saying you are wrong. Have you a reference for this

The figures come from the NIHE in August 2011.

[2buyornot2buy]

Quote

What may halt the drop in prices is that people stop buying houses, at all.

Can you expnd on this as I simply dont understand.

I believe Shoto is saying that if there are zero sales then the price will neither rise nor fall.

[Bergy100]

In my most recent conversation with an EA I was told, w/o any prompting on my part, the middle market was stuck. Obvious inference was asking prices are still too high. With that in mind, I'm anticipating decent sizes drops in asking prices to continue into 2013. Still seeing examples of 20K being taken off houses in one day and continuing to sit unsold.

For 2013, I would like to see more houses coming on realistically priced in the first place - think there's still far too many kite fliers. There's a fair bit to play out yet.

[ravedave]

Was the EA talking in relation to the middle market in a specific area or NI in general?

[YoungFTB]

In my most recent conversation with an EA I was told, w/o any prompting on my part, the middle market was stuck. Obvious inference was asking prices are still too high. With that in mind, I'm anticipating decent sizes drops in asking prices to continue into 2013. Still seeing examples of 20K being taken off houses in one day and continuing to sit unsold.

For 2013, I would like to see more houses coming on realistically priced in the first place - think there's still far too many kite fliers. There's a fair bit to play out yet.

Yup I can second that! I've spoke to a few who have said the same thing, repossessions & auctions are driving the market atm at the bottom end but until the middle of the market gets moving then the transaction numbers are doing to remain low and that won't change unless sellers start getting more realistic about their asking prices.

Was the EA talking in relation to the middle market in a specific area or NI in general?

I think it was NI in general but may apply more so to the more desirable areas like Belfast and North Down

Edited December 5, 2012 by YoungFTB

[Shotoflight]

Could you expand

I hadn't heard this-not saying you are wrong. Have you a reference for this

Can you expnd on this as I simply dont understand.

My opinion on this is if the trend during 2012 continues into 2013 then Q2,3 & 4 will show drops of 6% yoy

The 5000 was quoted by prob jim fitz on newsline - in relation to sammy wilson extending the vacant rates allowance for builders.

My view is that the only way house prices will stop dropping is if none are sold ie continued sales mean continued drops for the forseeable future.

The fundamentals (for me) relates to the average wage, disposable income, rising bank interest rates, rising inflation (food/oil), unemployment, pay freezes, benefit cuts, 25% empty shops, austerity to 2018, dodgy eurozone and ROI, food banks and soup kitchens, debt agencies caseloads increasing exponentially, payday loans, negative equity, bank forbearance, part time work, up to 80% of cuts still in the pipeline, student fees, youth unemployment, high private rents precluding the saving for a deposit, triple dip recession...................

& I thought that 20% VAT was also temporary - people have short memories.

For EAs to claim the average selling price is £140k doesn't stack up

http://www.northernireland.gov.uk/index/media-centre/news-departments/news-dfp/news-dfp-nov-2012/news-dfp-261112-rates-relief-extended.htm

The Empty Retail Premises Relief scheme and the rates exemption for stand alone ATMs in rural areas which were due to end in March 2013 will now be extended until the end of the current budget period in March 2015, subject to Assembly approval. The Minister also announced his intention to extend the current 18 month developer exclusion applicable under the Rating of Empty Homes for a further 12 months.

I thought I heard on the radio by the way that mortgage interest relief (SMI) is to be extended for another 2 years.

From LPS. Sammy estimated £10 million income pa from this.

As of the 11 June (2011 - the last time the figure was compiled) there were 35,690 vacant domestic properties in the Valuation List

Edited December 5, 2012 by Shotoflight

[shifty_FTB]

been looking at houses over the last 2 years, bought in september, and generally the bottom of the market in belfast (2/4 bed terrace etc) hasnt really changed in price over the last year.

the houses that came on st or that were reduced to under £80k in east belfast over the last year for example had generally been a mess and in need of much refurbishment and work. I havent noticed this 12% drop in prices

not sure when the housing bubble began . . . . but i paid 85% of what the house sold for off-plan in 2004 . . . . whether or not that would equate to its supposed value in 2002 i dont know . . . and was it a good deal . . . hmmmm

[Bergy100]

Was the EA talking in relation to the middle market in a specific area or NI in general?

I didn't ask. I would assume it is in general but definitely applicable to Belfast where I am looking.

[Shotoflight]

Could you expand

I hadn't heard this-not saying you are wrong. Have you a reference for this

Can you expnd on this as I simply dont understand.

My opinion on this is if the trend during 2012 continues into 2013 then Q2,3 & 4 will show drops of 6% yoy

What 2012 trend are you referring to? Level of sales, level of drops, both?

As an aside to the 5,000 empty houses - there seems to be up to 3,500 unadopted roads. Probably a couple of vacant props here, and a few half built, and a couple rented out by the developer. Certainly was the case round my way with at least one bust developer.

http://www.niassembly.gov.uk/Documents/Reports/Regional%20development/nia-44-11-15.pdf

The Committee for Regional Development (the Committee/CRD) received a presentation on the increasing numbers of unadopted roads in Northern Ireland from the Northern Ireland Local Government Association (NILGA) on 18 January 2012. Following this presentation, the Committee agreed to undertake an Inquiry into Unadopted Roads

2. During the course of the inquiry, the Committee were advised that there were anything between 1,200 and 3,500 unadopted roads and some 1,200 sewerage schemes in backlog. DRD and NIW are unable to quantify the precise numbers which the Committee believes to be a significant weakness in itself. Recommendations to negate this weakness have been made and are detailed later in this report.

3. It was estimated that it would take some £300 million to bring roads up to a standard sufficient to allow for adoption and somewhere in the range of £41 million and £100 million to allow for adoption of sewerage and waste water schemes. As could be expected in today’s economic climate, it is extremely unlikely that these levels of investment can be acquired from central government. However, the Committee is not suggesting that actions cannot be taken to rectify this significant problem but rather a coordinated effort by all sectors involved in the process could see major improvements in the most critical cases.

[BelfastVI]

What 2012 trend are you referring to? Level of sales, level of drops, both?

As an aside to the 5,000 empty houses - there seems to be up to 3,500 unadopted roads. Probably a couple of vacant props here, and a few half built, and a couple rented out by the developer. Certainly was the case round my way with at least one bust developer.

http://www.niassembly.gov.uk/Documents/Reports/Regional%20development/nia-44-11-15.pdf

The Committee for Regional Development (the Committee/CRD) received a presentation on the increasing numbers of unadopted roads in Northern Ireland from the Northern Ireland Local Government Association (NILGA) on 18 January 2012. Following this presentation, the Committee agreed to undertake an Inquiry into Unadopted Roads

2. During the course of the inquiry, the Committee were advised that there were anything between 1,200 and 3,500 unadopted roads and some 1,200 sewerage schemes in backlog. DRD and NIW are unable to quantify the precise numbers which the Committee believes to be a significant weakness in itself. Recommendations to negate this weakness have been made and are detailed later in this report.

3. It was estimated that it would take some £300 million to bring roads up to a standard sufficient to allow for adoption and somewhere in the range of £41 million and £100 million to allow for adoption of sewerage and waste water schemes. As could be expected in today’s economic climate, it is extremely unlikely that these levels of investment can be acquired from central government. However, the Committee is not suggesting that actions cannot be taken to rectify this significant problem but rather a coordinated effort by all sectors involved in the process could see major improvements in the most critical cases.

The trend in 2012 that I was referring to was the drop in sales prices.

In regards to the unadopted Roads I know a bit about this.

A road bond is a form of security taken out by the developers to cover the uncompleted streets that are constructed as a development proceeds. If a developer fails to complete a road, or goes bust the bondholder will pay up to complete. It is a slow process but it has been happening.

In an answer to a question by the Minister, which was:

Question: How many road bonds are currently still active- Answer 3,500

Question: What is the value of these bonds. Answer £350,000

Therefore our intelligent took the absolute doomsday figure of every bond been called for the max amount and stated that that could be the liability out there.

That is like asking how many insurance policies are there for houses Answer (guess) 500,000

What is the average cost of rebuilding Answer £80,000

Therefore yes the total exposure is £40bn. But it is a nonsense figure.

The best bit is this was all explained in detail to the government committee and they understood it. However, they came out with the nonsense figures anyway.

[Shotoflight]

The trend in 2012 that I was referring to was the drop in sales prices.

In regards to the unadopted Roads I know a bit about this.

A road bond is a form of security taken out by the developers to cover the uncompleted streets that are constructed as a development proceeds. If a developer fails to complete a road, or goes bust the bondholder will pay up to complete. It is a slow process but it has been happening.

In an answer to a question by the Minister, which was:

Question: How many road bonds are currently still active- Answer 3,500

Question: What is the value of these bonds. Answer £350,000

Therefore our intelligent took the absolute doomsday figure of every bond been called for the max amount and stated that that could be the liability out there.

That is like asking how many insurance policies are there for houses Answer (guess) 500,000

What is the average cost of rebuilding Answer £80,000

Therefore yes the total exposure is £40bn. But it is a nonsense figure.

The best bit is this was all explained in detail to the government committee and they understood it. However, they came out with the nonsense figures anyway.

You're right to be sceptical about the figures - or guesstimates - the plain fact is they probably don't know. However there is no doubting it is a major problem - your own eyes will tell you that. There's also no doubting the figures could be established very quickly - if they wanted to shine a light under that particular stone.

In terms of house prices going up or down - an added dimension, I feel, is that many people are now coming back to seeing the real value of money where they realise £100k actualy is one hundred thousand pounds and £250k actually is a quarter of a million pounds (and indeed has to be paid back). I think many will think longer and harder before signing off on such sums when prices are steadily falling, builders are failing, incomes are trailing and "hard luck" stories abound about people 'buying at the wrong time' and 'paying too much'. It has been stated quite clearly that in terms of austerity, we are only half way through - what will the next half bring?

Certainly in NI, the public sector foundation is being eroded and the private sector (which feeds off the public sector to a large extent) is feeling the chill. This is only going to get worse.

and as for tourism............