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Why Are So Few New Properties Coming On To The Market?

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I live in London and I thought that with HTB I would see a lot more would be sellers putting their properties on the market. Strangely, this has not happened (in my area at least it is even quieter than normal with very few new properties coming on). HTB can only work if there are sellers and buyers. Presumably all the media hype has not go to to many sellers who know that it means paying more for their next property (and more stamp duty). It feels like the market has really stalled around here. Where are all the sellers who could be making huge profits from their overpriced properties?

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I live in London and I thought that with HTB I would see a lot more would be sellers putting their properties on the market. Strangely, this has not happened (in my area at least it is even quieter than normal with very few new properties coming on). HTB can only work if there are sellers and buyers. Presumably all the media hype has not go to to many sellers who know that it means paying more for their next property (and more stamp duty). It feels like the market has really stalled around here. Where are all the sellers who could be making huge profits from their overpriced properties?

No one can afford to move to bigger houses, so down-sizers only?

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Have a look at HonestEA's pinned thread in anecdotals.

As I understand it the fundamental problem is that there are a lot of people in properties bought 2004-2008 who have minimal equity and no chance of trading up.

HEA says (20 October) that selling enquiries are up by 25% but buying enquiries have collapsed.

HTB was generating a mini-boom as people were buying anticipating price rises next year on the back of it; now that the details have been revealed (i.e. there isn't much help in reality) the demand has collapsed.

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I think we are seeing a congestion due to FTB can't afford to buy even with HTB, homeowners unable to upsize as cannot afford where downsizers cannot buy due to lack of supply (see upsizers), foreigners snapping up property to rent out at very high price which remain vacant, no more homes being built... Everything will grind to a halt.

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Another issue is stamp duty. Whilst many homeowners may like the value of their house to increase, many just want a home to live in. If they need to move for personal or job reasons, they need to find ever more money for stamp duty. Stamp duty in the south east in particular locks people to their homes, as they cannot afford to find the money to move.

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If there really is a genuine housing shortage then surely there would not be many houses to buy as they are all occupied and if you sold then where would you move to.

Back in 08' there were quite a few new build flats and small houses compared to today's market.

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No one can afford to move to bigger houses, so down-sizers only?

+1.

People cannot afford to move. Loads of people wanting to downsize.

I am pleased to see lots of 250K to 600K sales finally falling through in Swansea. Many went SSTC in May/June so their sales have been dragged out for months before failing. It might even remove some of that Summer smugness from the EAs.

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Sellers in central-ish London wanting to upsize won't get the HTB bung from the taxpayer if the next place is > £600k - and in that bracket they are competing with foreign cash.

The increased selling price they get thanks to HTB won't help their next purchase - presumably the penny is dropping that HPI hurts upsizers.

Edit to add: I am seeing v. low volumes in my area too btw

Edited by Vested Disinterest

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The next rung of the ladder has been moved further away and you need an additional £20,000 cash to cover stamp duty and moving fees so although people are 'property rich' they can't move, if property halved in price overnight the next rung would be reachable and they would only need £10,000 in cash to move (rough figures but you get the point) and so could move up the property ladder.

It's happening all over again, just in a different way.

Social misery and crippling economic instability followed. Citizens watched in horror as their life savings disappeared. It didn't take long for the middle class to be replaced by a new class: the new poor. Many struggled to find even the barest of necessities, and starvation raged. Soon communities printed their own money, based on goods such as potatoes or rye. Shoe factories paid their workers in bonds for shoes which they could exchange at the bakery for bread or the meat market for meat. As Fergusson describes it: "In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. A prostitute in the family was better than an infant corpse; theft was preferable to starvation; warmth was finer than honor; clothing more essential than democracy, food more needed than freedom."

A few years time people will marvel at their property prices then be surprised that they can only exchange their property for a used car. Meanwhile people will be starving on the streets and queued up outside hostels and food banks.

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Depending on where you are in London - it might also be something that I have seen 3 times now with 3 different couples from our NCT group. All of them living in 1 or 2 bed flats on the Zone 1/2 boundary, and deciding that as the first child gets past 18months, and they think about a second and / or wanting more space they look for a 3/4 bed somewhere further out - either zone 3/4 or suburban commuter land. The flats that they are moving out of are reasonably typical first time buyer flats either ex LA, or Victorian terrace conversions types - so pretty much typical FTB fodder.

All of them - without exception - have kept the flat to rent out, and just bought a house in addition. God knows how much debt it means that they must have in total, or how they square it with the bank, but they have all taken the view "you can't go wrong with central London property - whatever we do we shouldn't sell it unless we absolutely have to"

No idea how much that must be being repeated across the place, and is clearly anecdotal, but it must be having some sort of impact on the lack of property for sale.

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The next rung of the ladder has been moved further away and you need an additional £20,000 cash to cover stamp duty and moving fees so although people are 'property rich' they can't move, if property halved in price overnight the next rung would be reachable and they would only need £10,000 in cash to move (rough figures but you get the point) and so could move up the property ladder.

It is worse than that. If you move between houses worth up to 250k you only need to find 1% for stamp duty (£2500 for 250k). If you move between 300k houses you need to find 3% or £9000 just for the privilege of moving. If you need to move between two houses worth 600k it will be 4% so 24k just to pay the duty. If all you want to move up or even sideways, it is often too much to afford.

Edited by BalancedBear

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It is worse than that. If you move between houses worth up to 250k you only need to find 1% for stamp duty (£2500 for 250k). If you move between 300k houses you need to find 3% or £9000 just for the privilege of moving. If you need to move between two houses worth 600k it will be 4% so 24k just to pay the duty. If all you want to move up or even sideways, it is often too much to afford.

Yep. Equity rich but cash poor. They need a new mortgage just to pay for the stamp duty.

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Have a look at HonestEA's pinned thread in anecdotals.

As I understand it the fundamental problem is that there are a lot of people in properties bought 2004-2008 who have minimal equity and no chance of trading up.

HEA says (20 October) that selling enquiries are up by 25% but buying enquiries have collapsed.

HTB was generating a mini-boom as people were buying anticipating price rises next year on the back of it; now that the details have been revealed (i.e. there isn't much help in reality) the demand has collapsed.

HonestEA -

Posted 19 September 2013 - 10:49 PM

'The next 6 months may well be the most interesting in the UK housing market since 2008 in my opinion.

I have not posted this year since the market has been broadly unchanged for ages. Basically the story has been one of gently increasing prices with buyers competing for anything of quality in a good areas underpinned by low transactional volume. This year in particular the paucity of choice for potential buyers has been more dominant than overwelming demand. Essentially buyer numbers in my SE location are up a modest 5% Year on Year but the number of sellers is down over 20%. As this gap has progressively widened , so the upward pressure on prices has intensified , but crucially the transactional volume is still not above 50% of the long term average achieved 1945 - 2007. I am reminded of standard advice to traders to not extrapolate pricing signals from a thinly traded market.

There has been a few more sellers tempted to the market this September but not nearly enough to affect the trajectory of the market. Low end freeholds (<200K) are attracting triple demand from first time buyers, downsizers and still a significant number of cash rich BTL types and are therefore virtually an instant sale when presented to the market. Highend stuff (for Kent) 500K - 2M still turning over bouyed by price refugees from more affluent parts of London & Home Counties. Middle bracket also turning over but more downsizers from higher value properties than people trading up the market. Very little vertical movement locally as the gap between each "rung of the ladder" has become prohibitive for most. 60% of our sales are cash buyers or cash from sale.

Asking prices have bidded up agressively by agents desperate to secure the business along with downward pressure on fees. Sale agreed prices are increasing , but not as fast as asking prices. Actual selling prices up approx 5% this year in my location , projected 6% by year end.

New Homes division of our EA absolutely flat out making hay while sun shines on the back of Help to Buy. New Homes collegues starting to become a little nervous that the government will actually go through with making Help to Buy available to the second hand market from January 2014 which will collapse demand for their overpriced offerings overnight.

The forward announcing of Help to Buy in the last budget has been a very clever piece of market manipulation. Basically it has been a sentiment changer in that those who were waiting in the wings hoping for some sort of correction have actually been buying in significant numbers. This is my anedotal evidence from the front line backed up by many posts over the last few months on this forum from people who have thrown in the towel and decided to buy fearing a wall of government subsidy money will push prices further away from them next year. No serious money has yet been spent by the Government on this policy yet it has succeeded in bringing back the general populations confidence in perpetual house price growth. However, the history of government intervention in the housing market is full of unintended consequences.

Clearly the plan is to restore the "missing 50%" by enticing people to the market who previously could not afford to participate due to lack of equity in their current property to fund the onward deposit. It is spun as help for First time buyers but those who bought with those 100% to 120% mortgages around 2006 - 2008 are the real target audience here. If they come to the market and use Help to Buy then provided every seller becomes a buyer then then we are well on the way to restoring the missing 50% and stand a chance to restore the transactional volume far closer to the long tem average while attaining price stability along the way. The more volume in the market , the more reliable but less extreme become the pricing trends. So goes the theory.

In reality the number of these people is very significant indeed and their ability to distort the supply side of a local market is considerable if they act en masse. Every year that has passed since 2008 had added to the surpressed demand to sell. People delay selling, become reluctant landlords etc but very often the underlying demand to sell has not gone away. I (and any EA that have out there for the last 6 years) will have conducted literally hundreds of valuations over the last few years where the agents best and most generous assessment of value has simply not been enough to make the move financially viable even though there are strong personal reasons for the move to take place. My gut feeling is that at a certain pricing point , encouraged by Help to Buy , 6 years of pent up demand to sell will hit the market in Q1 2014. There are simply not enough buyers to assorb this potential surge in supply particularly from would be first time sellers and this could very quickly turn sentiment sharply negative again and more in tune with the harsh realities of the UK PLCs still precarious financial position. So a policy designed to prop up the market could actually cause a correction. That would indeed be ironic. '

Posted 20 October 2013 - 10:59 AM

'Small Update: Well things are changing for us as a result of Help to buy 2.

Up to the week when the announcement that the start date for HTB2 was to be brought forward , we were ticking along just fine. Not as many sellers as we would have liked , but enough fresh buyers registering to enable us to sell anything we listed fairly quickly.

Then , the monday after the announcement and ever since , basically tumbleweed time. December conditions in mid October. Not good. Buying enquiries down 70%.

At the same time , selling enquiries up 25% with the diary starting to pack out with valuation appointments. Significant increase in selling demand from 1st time sellers out there.

HTB2 not that all that great a deal actually. If they had subsidized the interest rate on the guaranteed part (as HTB1) then it would have been quite a significant game changer. The first time sellers now just about have enough equity to provide a 5% deposit to qualify, but they can t afford the payments on the the new 95% mortgage at rates of around 5% which is not very affordable for many, particularly if you are trading up the market to get a bigger place which is the typical scenario.

It now appears to me from my anicdotal experience that the mini boom this year has mainly been driven by purchasers trying to get ahead of anticipated price rises from HTB2 and this has suddenly subsided now it the details on HTB2 are becoming more widely known. All it has done is increase the availablility of 95% mortgages, but it has done nothing to increase the numbers of buyers who feel comfortable taking on this much debt or who can actually afford the repayments based upon the lenders still stricter lending ciriteria. It seems the banks are having to play along , but would still rather lend to a middle class BTL investors with a 50% deposits. '

Edited by Sancho Panza

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HonestEA -

Posted 19 September 2013 - 10:49 PM

'The next 6 months may well be the most interesting in the UK housing market since 2008 in my opinion.....

There's a later post on the same thread:

Small Update: Well things are changing for us as a result of Help to buy 2.

Up to the week when the announcement that the start date for HTB2 was to be brought forward , we were ticking along just fine. Not as many sellers as we would have liked , but enough fresh buyers registering to enable us to sell anything we listed fairly quickly.

Then , the monday after the announcement and ever since , basically tumbleweed time. December conditions in mid October. Not good. Buying enquiries down 70%.

At the same time , selling enquiries up 25% with the diary starting to pack out with valuation appointments. Significant increase in selling demand from 1st time sellers out there.

HTB2 not that all that great a deal actually. If they had subsidized the interest rate on the guaranteed part (as HTB1) then it would have been quite a significant game changer. The first time sellers now just about have enough equity to provide a 5% deposit to qualify, but they can t afford the payments on the the new 95% mortgage at rates of around 5% which is not very affordable for many, particularly if you are trading up the market to get a bigger place which is the typical scenario.

It now appears to me from my anicdotal experience that the mini boom this year has mainly been driven by purchasers trying to get ahead of anticipated price rises from HTB2 and this has suddenly subsided now it the details on HTB2 are becoming more widely known. All it has done is increase the availablility of 95% mortgages, but it has done nothing to increase the numbers of buyers who feel comfortable taking on this much debt or who can actually afford the repayments based upon the lenders still stricter lending ciriteria. It seems the banks are having to play along , but would still rather lend to a middle class BTL investors with a 50% deposits.

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I live in London and I thought that with HTB I would see a lot more would be sellers putting their properties on the market. Strangely, this has not happened (in my area at least it is even quieter than normal with very few new properties coming on). HTB can only work if there are sellers and buyers. Presumably all the media hype has not go to to many sellers who know that it means paying more for their next property (and more stamp duty). It feels like the market has really stalled around here. Where are all the sellers who could be making huge profits from their overpriced properties?

....they won't sell if they think their investment will continue to rise......they either stick and deleverage or remortgage to rent it out and buy something else using that money as a deposit for a new place somewhere......you can't lose with London property they keep telling them. ;)

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