Is Prime London Crashing? - Merged Threads

[rantnrave]

No. Just availability of credit.

Sentiment certainly affects asking price levels.

[dances with sheeple]

Sentiment certainly affects asking price levels.

Yes, but that`s not backed by anything?

[Damik]

FTBs house prices soaring. I think the London will crash next year ...

http://www.theweek.co.uk/house-prices/61987/house-prices-for-first-time-buyers-soar-after-buy-to-let-feast

Asking prices for homes targeted at first-time buyers soared at a far faster rate than the wider market in April after a "feast" for buy-to-let investors in recent months, according to the property website Rightmove.

[kibuc]

Well the shared ownership crowd shouldn't be too worried. Maybe they will soon be able to buy the 75 per cent they don't own for less then the 25 per cent share they have bought!

But I tell you this shared ownership stuff now in London is crazy. I even saw one advertised this week - yes what is supposedly government subsidised housing - which required you to have a £150000 deposit and a £71k salary (the max permitted) as the price of the 60 per cent share of flat you were buying was so crazy that was the only combo that could work. You have to live in Ealing at present too!

Priority will be given to serving military personnel - as if you could save £150k on an army salary!

https://www.sharetobuy.com/firststeps/sharedownershippropertydetails?id=23229

I agree that buying a small share doesn't have to be the worst idea of all. At least, that's what I keep telling myself, as I'm about to buy one

The only scenario that would be a massive blow for me would be a huge (40%+), but short-lived fall in prices in the next 2 years. That would wipe out most of my equity and wouldn't allow me to re-mortgage to take advantage of lower prices. However, since I'm in the market for a rather limited number of properties in my neighborhood (circa 60 existing ones and another 60-80 due to be completed next summer, but reportedly 'sold' already), I'm not going to bet my well-being on the chance that one of those properties will be on sale precisely when the market hits the bottom. And I don't believe that the market will bounce back that quickly anyway. It's not 2009 anymore and European governments have already used most of their tricks.

Any other scenario is one I can live with, as it would take a fall of roughly 9% per year to make renting-and-waiting on par with buying immediately - courtesy of insane renting costs. 30% over 3 years would leave we 10k short, which translates into 300£ per month for 3 additional years of comfort of being able to settle in. It's still money, but for me it's worth it.

Some of those 'affordable' SO flats out there are a joke, however. 'Priority given to council tenants' with 65k+ income and 30k savings are a regular occurrence.

[suntory]

I agree that buying a small share doesn't have to be the worst idea of all. At least, that's what I keep telling myself, as I'm about to buy one

The only scenario that would be a massive blow for me would be a huge (40%+), but short-lived fall in prices in the next 2 years. That would wipe out most of my equity and wouldn't allow me to re-mortgage to take advantage of lower prices. However, since I'm in the market for a rather limited number of properties in my neighborhood (circa 60 existing ones and another 60-80 due to be completed next summer, but reportedly 'sold' already), I'm not going to bet my well-being on the chance that one of those properties will be on sale precisely when the market hits the bottom. And I don't believe that the market will bounce back that quickly anyway. It's not 2009 anymore and European governments have already used most of their tricks.

Any other scenario is one I can live with, as it would take a fall of roughly 9% per year to make renting-and-waiting on par with buying immediately - courtesy of insane renting costs. 30% over 3 years would leave we 10k short, which translates into 300£ per month for 3 additional years of comfort of being able to settle in. It's still money, but for me it's worth it.

Some of those 'affordable' SO flats out there are a joke, however. 'Priority given to council tenants' with 65k+ income and 30k savings are a regular occurrence.

I don't understand your logic. Let's say that you are putting down £20k for £200k stake in a SO flat. Let's say that £200k is 25% of the total value of £800k. That means that your £20k only reprents 2.5% of the total value.

If you factor in stamp duty, fees, solicitor and so forth, you are already in negative equity the moment you move in. And that's assuming value remains the same. The tiniest wobble means that you owe money, perhaps tens of thousands of pounds. It's an insane risk to take.

[MARTINX9]

I don't understand your logic. Let's say that you are putting down £20k for £200k stake in a SO flat. Let's say that £200k is 25% of the total value of £800k. That means that your £20k only reprents 2.5% of the total value.

If you factor in stamp duty, fees, solicitor and so forth, you are already in negative equity the moment you move in. And that's assuming value remains the same. The tiniest wobble means that you owe money, perhaps tens of thousands of pounds. It's an insane risk to take.

You only pay stamp duty on the share you buy ie £1500 in your example on £200k rather than £30k on £800k. Clearly if you staircase up you would incrementally pay more - but few will ever own outright at those prices.

So I don't exactly see how the immediate negative equity applies.

It's not ideal but if you are desperate to live in zones 1 and 2 in London and have security of tenure it's the only option for most people these days. If prices fall you can buy a higher share more cheaply and if they rise well your share is worth more.

Is it better to own 25 per cent of a flat in Islington or Wapping or 100 per cent of one in Luton?! We all hope for the crash - but we can't be certain.

Edited May 16, 2016 by MARTINX9

[Growlers2]

http://www.rightmove.co.uk/news/house-price-index

• Modest May rise of 0.4% (+£1,118) in price of property coming to market in the last month masks nasty spring surprise for first-time buyers
• An 80% uplift in March transaction numbers has left behind a property drought and price surge:
  – 6.2% (+£11,298) monthly jump in price of typical first-time buyer properties
  – Strong demand continues in this sector despite withdrawal of many investors following introduction of higher stamp duty taxes, yet new-to-the-market supply is down 1.5% year-on-year
• First-time buyer regional hotspots led by Croydon, Dartford and Luton, all with annual surges of over 18%

I'd not read one of these for along time. They really do torture the data. Utter BS. They seems to have come up with as many metrics as possible so that they can always report on a particular segment showing growth.

No mention of the 0.3% fall in asking prices in London per the lead:

http://www.rightmove.co.uk/news/wp-content/uploads/2009/07/Rightmove-House-Price-Index-16-May-London-Final.pdf

And that doesn't include reductions. And just 0.4% nationally. Basically post reductions prices are falling.

[MARTINX9]

Property hotspots like Croydon, Luton and Dartford. Is that what people have to look forward to aspiring to?!

[Growlers2]

Property hotspots like Croydon, Luton and Dartford. Is that what people have to look forward to aspiring to?!

Right but crucially it's FTB demand in those areas (2 bedrooms or fewer)

The Index can now include further breakdowns in the housing market to offer trends at three different sectors of the market: first-time buyer, second-stepper and top of the ladder. Inner London prices have been excluded from this categorisation as the normal housing ladder is not really applicable.

Move along...nothing of significance happening in central London!

First-time buyer: This figure represents the typical property a first-time buyer would purchase, covering all two bed properties and smaller that come to market (houses and flats).

Second-stepper: This figure represents the typical property of a person moving from their first home, covering all three and four bed properties that come to market (houses and flats) excluding four bed detached houses.

Top of the ladder: This figure represents asking prices at the top end of the market, covering all five bed properties and above (houses and flats), as well as four bed detached houses.

The reason Croydon is top for FTBers is because they have a mountain of shit new build 1-2 beds coming to market literally as far as the eye can see.

[suntory]

You only pay stamp duty on the share you buy ie £1500 in your example on £200k rather than £30k on £800k. Clearly if you staircase up you would incrementally pay more - but few will ever own outright at those prices.

So I don't exactly see how the immediate negative equity applies.

It's not ideal but if you are desperate to live in zones 1 and 2 in London and have security of tenure it's the only option for most people these days. If prices fall you can buy a higher share more cheaply and if they rise well your share is worth more.

Is it better to own 25 per cent of a flat in Islington or Wapping or 100 per cent of one in Luton?! We all hope for the crash - but we can't be certain.

Sorry, but you own jack shit. Let's say you do end up paying off the 25% share: all you "own" is the right to be a tenant in the property for a contractually agreed price. And believe you me, that price will just rise and rise and rise. Folks who are buying SO today will be royally ******ed with regards to service charge, ground rent and the rent for the remaining share.

If you don;t believe me then perhaps you should check Land Registry figures for SO properties. The deed does not make any mention of the owner of the 25% whatsoever.

As for security of tenure, well let's see how secure that is if you fall behind in your rent. I would say within 6 months you are probably out. If not sooner.

Shared ownership is a total scam.

[pig]

You only pay stamp duty on the share you buy ie £1500 in your example on £200k rather than £30k on £800k. Clearly if you staircase up you would incrementally pay more - but few will ever own outright at those prices.

So I don't exactly see how the immediate negative equity applies.

It's not ideal but if you are desperate to live in zones 1 and 2 in London and have security of tenure it's the only option for most people these days. If prices fall you can buy a higher share more cheaply and if they rise well your share is worth more.

Is it better to own 25 per cent of a flat in Islington or Wapping or 100 per cent of one in Luton?! We all hope for the crash - but we can't be certain.

I've never heard of one that wasn't over-priced to begin with and almost impossible to sell once the owner wanted to get shot of it. Bearing that in mind I'm struggling to understand the desperation to live in zones 1/2.

Edited May 16, 2016 by pig

[long time lurking]

No. Just availability of credit.

See Spain.... no problem whatsoever with credit ...prices ?

[Nabby81]

Right but crucially it's FTB demand in those areas (2 bedrooms or fewer)

Move along...nothing of significance happening in central London!

The reason Croydon is top for FTBers is because they have a mountain of shit new build 1-2 beds coming to market literally as far as the eye can see.

Luton will get that way soon , planning permission has just gone in for 18 story apartment blocks near the airport train station

[Byron]

Will they actually build the apartment blocks?

I guess builders are starting to get cold feet.

[MARTINX9]

I've never heard of one that wasn't over-priced to begin with and almost impossible to sell once the owner wanted to get shot of it. Bearing that in mind I'm struggling to understand the desperation to live in zones 1/2.

I don't disagree but some people want to live in Upper Street or Dalston.

If the alternative is a lifetime of six monthly private rentals with no security at all many will prefer that. In the right location these are as easy to sell as a flat in a worse place as few can afford the full market prices but can afford a quarter of that.

London is heading for 12 million people by 2035. Most of outer London is going to turn into an overcrowded dump - Upper Street may still be quite nice

Edited May 16, 2016 by MARTINX9

[suntory]

I don't disagree but some people want to live in Upper Street or Dalston.

If the alternative is a lifetime of six monthly private rentals with no security at all many will prefer that. In the right location these are as easy to sell as a flat in a worse place as few can afford the full market prices but can afford a quarter of that.

London is heading for 12 million people by 2035. Most of outer London is going to turn into an overcrowded dump - Upper Street may still be quite nice

If you are so into upper street why not buy a boat and find a mooring in Regent's Canal in Islington? Surely that's better than doing the whole SO thing.

[MARTINX9]

If you are so into upper street why not buy a boat and find a mooring in Regent's Canal in Islington? Surely that's better than doing the whole SO thing.

I'm not but I am sure there are some mugs - sorry Londoners - who will be willing to pay £2600 a month to own 25 per cent of a two bed flat at Canonbury Cross. It's noisy and on a main road but you are literally seconds away from all those delightful bistros, wine bars and yes artisan bakeries (aka Tesco metro) of Upper Street. It will at least be warner than a boat.

https://www.sharetobuy.com/firststeps/sharedownershippropertydetails?id=21500

Edited May 16, 2016 by MARTINX9

[Killer Bunny]

Yes, but that`s not backed by anything?

Thank you!

[Saving For a Space Ship]

House prices fall in London’s luxury postcodes

http://www.theguardian.com/money/2016/may/17/house-prices-drop-london-luxury-postcodes

Eric posted it below, but i thought it worth linking here

http://www.housepricecrash.co.uk/forum/index.php?/topic/209716-guardian-house-prices-fall-in-londons-luxury-postcodes/

[Killer Bunny]

See Spain.... no problem whatsoever with credit ...prices ?

What on earth are you talking about?

Biggest number build in World and no crash. Credit crunch and Crash.

Since then lacklustre gorwth if any - still tight lending

[Damik]

House prices fall in London’s luxury postcodes

http://www.theguardian.com/money/2016/may/17/house-prices-drop-london-luxury-postcodes

Eric posted it below, but i thought it worth linking here

http://www.housepricecrash.co.uk/forum/index.php?/topic/209716-guardian-house-prices-fall-in-londons-luxury-postcodes/

Unfortunately these Prime London falls are not still reflected in LR numbers. Very annoying!

[Growlers2]

Interesting:

http://www.breakingviews.com/chancellor-uk-housing-crisis-isnt-supply-problem/21247887.article

[Killer Bunny]

It is of course wrong.

It's about lending primarily. IE HTB thus time. Bank lending to 2008.

[Si1]

It is of course wrong.

It's about lending primarily. IE HTB thus time. Bank lending to 2008.

As far as I can tell, behaviorally, people simply borrow as much as they get offered, so would agree with this. Banks' own sentiment or rather, I guess, the sentiment of owners of banks and their own debt, is probably more significant than public sentiment. Of course if the government underwrites the banks then ridiculous things then happen. Edited May 18, 2016 by Si1

[Damik]

It is of course wrong.

It's about lending primarily. IE HTB thus time. Bank lending to 2008.

Interestingly BoE stopped publishing M3 or M4 money aggregates some years ago. When they started to clearly show new money coming in from the house market ..