Jump to content
House Price Crash Forum
crashmonitor

A Housing Boom Without Sellers -Sunday Times David Smith

Recommended Posts

http://www.thesundaytimes.co.uk/sto/business/article1419856.ece?CMP=OTH-gnws-standard-2014_06_07

Sunday Times the spoilers will put the blocks on the link.

But in the lead article today he argues low interest rates and stamp duty are crippling supply and transactions are falling as prices continue to rise.

I have recently posted a thread where I also thought that stamp duty is deterring sellers....it makes no sense to pay £10,000 + in stamp duty with extending options. For a long tine I thought stamp duty was a restraint on prices but instead it seems to be causing a dearth in sellers.

The low interest rates he argues deters sellers that would normally downsize because of the zero interest rates on offer from releasing the equity. So widows hangs on in their five bedrooms mansions.......queue blocking.

Share this post


Link to post
Share on other sites

Supply has picked up slightly from Winter lows.

13 Dec 2013: According to Home, which takes property listings from virtually every single estate agency website and portal in the country, there are 481,000 properties currently for sale. In late 2007, there were 771,000.

The source EA Today above used now: http://www.home.co.uk/company/stats.htm

Here's a selection of our key website statistics, updated daily.
Property For Sale
Total unique homes for sale found: 550,399

Also it takes very few sellers and buyers to agree lower prices, for all other owners to see the values of their homes fall. That's how markets work.

Widow-A holds on, not wanting to sell home for less than £695,000, but Widow-B with little in savings, feeling bills mount up, or an expensive roof/damp repair to the house needs doing, deciders to get real, and sells for less to someone who now qualifies for a smaller MMR mortgage at £490K, and guess what? Widow-A's house is down-valued even though she wasn't on the market for sale, when it happens in just a few number. We could easily be at such a market point. An inflection point.

That's how HPI worked on the way up, when £695K owner, bought for £30K back in 1964. Other buyers in the area, over the years and decades, paid ever higher prices for homes, pushing hers up on comparable. It works same way to make all values fall. And supply is ticking up in some other non UK prime markets I track too, finally. Not by much, but hyperinflated 2.0 prices finally seeing more owners looking to cash in on that - and buyers may be in decline post MMR etc.

Share this post


Link to post
Share on other sites

http://www.thesundaytimes.co.uk/sto/business/article1419856.ece?CMP=OTH-gnws-standard-2014_06_07

Sunday Times the spoilers will put the blocks on the link.

But in the lead article today he argues low interest rates and stamp duty are crippling supply and transactions are falling as prices continue to rise.

I have recently posted a thread where I also thought that stamp duty is deterring sellers....it makes no sense to pay £10,000 + in stamp duty with extending options. For a long tine I thought stamp duty was a restraint on prices but instead it seems to be causing a dearth in sellers.

The low interest rates he argues deters sellers that would normally downsize because of the zero interest rates on offer from releasing the equity. So widows hangs on in their five bedrooms mansions.......queue blocking.

Low interest rates crippling supply? Are equity release schemes really that popular amongst pensioners?

Stamp duty I can kind of see why, just, because if a certain type of person thinks their property is worth £260k or £510k they aren't going to accept <£250k or <£500k that the buyer will offer to avoid the higher level of stamp duty so they sit on the property until that nice Mr Osbourne hears the heils wails of the Daily Mail/Express readers and puts thresholds up.

Another, rather ghoulish thought has occurred to me, is the mild winter we've just had also restricting supply? Fewer people either dying due to cold weather, realising their home is too expensive to heat or realising that in the snow and ice they can't cope. Hence fewer chain free houses and fewer downsizers selling.

Share this post


Link to post
Share on other sites

Quite ghoulish, but could be something in it. I think it's more as Martin L subtly implies, the default mindset is forever more HPI.

(shortage of houses dontcha know lol - just about everyone news-source and politician pushing that totally crazy notion being the main thing underpinning high house prices, thus no rush to downsize.) And as you suggest, nice Mr Osborne always going to protect home-owners; they need votes dontcha know and home-owners are voters.

Whereas it only takes few buyers and few sellers to transact at lower prices on other homes, to crash the value of homes not even on the market.

Equity release has its place, but expensive. For those on it now, less in inheritance for some, and for those on it long term, their creditors will have to do something with the house (sell or rent it), if and when it falls to their secured debt control.

By Martin Lewis

27 Mar 2014

...

4. If you need to release equity from your home, downsize sooner not later

... At 6 per cent to 7 per cent, interest rates here are far higher than most mortgages. Yet more significantly, as it’s usually paid from your estate or the sale of your house on death, you often don’t make any repayments, which means that, unlike a mortgage, you’re subject to vicious compounding.

... Otherwise it’s an expensive way to unlock your home’s value. That’s why I’d again note – do explore downsizing earlier. While you may argue house price inflation means it’s worth holding on, that won’t help you if you never get round to it.

Edited by Venger

Share this post


Link to post
Share on other sites

It would be interesting to find out how many of the "mythical" poor widows living in expensive homes really exist. There must be quite a few (not just widows but people who never married or got divorced/separated).

Share this post


Link to post
Share on other sites

Supply has picked up slightly from Winter lows.

The source EA Today above used now: http://www.home.co.uk/company/stats.htm

Also it takes very few sellers and buyers to agree lower prices, for all other owners to see the values of their homes fall. That's how markets work.

Widow-A holds on, not wanting to sell home for less than £695,000, but Widow-B with little in savings, feeling bills mount up, or an expensive roof/damp repair to the house needs doing, deciders to get real, and sells for less to someone who now qualifies for a smaller MMR mortgage at £490K, and guess what? Widow-A's house is down-valued even though she wasn't on the market for sale, when it happens in just a few number. We could easily be at such a market point. An inflection point.

That's how HPI worked on the way up, when £695K owner, bought for £30K back in 1964. Other buyers in the area, over the years and decades, paid ever higher prices for homes, pushing hers up on comparable. It works same way to make all values fall. And supply is ticking up in some other non UK prime markets I track too, finally. Not by much, but hyperinflated 2.0 prices finally seeing more owners looking to cash in on that - and buyers may be in decline post MMR etc.

I think you mean a house worth £695k today was probably about £6k in 1964, not £30k. Some places have risen more than 65 x in the time period 1964 to today!

Share this post


Link to post
Share on other sites

I think you mean a house worth £695k today was probably about £6k in 1964, not £30k. Some places have risen more than 65 x in the time period 1964 to today!

Yes...take ~£fivek.......what in 50 years?

Share this post


Link to post
Share on other sites

It would be interesting to find out how many of the "mythical" poor widows living in expensive homes really exist. There must be quite a few (not just widows but people who never married or got divorced/separated).

Agreed. How could we find out? Maybe theres something in the census data that could help?

Personally, I can't understand why anyone over retirement age would prefer to live in a big old lonely house with its associated maintenance and heating costs than downsize drastically and invest the profit where you would actually get to see the yield.

If it's about the inheritance legacy, I'd prefer to see my family benefit from it while I'm alive.

Perhaps it's the hassle, if they are comfortable enough as they are then maybe they can't be bothered.

Maybe they need that amount of chores to keep them busy?

Maybe they don't exist (in any quantity).

Share this post


Link to post
Share on other sites

There were much higher numbers trying to sell their houses in 2007 but stamp duty was the same for most houses.

The lack of people trying to sell is strange. But when governments interfere with markets the outcome is never predictable.

Share this post


Link to post
Share on other sites

I think you mean a house worth £695k today was probably about £6k in 1964, not £30k. Some places have risen more than 65 x in the time period 1964 to today!

Yes, you're right lol; I'm being totally too generous again.

Perhaps I was 10 year out? 1974 might have been £30K?

When I posted that, I had this house in mind: http://www.rightmove.co.uk/property-for-sale/property-30713532.html

Stamp duty causing a dearth in sellers when so many older owner (not all who only have average terraces etc) have opportunity to downsize for a fortune. Eventually some will accept lower prices, and decide values for other owners of similar homes who aren't even on the market.

For a long tine I thought stamp duty was a restraint on prices but instead it seems to be causing a dearth in sellers.

The low interest rates he argues deters sellers that would normally downsize because of the zero interest rates on offer from releasing the equity. So widows hangs on in their five bedrooms mansions.......queue blocking.

It was annoying enough the calls to scrap stamp duty for older downsizers, earlier in the year (effectively allowing them to not only sell for a fortune, but even better placed to outbid others for humble homes - which I accept is part of a crash process, and smooths out over time).

Then you get argee1991 repeatedly posting how you can't expect older downsizers to bank a fortune in equity to downsize (£360,000 in his example, and still likely nice generous apartment/bungalow home at £600,000)- and maybe missing out on more HPI.

It is expensive to downsize. Moving down incurs all the moving costs associated with moving up. Selling a £1m property to move into a £600K property will cost over £40K when all fees and taxes are considered. In effect you lose 10% of the potential gain. I don't believe people are refusing to downsize, it's just that they lack any incentive to do so.

Share this post


Link to post
Share on other sites

Come to think of it where the heck are pensioners supposed to downsize to? Up until the 90s they were still building 1-2 bed bungalows*, that's all stopped now and it's all retirement flats (and all of their associated annual fees). That leaves 1-2 bed homes as the only other option, the very same small houses single people or young couples might be looking to buy. Leaving a FTB with competition not only from other FTBs and speculators but also cash-buyer pensioners.

* bungalows, now that's an interesting one, I wonder how many baby boomers are eyeing-up the bungalow their elderly parents might be living in so as to hoard it just in case they need it in later life.

Share this post


Link to post
Share on other sites

They're a bit less likely to downsize to Spain now, what with reports (true?) of having to declare all your financial assets.

Another feeble excuse, but real in the minds of many - including owners of higher value homes - is fear of savings in the bank. Arrggee's example of them downsizing with £360,000 cash left over after downsize. The horror of having that spread around in a load of banks. And belief in forever HPI anyway, and belief in general inflation making it worth less (say hello to 14 continuous months on non-food deflation).

Then there's the excuse bandied about, that they'll earn very little interest on such a fortune amount of savings (fgs).

The houses are there - many families in good financial positions in small houses, waiting to upsize. Crash bring out a cascade of landlords to market too perhaps.

It wouldn't take too many transactions of £1m / £695K homes at lower prices, from downsizing older owners willing to accept lower prices - and now the buying side becoming ever weaker, with HTB having pulled forward pent-up demand, and MMR adding something of a brake.

Even on very low volume, adjustment could happen very quickly (my guess as quickly as a 12 month smooth out - and that includes variations for those downsizing may influence the market higher for those homes for a time). Thus narrow the price gap for upsizers who've been waiting to upsize at better value, and more homes for downsize to downsize to.

Then again, all older owners of large nice family homes currently worth £1m, £695K, have 'no incentive' to downsize.

Aside from reducing IHT liability, it doesn't make much sense to downsize.

Moving from a £1million property to a £600K property costs £24K Stamp duty, £12K Estate agent fees (assuming 1% +VAT) and probably another £4K in various other costs. So that is £40K off the £400K "profit".

Moving costs are a reason to not move no matter what level the downsizing is. Even with a crash to 50% of current values and the abolition of Stamp Duty, the fees and other costs are still significant. Two million may plan to downsize, but far less will do it.

Edited by Venger

Share this post


Link to post
Share on other sites

Personally, I can't understand why anyone over retirement age would prefer to live in a big old lonely house with its associated maintenance and heating costs than downsize drastically and invest the profit where you would actually get to see the yield.

If it's about the inheritance legacy, I'd prefer to see my family benefit from it while I'm alive.

Perhaps it's the hassle, if they are comfortable enough as they are then maybe they can't be bothered.

.

My grandmother (86) will stay put simply because she is suffering macular degeneration & nearly blind, so the familiarity is important. She's well off enough not to need to downsize anyway

Share this post


Link to post
Share on other sites

My grandmother (86) will stay put simply because she is suffering macular degeneration & nearly blind, so the familiarity is important. She's well off enough not to need to downsize anyway

Indeed the idea that octogenarians need to downsize for financial reasons is way off the mark. We are talking about folk who bought these properties for next to nothing in the 50s and 60s, will probably have a large works pension and will be possibly hoarding large savings portfolios. The elderly lady a couple of doors down from me did downsize but she bought the downsize cash and marketed her property afterwards.

Indeed there is definitely a wasteful attitude to houses with the attitude that they only go up....why bother to sell when you can move and own two and leave one empty.

Edited by crashmonitor

Share this post


Link to post
Share on other sites

Indeed the idea that octogenarians need to downsize for financial reasons is way off the mark. We are talking about folk who bought these properties for next to nothing in the 50s and 60s, will probably have a large works pension and will be possibly hoarding large savings portfolios. The elderly lady a couple of doors down from me did downsize but she bought the downsize cash and marketed her property afterwards.

Indeed there is definitely a wasteful attitude to houses with the attitude that they only go up....why bother to sell when you can move and own two and leave one empty.

It's also off the mark (I won't say way off) to assume all octogenarians are wealthy.

In my grandmother's case, she lived in a tiny council flat. She had a decent enough army pension so got by financially.

The flat wasn't even suitable though as you had to walk up a flight of steps just to get to it which inevitably became too much.

The council offered her somewhere on the ground floor and later I offered to pay for a care home.

Her attitude to both was "this is my home, this is where I'll stay put till I die".

Which is exactly what she did, may her soul rest in peace.

Share this post


Link to post
Share on other sites

I suppose I'm also saying that living in large owner occupied accommodation doesn't neccessarily mean they have loads of money outside of the equity in the property. They didn't *need* to be wealthy when they bought.

Share this post


Link to post
Share on other sites

Come to think of it where the heck are pensioners supposed to downsize to? Up until the 90s they were still building 1-2 bed bungalows*, that's all stopped now and it's all retirement flats (and all of their associated annual fees). That leaves 1-2 bed homes as the only other option, the very same small houses single people or young couples might be looking to buy. Leaving a FTB with competition not only from other FTBs and speculators but also cash-buyer pensioners.

* bungalows, now that's an interesting one, I wonder how many baby boomers are eyeing-up the bungalow their elderly parents might be living in so as to hoard it just in case they need it in later life.

The bungalow housing stock is falling as building supply is next to nothing and developers are converting into houses. Now if that allows a family to live there then great. The market is unlikely to build them.

Is this the same David Smith from years back ? It isn't news. Just check out Freetrader's hmrc sales volumes threads. Commentators are always writung about a return to 2007 but the volumes are still miles off!

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   211 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.