Why August's Property Slump Will Only Get Worse

[Sancho Panza]

Telegraph 20/8/14

'Sellers have grown used to being able to price their homes unreasonably. Add a few thousand extra and the weary sellers keep trudging through the front door.

Fears of an unstoppable property boom have taken hold. The fear is understandable. While prices are over-valued against long-term averages (by 24pc against wages and 35pc against rents, according to the OECD), even cautious Britons are being tempted to get any sort of toehold on the property market. Some are becoming landlords. Buy-to-let mortgages are not subject to the same regulatory rigours as traditional mortgage lending. So when one type of lending is easier to dish out than another, the industry reacts as you would expect - it lends to landlords. Today there are 52pc more buy-to-let mortgages than a year ago.

To add to this perfect storm of rising prices, foreign money continues to pile in, at least in London, with Chinese demand for Battersea flats displacing would-be buyers and eventually translating into higher prices in Esher and Epsom.

First time buyers, understandably, have panicked. Their ranks have swollen by 20pc in a year.

But the picture may finally be changing, with the threat of rate rises looming. The Press seized upon data from Britain's biggest property portal this week that showed asking prices falling sharply. Rightmove recorded a 2.9pc drop in August. In some quarters, this was presented as the biggest fall on record but in reality was the largest decline for an August month since the index began in 2001.

It therefore raises the question of when have prices fallen faster. I asked Rightmove and the results are worth consideration.

Rightmove doesn't smooth its figures with the seasonal adjustments that are made to most other indices. This raw data, while volatile, can be more telling.

Firstly, August is always a bad month, precipitated by buyers disappearing off on holiday. But this year's drop was particularly bad (see the first table).

Secondly, the top five monthly falls (see the second table) have all fallen in the months of November and December.

To cut to the chase, if you are selling, you may want to redouble your efforts in the next two months. And buyers might want to target offers under the asking price from November.

This is no exact science - it never is with house prices - but if August registered a 2.9pc decline, far worse even than the decline of August 2007 when the market began to tank, then the established price drop months of November and December could be particularly bad this year.

Asking price falls during August
^{Source: Rightmove}

Year % fall 2007 -2.6% 2008 -2.3% 2009 -2.2% 2010 -1.7% 2011 -2.1% 2012 -2.4% 2013 -1.8% 2014 -2.9%

Five worst falls in asking prices
^{Source: Rightmove}

Month % fall December 2012 -3.3% December 2007 -3.2% December 2010 -3.2% November 2011 -3.1% November 2008 -2.9%'

Edited August 20, 2014 by Sancho Panza

[Fully Detached]

And buyers might want to target offers under the asking price from November.

Until then, keep offering above the asking price though, k?

[mewParadigm]

Not seen posted elsewhere - the Rightmove report prompted some bearishness from Forbes: http://www.forbes.com/sites/timworstall/2014/08/18/british-especially-london-property-prices-start-to-fall/

[sPinwheel]

Until then, keep offering above the asking price though, k?

Shes Worst?

[Fully Detached]

Shes Worst?

Of the two of them? Yes, I think so. I'd still take massive pleasure in tying his shoe laces together before setting a herd of wild bullocks loose on him, but she is just bloody awful.

[SE10]

Telegraph 20/8/14

November and December could be particularly bad this year

I'm looking forward to Christmas

[TwoWolves]

Don't suppose Russian sanctions might have something to do with killing the London market?

Who-would-have-thought-that?

[Ash4781]

Browsing Rightmove there seems to be imo a fair increase in stock in my local area (Maidstone) at sub £200k. Worryingly a lot more of the listings are chain free. Now to jump to conclusions these may be BTL who have cleared the tenant out for Summer with a view to sell. Some posters on the RICS survey thread highlighted that some surveyors were reporting BTL investors exiting.

Edited August 20, 2014 by Ash4781

[TheCountOfNowhere]

Browsing Rightmove there seems to be imo a fair increase in stock in my local area (Maidstone) at sub £200k. Worryingly a lot more of the listings are chain free. Now to jump to conclusions these may be BTL who have cleared the tenant out for Summer with a view to sell. Some posters on the RICS survey thread highlighted that some surveyors were reporting BTL investors exiting.

Do you mean, joyfully ?

[TheCountOfNowhere]

The statement "5 worse falls in property prices" tells you all you need to know about the people writing this article.

That should ready:

"5 BIGGEST falls in property prices"

or

"5 BEST falls in property prices"

TO use the word "worst" says to people, prices going up is good, prices going down is bad.

The whole thing sounds like another....BUY NOW BEFORE IT ALL COLLAPSES AND INTEREST RATES GO UP.

If someone can post that on the website i'll be much obliged.

[Sancho Panza]

Browsing Rightmove there seems to be imo a fair increase in stock in my local area (Maidstone) at sub £200k. Worryingly a lot more of the listings are chain free. Now to jump to conclusions these may be BTL who have cleared the tenant out for Summer with a view to sell. Some posters on the RICS survey thread highlighted that some surveyors were reporting BTL investors exiting.

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=me15&sellersPriceGuide=Update+Results

Stock available is down from 500 two years ago to 330 now.

[TheCountOfNowhere]

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=me15&sellersPriceGuide=Update+Results

Stock available is down from 500 two years ago to 330 now.

Will be intersting to see Augusts figures then to see if the posters comment hold any water.

Interestingly sales volumes are down from an October peak ( prime FLS selling territory ), which is much the same around Northants.

[Bloo Loo]

How do first time, mortgage required, buyers "Panic" into the market?

Do they get on the phone to the broker and tell him their dream roof space has just gone up 20% and they need another 40K on the mortgage they already tested for to the hilt, and the broker says, fine...ill get it?

Or is the buyer "panic" something entirely made up by people trying to justify the price rises?

[TheCountOfNowhere]

How do first time, mortgage required, buyers "Panic" into the market?

Do they get on the phone to the broker and tell him their dream roof space has just gone up 20% and they need another 40K on the mortgage they already tested for to the hilt, and the broker says, fine...ill get it?

Or is the buyer "panic" something entirely made up by people trying to justify the price rises?

It's maybe like people being worried about terrorism. It's a basic human instinct played upon by the marketeers/propagandists

Ask yourself, Have you been attacked by a terrorist ? Has anyone you know been attacked by a terrorist ? Have you been without 50 miles of a terrorist attack ?

So, ask yourself, what are the odds your new £500K flat in Clapham is going to double in price versus halving in price.

Have they stopped teaching arithmetic in primary schools ?

Euromillions jackpot: 1 in 116,531,800

Killed by a terrorst: 1 in 9,300,000

http://www.mirror.co.uk/news/weird-news/scientists-calculate-odd-ways-die-282884

Edited August 21, 2014 by TheCountOfNowhere

[Ash4781]

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=me15&sellersPriceGuide=Update+Results

Stock available is down from 500 two years ago to 330 now.

Thanks. Does it have stock by value analysis ? My recent experience has been as those numbers - not much for sale at sub 200k. Edited August 21, 2014 by Ash4781

[Wurzel Of Highbridge]

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=me15&sellersPriceGuide=Update+Results

Stock available is down from 500 two years ago to 330 now.

Seems to have been the general pattern, people selling in London buying in cheaper places like Maidstone.

Now people are struggling to off load London properties Maidstone stock will grow.

[Sancho Panza]

Will be intersting to see Augusts figures then to see if the posters comment hold any water.

Interestingly sales volumes are down from an October peak ( prime FLS selling territory ), which is much the same around Northants.

Must say I'm seeing some increase in supply in the East Mids,but nothing like bits of London.Definitely seems to be a lot of old dears trying to flog 5 Bed mansions off at the top.

[Sancho Panza]

Thanks. Does it have stock by value analysis ? My recent experience has been as those numbers - not much for sale at sub 200k.

No it's lists them as one bed,two bed etc.

[TheCountOfNowhere]

Must say I'm seeing some increase in supply in the East Mids,but nothing like bits of London.Definitely seems to be a lot of old dears trying to flog 5 Bed mansions off at the top.

Oh yes, at price only a Londoner could afford ( 3 months ago ).

The boomers are moving out and downsizing, now pricing out local famillies. The sooner London collapses the better for us all. It's like a leech sucking up all out futures.

[Damik]

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=me15&sellersPriceGuide=Update+Results

Stock available is down from 500 two years ago to 330 now.

London stock going terminal:

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=sw8&sellersPriceGuide=Update+Results

http://www.rightmove.co.uk/house-prices-in-my-area/marketTrendsTotalAvailableListingsAndNew.html?searchLocation=se1&sellersPriceGuide=Update+Results

[crashmonitor]

It's maybe like people being worried about terrorism. It's a basic human instinct played upon by the marketeers/propagandists

Ask yourself, Have you been attacked by a terrorist ? Has anyone you know been attacked by a terrorist ? Have you been without 50 miles of a terrorist attack ?

So, ask yourself, what are the odds your new £500K flat in Clapham is going to double in price versus halving in price.

Have they stopped teaching arithmetic in primary schools ?

Euromillions jackpot: 1 in 116,531,800

Killed by a terrorst: 1 in 9,300,000

http://www.mirror.co.uk/news/weird-news/scientists-calculate-odd-ways-die-282884

Some of those death risks I guess you can increase ten or a hundred fold by the way you behave...such as being a cameraman in the Middle East.

No way is a lightning strike ten million to one for me or falling off a ladder 2,3 million to one. Come too close in the past...risking climbing ladders off a too steep angle because I had no alternative and almost falling backwards, jumping off ladder as it falls after over reaching etc. and as for lightning always the bloke caught in the middle of a lightning storm in the open...the dangers of being a walker. And bloody close hits too........ feet away.

Edited August 21, 2014 by crashmonitor

[The Masked Tulip]

I spoke with an EA manager this week who has a 150K IO mortgage. He went to remortgage recently and they would only offer him 90K based on his salary. No idea how that affects him. I didn't want to push - unlike me admittedly.

Bear in mind that this EA has properties on his book at well over half a million pounds.

[Neverwhere]

Ask yourself, Have you been attacked by a terrorist ? Has anyone you know been attacked by a terrorist ? Have you been without 50 miles of a terrorist attack ?

No, yes and yes but other than 7/7 they were all Irish, does that still count?

[Austin Allegro]

The 'threat of rate rises' has been 'looming' for several years now. It's starting to seem a bit like the 'Millenium Bug' that was going to wipe us all out but didn't.

[Guest]

Does anyone know.... with Rightmove Alerts... if a house comes through on alert because it meets my search criteria (say houses sub £200k), will it come through again if the price reduces?