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VacantPossession

Halifax: Why You Should Ignore The Hype

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Here is a classic illustration of why you might consider completely ignoring all the rubbish that vested interests, the daily press, TV and property pros spew out with increasing desperation, and ESPECIALLY the Halfax claim that prices actually rose last month.

I've been looking at places near the South East coast to rent, for some time. I've done my research thoroughly and have a long list of properties (mainly apartments) on offer to rent. In each case I have looked up the place I'm interested in plus several similar properties on offer. I took a note of the last known sale transaction COMPLETION price then double checked by cross referencing them, paying £2 each to search the Land Registry for copies of deeds. The LR data is very revealing because it gives the precise transaction value and date, lists the name of the vendor and buyer and their current address, and a raft of other salient info with which a pretty clear picture can be deduced.

In every case (around 20) but one, there is evidence of not only slight reductions but very hefty reductions both in rent and sale offers and in many cases a strong likelyhood of negative equity. Each property was matched to a current ad on rightmove comparing the price offered for rent and the same, or exactly similar properties (same area, same quality, type, size and number of rooms) which were also for sale.

I have not included names (partly to protect myself) but I ask you to take what I say on trust. In any case it is easy enough to check for yourself, but it did cost me aout £40 to check all the data.

A typical example: A 2 bedroom flat in a large development of smart 2 and 3 bedroom flats, according to the Land Registry sold off plan for an average of £250,000 in mid 2004 to early 2005. Typically these flats were purchased by (presumably) Buy-to-let enthusiasts for this price. I have seen several of these flats now advertised for rents between £650 and £750. Some of them are very well specified and have "luxury" kitchens and bathrooms, generous-sized rooms and car parking spaces thrown in. One particaulrly tasty apartment was advertised for £800 but the agent assured me they would accept £730.

Now, a £250,000 flat, assuming a near 100% mortgage, is going to cost in the region of £1400 to £1600 in monthly mortgage payments. If you include service charges that could reach £1700 per month. So they are being rented out for LESS than half the current commitment the BTL'er is compelled to support. Not only that but in almost all cases I saw, either the same or similar properties have appeared for sale on Rightmove at approximately £210,000 and in the last week many have been reduced to £199,000. That's OFFER, not completion prices.

That's OVER £50,000 reduction in less than half a year in some cases, and I am certain that many of these BTL'rs are now seriously in negative equity. And Halifax tells us that prices increased?

I am not saying that these particularly properties are absolutely representative, nor am I ignoring the fact that new builds are probably more susceptable to this. What I am saying is that in the light of just a few days research, for anyone to claim the entire nation's housing stock actually increased in price last month is simply ludicrous. There is too much obvious and hard evidence that if anything, the potential for a crash is even greater than it was six months ago.

The agent handling the property I made an offer on told me that my potential landlord has THREE similar properties. That rings alarm bells. For all I know this person is in it for the long term and has money to burn. However, the Land Registry copy deeds also (usefully) reveal that at least one has a mortgage, and piecing things together it looks very much as though these three properties are all mortgaged. Multiply the amount of shortfall between mortgage and rent by three, then factor in three lots of negative equity for a total (so far) of £150,000 and you begin to see, translated and multiplied nationwide, the unstoppable disaster that is just waiting to happen in the end. It is quite possible that this landlord is going to lose £200,000 capital in less than a year and a further £2000 shortfall in his mortgage payments PER MONTH. Over a year that's another £24,000 down the drain apart from the negative equity. This is completely unsustainable for even the most thick skinned BTL'er. Again, multiply this ONE instance by tens of thousands and you have the scale of what is almost inevitable.

There is just too much evidence around to contemplate the unlikely event that rosey "recovery" press releases have any substance to them whatsoever. I am willing to eat my hat if I am wrong, but I cannot imagine prices are going to recover.

So yah-boo to Halifax and all the other hype merchants. The crash is still on and it is only a matter of time. People are holding on grimly, but eventually they'll have to sell. And they'll all start selling at the same time.

If you thought 1990 was apocalyptic you ain't seen nothing yet.

VacantPossession

Edited by VacantPossession

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I am increasingly beginning to wonder about how the various housing price indexes are being calculated. Where the fullest data are available (Land Registry) it is clear that sales of lower-riced houses have fallen much more that higher-priced houses, boosting the average. This is why it has looked the best of all indexes. Nationwide and Halifax use sales data so this is subject to the same bias of a shift in mix of properties sold (e.g. lentry-level propoerties selling less well). Both Rightmove and Hometrack publish primarily asking price data, depsite the fact that they must have selling price data and could obviously match the two. The best we can get is askling price as a % of selling price (overall average for all propoerties). However, who knows what the aslking price used here is - is it the orginal asking price or the latest. Moreover, even asking prices can be subject to mix effects - e.g. if relatively more people are listing more expensive proporties, then the average asking price appears to rise. This is quite different from people increasing the asking price of their propoerties. I find it hard to beleive that at this stage in the market, people have actually decided to increase their asking prices, so it may be that more people further up the housing price ladder are listing. Given anecdotal evidence such as yours and others, the market does not apear healthy.

Edited by Alex

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It's called PR, and they have to answer to various stakeholders, can't see them coming out with negativity. They own loads of EA's and gain money from people willing to buy a house. Of course they are going to encourage people to pay a 100% premium on some bricks and mortar.

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Excellent work :)

The one thing I'd say with regard to a lot of the flats - and this won't apply to muppet man in the street who pays the deposit with his credit card, but to genuine investors:

I was once told (by someone who worked as a cleaner on new build estates) that only mugs actually pay the full buy off plan prices. A serious investor would make an offer on several properties, e.g. flats up for 250k each so offers £600k for three.

There's a development of flats on the sea front here with prices around £250k, however those same flats rent for no more than £800 per month (just starting to appear in the lettings pages now). Clearly you either have some very stupid BTL amateurs (definite possibility especially given the local market and where these flats actually are, nowhere near the main promenade), or some other deal was struck with regard to the purchase price.

I'm not sure how that ould affect the LR data, though, and at what price the sales would be recorded.

As for the VI spin, as you say, one or several properties do not the whole market represent, but this one went on the market nearly 2 years ago and it's still at the same price now:

http://www.rightmove.co.uk/viewdetails-813...pa_n=1&tr_t=buy

However all other comparable / identical properties have been being progressively reduced. Glad I didn't pay 249k for it, because now you can buy a better design one a little cheaper:

http://www.rightmove.co.uk/viewdetails-814...pa_n=2&tr_t=buy

Or, if you want to save a bit more money, skip over those two and go for this one:

http://www.rightmove.co.uk/viewdetails-974...pa_n=3&tr_t=buy

I'm interested to see if that last one actually sells now, as it's the cheapest of it's type in the estate. That might or might not be the right price level to attract a buyer, they've been trying forever as well.

Two years to sell - either, the estate is a dump, the house is a dump, or the price is too high. Here and with the others I've followed, I suspect the latter of those to be true.

North West up 5.7% - now who said that, the Halifax? Look at who is marketing the first (dearest) of those properties. Hmmm.

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That first link you posted; couldn't you buy those houses for like 99k a few years ago? :huh:

Price 3 years ago for one of those was around 135k - 145k depending on the specific design.

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Guest Charlie The Tramp

That first link you posted; couldn't you buy those houses for like 99k a few years ago? :huh:

Purchased January 2001 for £116,950

but this one went on the market nearly 2 years ago and it's still at the same price now:

Two years later they put it up for nearly a 1/4 million :o

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Hi Mark,

Thanks for the links...interesting stuff.

I had thought about the possibility of "deals" being struck too. But on the Land Registry deeds is shown clearly £250,000. I think even if a deal was struck that was somehow hidden from the LR data, I doubt whether the discount would be anywhere near sufficient to offset the comparitively enormous negative equity this particular BTL is now experiencing.

Living currently in Surrey, I cannot concur with another poster that only lower priced properties show a fall. There are plenty of houses round here which would have easily fetched 700k which are now on offer at 600-650k and going down. That is a huge discount.

VP

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Well this is the sort of information being given out on the "Independent Financial Advisor" Website - regulated true?? 'inside' info!

Exactly the opposite to what is released in the media!!!!

02 December 2005 - "Public is starting to lose faith in housing market"

Less people believe the housing market will outperform equities over the next year than did six months ago, research from the Association of Investment Trust Companies has revealed.

While 30% of the general population said they still think the housing market will produce better returns than the stock market over the next year, this represents a sharp drop from the 40% who said this in February this year and 53% in January 2003.

In contrast, just 9% of active investors agree the housing market will outperform.

But active investors are also less confident about the prospects for the stock market, with 58% tipping equities to outperform property over the next 12 months, a 22% fall compared to 71% in February.

Some 44% of active investors plan to increase their equity holdings in the coming year, considerably down on the 58% who planned to do so back in February 2005 and the 46% in October 2004.

When asked why they thought equities would outperform the housing market over the next 12 months, 24% of active investors said they felt property is still too expensive, up from 20% in October 2004, while 13% expressed concerns over a property market crash.

Annabel Brodie-Smith, communications director at the AITC said: "Although nearly a third of the general public still believe property will outperform the stock market over the next year, this figure has been consistently falling.

"We believe the repeated warnings about a property slowdown are beginning to have an impact but it is a concern that many people are still banking on property prices rising."

http://www.trustnet.com/general/news/displ...?id=73259&db=it

So are they telling the IFA advisors that they can still fleece up to ONE THIRD of the population who still believe in BTL etc?

They wouldn't do that now - surely? :unsure:

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Guest Time 2 raise Interest Rates

Browns cut G.D.P in half to 1.75% and this with so-called stagnant

house prices,in this case I don't expect reports about house prices

falling anytime soon from the Halifax and such like. It's more than

they dare do.

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Ignore the published housing market figures. They are obviously manipulated. Lies, Damned Lies and statistics.

If you believe inflation has only recently gone over 2% after years of <2% then ignore my comment above.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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