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Ologhai Jones

R I C S: Momentum Slows In Housing Market

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Not surprising really, those with big enough (small) deposits have been hoovered up, those without have been priced out once again. The MMR has helped put the brakes on those who might have a small deposit but can't actually afford the mortgage.

Plus the panic buying phase is over, especially from those with smaller deposits who could see the LTV creeping up to over 95% because of rampant HPI who bought whatever they could. I suspect there might even be a bit of buyers regret out there as well, when they realise they boat they didn't miss is the costa concordia.

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Full text here:

Demand slips but no sign of a pickup in new instructions
• More balanced picture emerging nationally
• London market coming off the boil
• Rental market remains firm, underpinned by tight supply and steady demand growth
The September RICS Residential Market Survey indicates fading, albeit still robust, price momentum
at the headline level. This comes on the back of a more balanced demand picture, in part related to
less buoyant expectations of future price rises. Crucially however, the supply trend remains more or
less flat with no indication of a pick up in new vendor instructions.
The headline price net balance fell from 39 previously to 30 this month, the lowest reading since
June 2013. The London price balance turned slightly negative in September for the first time since
the beginning of January 2011, ending the longest continuous period of price growth that this survey
has recorded for the capital. Although stripping London out from the headline balance produces a
more positive reading, the trend in the headline ex-London series over the last few months has still
been on a downward trajectory, indicating that fading price momentum is more than just a London
story.
Expectations for price growth over the coming three months remain positive with only surveyors in
the London market expecting to see values decrease. However, at the twelve month horizon, prices
are expected to rise across all regions with respondents on average forecasting a 2.1% increase.
Price rises are expected to be more gradual in London over this period, with surveyors expecting 1%
growth on average in the year to come. Looking further ahead, at the national level respondents still
expect prices to rise by an average of 4.7% per year over the next five years.
The growing sense of caution seems to have taken a particular toll on the London market where
buyer demand contracted more significantly than elsewhere in September, falling for the fifth
consecutive month. Supply conditions at the headline level remain tight with new instructions to sell
almost unchanged in September, continuing the trend that we have seen for most of the past year.
The softening in buyer sentiment and tight supply conditions have combined to keep transaction
levels relatively subdued. The agreed sales balance came in broadly stable this month following the
decline seen in August. However, sales expectations remain in positive territory at the headline level
at both the three and twelve month horizons. The only exception to this is London where the sharper
contraction in demand that has been witnessed recently has pulled near term sales expectations into
negative territory.
The Scottish independence referendum likely had an impact on the local market during the month,
with activity indicators turning negative following a period of strong growth. However, respondents
expect any disruption caused to be temporary, with sales and price expectations firm.
The softening tone to buyer activity in the sales market stands in contrast to the lettings market
where demand on a non seasonally adjusted basis has continued to grow solidly across the majority
of the UK. However, it is noteworthy that new instructions to let have generally not kept pace with the
rise in new tenants. Indeed, fresh instructions registered with agents decreased slightly at the
headline level for the sixth consecutive month in September. The tightening in market conditions has
led to an increase in expectations for rental growth, with respondents now anticipating growth of
2.3% over the coming year.

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Not surprising really, those with big enough (small) deposits have been hoovered up, those without have been priced out once again. The MMR has helped put the brakes on those who might have a small deposit but can't actually afford the mortgage.

Plus the panic buying phase is over, especially from those with smaller deposits who could see the LTV creeping up to over 95% because of rampant HPI who bought whatever they could. I suspect there might even be a bit of buyers regret out there as well, when they realise they boat they didn't miss is the costa concordia.

This is a good one of buyers regret:

http://www.theguardian.com/money/2014/aug/08/estate-agent-sell-advertise-exchange-price-data-protection

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BBC News just had the chief noddy from RICS on to talk up the market :rolleyes:.

http://propertyawards.net/peter-bolton-king/

Peter Bolton King started work in 1973 with a leading Warwickshire firm of chartered surveyors and estate agents, Locke & England. After working in different departments he qualified as a Chartered Surveyor and became the firm’s youngest ever partner. In 1987 the business was sold to Lloyds Bank and Peter Bolton King became an area director. More recently, the firm became part of Bradford and Bingley and he became area sales director for the largest area in the country. In July 2003, Peter became Chief Executive of the National Association of Estate Agents, the largest professional body for estate agents with a membership in excess of 10,000.

Earlier this year he was appointed Group Chief Executive of the National Federation of Property Professionals when a new company was set up which now incorporates the National Association of Estate Agents (NAEA), the Association of Residential Letting Agents (ARLA), National Association of Valuers and Auctioneers (NAVA) and the Federation of Overseas Property Developers Agents and Consultants (FOPDAC).

Peter was awarded an honorary Certificate in International Property by the National Association of Realtors in recognition of his contribution to international agency.

Currently representing the NAEA on various Government committees relating to the proposed Home Information Packs and related matters, he also holds a number of other Industry Board appointments of behalf of the Federation. These include ICREA, FIABCI, Asset Skills and the Ombudsman for Estate Agents (OEA) Board and Council.

Edited by Bruce Banner

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Wonder if market stagnation and standoff is more likely than an outright crash. In London new buyers are pulling out but new instructions down too. Sellers are not being compelled to sell which is a key requirement for a crash. The overvaluation is clear but need material rate rises or a recession to tip market from it's unstable equilibrium.

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I read this "Demand slips but no sign of a pickup in new instruction" with some interest.

Damik....where's your graph,

Damiks study of London, I think, shows the opposite in the areas he looks at.

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I am seeing an awful lot of houses still on the market in Swansea - no sign of the usual stop trying to sell now and try again in the spring.

Sell before the general election ?

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I read this "Demand slips but no sign of a pickup in new instruction" with some interest.

Damik....where's your graph,

Damiks study of London, I think, shows the opposite in the areas he looks at.

I think that data on Damiks thread is from Rightmove.

Properties listed = Existing stock + New Supply - Sales

Properties listed have jumped up but I think what RICS survey is saying is that this is because buyers have pulled out i.e. sales are down. New supply is stable. In London anyway.

For a crash to happen we need a jump in supply. Some of my friends in London have a almost superstious view of London property. They say things like 'I'll never sell' etc. IMO we need a shock to break that mentality. People need to be compelled to sell. i.e. Interest rate rises or recession.

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Sell before the general election ?

Nah, I don't think it has crossed their minds. I think people are getting desperate now. Lots of job cuts coming in the Council as the Welsh Assembly has cut back on budgets across Wales. People having trouble remortgaging.

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For a crash to happen we need a jump in supply. Some of my friends in London have a almost superstious view of London property. They say things like 'I'll never sell' etc. IMO we need a shock to break that mentality. People need to be compelled to sell. i.e. Interest rate rises or recession.

No we don't! if you look back at the Rightmove history for number of properties for sale when prices started falling in Q4 of 2007 they stock for sale wasn't particularly high.

It's not until prices had been falling for a good 6 to 9 months that the stock of properties started to accumulate as no buyer in their right mind buys in a falling market.

The result of prices falling is increased stock on the market. It also ties in with the economic theory of deflation causes buyers to hold off purchasing what they think they will be able to get at a lower price in the near future. It works in reverse for inflation, people were panic buying late last year because they feared that government policy combined with low interest rates would cause property to go to the moon.

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Wonder if market stagnation and standoff is more likely than an outright crash. In London new buyers are pulling out but new instructions down too. Sellers are not being compelled to sell which is a key requirement for a crash. The overvaluation is clear but need material rate rises or a recession to tip market from it's unstable equilibrium.

You're forgetting the number of business models that bank on continuing HPI for attractive yields. If HPI becomes static, let alone goes into reverse, then speculators will want to move their money to chase higher yields elsewhere; and given recent rampant HPI in London many of them will have already made large enough gains to be able to take a hit on current prices and still be quids in. The falls from these transactions will spook those amateur speculators (for instance those holding on to larger properties than they need purely for the expected HPI) who want to turn their paper gains into actual gains at some point. For most of them, by this point, it will already be too late to do this as very few people need to transact in order for a crash to happen: as long as a trickle of transactions go through prices will continue to move.

In some areas new supply is stable but sales are already down so the amount of supply on the market is already jumping while effective demand is simultaneously dropping away. Remaining buyers are already in good positions to negotiate discounts on asking prices in these areas, which will in turn cause asking prices to move down and the price point from which the next lot of buyers negotiate a discount to be lower. As prices fall new market entrants hold off from buying in as they wait to see what happens and demand drops further.

The thing which will really shock most homeowners out of the London property bubble mentality will be the popping of the bubble itself IMO. Prices are set at the margins, the vast majority of them simply won't be involved in the actual process of the crash itself, they're superfluous to requirements.

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Carney will no doubt be reileved he won't actually have to DO anything.

Cameron/Osborne will be sh1tting themselves.

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You're forgetting the number of business models that bank on continuing HPI for attractive yields. If HPI becomes static, let alone goes into reverse, then speculators will want to move their money to chase higher yields elsewhere; and given recent rampant HPI in London many of them will have already made large enough gains to be able to take a hit on current prices and still be quids in. The falls from these transactions will spook those amateur speculators (for instance those holding on to larger properties than they need purely for the expected HPI) who want to turn their paper gains into actual gains at some point. For most of them, by this point, it will already be too late to do this as very few people need to transact in order for a crash to happen: as long as a trickle of transactions go through prices will continue to move.

You might be right but I just want to keep a level head. Sick of being disapointed.

One thing that did ring a bell from your post was I read allot of the new off plan new builds were sold on a tiny margin deposit with people never intending to take ownership - they just planned to flip in a couple fo months / years at higher prices. Almost like a massive futures market on new builds in London. I remember thinking this could easily implode if prices just stoped rising.

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Ok, anyone going to comment on this? Pretty major no?

Yes.

Not sure what's the driver.

It can't be lack of demand. I've lost count of the number of people who tink BTL is a fantastic investment - despite all the immdeaite evidence its nots - forest of To Lets, relatives with non-paing tenants etc etc.

Im guessing the banks are saying 'No' to BTL mortgages of more than 50% LTV.

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You might be right but I just want to keep a level head. Sick of being disapointed.

One thing that did ring a bell from your post was I read allot of the new off plan new builds were sold on a tiny margin deposit with people never intending to take ownership - they just planned to flip in a couple fo months / years at higher prices. Almost like a massive futures market on new builds in London. I remember thinking this could easily implode if prices just stoped rising.

Yep, the vast majority of flippers add little to no value and require HPI for a profit margin; also recent-entrant BTL in the capital needs HPI for a decent yield. Then you have the average member of the public who needs to sell because of inheritance, job moves, etc and any discounting in an otherwise stagnant market will translate to price falls as the transactions that do go through revalue all of the properties that have not sold. A stagnant market will always tip over into a crash.

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Carney will no doubt be reileved he won't actually have to DO anything.

Cameron/Osborne will be sh1tting themselves.

Max Keiser made a rare insightful comment this week, you can't taper your way out of a Ponzi scheme...interest rates were never going to rise for the foreseeable future.

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