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WinstonSmith

When a HPC is not a crash?

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Based on my knowledge of the house market in my part of the northeast over the last three years (two bed terraces from 95 - 70k, three bed detached from 135 - 100k) I'm wondering if we're not all guilty of looking to the heavens for a sign when in fact there's a bloody great big one right in front of our eyes.

 

I know it's not a revolutionary thought as it's been covered on here before, but a "crash" implies a sudden occurrence, when what may in fact be happening is regional and gradual.

 

I'd be interested to read any other thoughts on this.

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57 minutes ago, WinstonSmith said:

Based on my knowledge of the house market in my part of the northeast over the last three years (two bed terraces from 95 - 70k, three bed detached from 135 - 100k) I'm wondering if we're not all guilty of looking to the heavens for a sign when in fact there's a bloody great big one right in front of our eyes.

 

I know it's not a revolutionary thought as it's been covered on here before, but a "crash" implies a sudden occurrence, when what may in fact be happening is regional and gradual.

 

I'd be interested to read any other thoughts on this.

I'm in the South Hams. I don't really look for property as they are so overvalued that it's not worth the effort. I do occasionally notice new properties that come on the market however, and I have been surprised they are not priced as highly as I'd have expected a few years ago. Little is selling and properties that have been on the market for a while are all dropping in asking price. They are all still overvalued by at least 40%, however. Interestingly, newbuilds, of which there has been a sudden increase, are now the most overpriced IMO, 50% or more over what they are worth. Completely all on my 'gut feeling'.

Edited by LiveinHope

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It does feel to me that there is a shift happening which isn't being reflected yet in the various official charts. Certainly where I'm looking - Chelmsford - which I read recently is the the top 5 cities for HPI over the last three years - I've been seeing a steady stream of reduced prices since pretty much the Brexit vote last year. That's not to say prices are coming down to sanity - but more people seem to be adding them with a big mark-up on last years going rates and they're not shifting. I think Rightmove only report on *iniital* asking price - so that would suggest to me that round my way the actual final asking price at the point of sale would be a fair few percentage points lower. Here's an example of a property which would have previously sold quickly - which has been reduced three times in the last couple of months:

http://www.zoopla.co.uk/for-sale/details/42968616?search_identifier=1593a2ca1a7535a9932f0164c3515a4b#oqCJUHe0TqoHPOKy.97

Is it still overpriced? To my mind yes. Is the houseprice mania over though? Properties like this would suggest yes. It feels like we've hit a plateau.

Is that going to lead to a crash? Not sure - supply is incredibly low round my way. Streets where a few years back I'd see a constant churn of properties not rarely crop up in my searches. It feels like people (BTL investors probably) are sitting on their portfolios. I'd expected them them to be offloading by now - but I have a horrible feeling that won't happen now until they start doing their tax returns in 2018. Annoyingly still a long wait for me.

 

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20 minutes ago, LiveinHope said:

Interestingly, newbuilds, of which there has been a sudden increase, are now the most overpriced IMO, 50% or more over what they are worth. 

Agree with the new build. The builders were given a HTB lifeline and have taken the absolute p*ss. 

Is this really 720k! It's the last stop on the jubilee line. 

http://www.rightmove.co.uk/s6p/47600103

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23 minutes ago, AvoidDebt said:

Agree with the new build. The builders were given a HTB lifeline and have taken the absolute p*ss. 

Is this really 720k! It's the last stop on the jubilee line. 

http://www.rightmove.co.uk/s6p/47600103

The newbuild prices are way over the top, but they are selling. Older cheaper, more spacious properties are not.  Must all be HTB.

I see in your example that they focus on the bathroom tap. It always amuses me when a selling point of newbuilds are the style and make of kitchen and bathroom fittings. Never a focus on the type of tiles that are on the roof, the quality of the timber in the construction, the insulation used, the make of the windows, etc never a focus on anything that matters.....

Edited by LiveinHope

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20 minutes ago, LiveinHope said:

The newbuild prices are way over the top, but they are selling. Older cheaper, more spacious properties are not.  Must all be HTB.

 

New builds aren't selling well in Wimbledon. There are small developments that they've been trying to shift flats in for at least a year - they aren't even stupidly overpriced compared with general asking prices. Another couple of developments turned up on Rightmove yesterday - will be interesting to see how they fare.

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My experiences of Oxford and the surrounding area would concur with those already posted to an extent - in our (very much bottom of the market) price range stuff is still shifting but a lot more slowly, there seem to be a lot more reductions on asking prices too. It certainly feels that prices are stagnating, maybe even falling a touch. To counter this supply seems somewhat down as well. 

Depending on which house price trend source you believe prices in the city either continue to grow or have fallen by about 3% since last August.

I also keep an eye on a town outside Oxford that was certainly massively over-valued, and has now seen similar trends to the above, and I'd say anecdotally has seen price falls in our range of maybe 5-8% from peak around the middle of last year.

Another thing to remember is that, despite the fact everyone loves the idea of a crash, in realty property prices never fall substantially overnight. By virtue of their illiquid nature plus the iterative process of pricing optimistically and reducing incrementally as inventory builds, price declines take years to play out. Looking at the last two "crashes" while the causal event can be pinned down to one short period in time at which price decline very obviously started (1989 and 2008), prices often didn't bottom out until a fair bit later (around 1993 and 2009 respectively).. admittedly the decline and "recovery" was a lot more swift most recently, however that's probably due to the government pulling out all the stops with interest rates and QE.

Talking to a sound agent during a viewing recently he admitted that the market had slowed significantly since last year - "last year you could pretty much ask what you want and it'd sell, now sellers are having to be more realistic with pricing and accept lower offers".

Something is definitely happening; all we can hope is that it's the start of something big rather than a temporary blip / false alarm. Viewing the situation objectively (interest rates, borrowing, earnings, inflation, sentiment) IMO it really feels like it should be the former.

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Volume low, reductions in price and yet houses not shifting. I am in SE where they have sold like hot cakes in the past and gazumping is normal.

Definetly at the tip of something big.

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2 hours ago, WinstonSmith said:

Based on my knowledge of the house market in my part of the northeast over the last three years (two bed terraces from 95 - 70k, three bed detached from 135 - 100k) I'm wondering if we're not all guilty of looking to the heavens for a sign when in fact there's a bloody great big one right in front of our eyes.

 

I know it's not a revolutionary thought as it's been covered on here before, but a "crash" implies a sudden occurrence, when what may in fact be happening is regional and gradual.

 

I'd be interested to read any other thoughts on this.

In Blackpool prices for well built semis and detached houses, even in areas you wouldn't mind living in, are now well below the their rebuild costs.

So yes there has been a HPC in some areas but does this count when it happens where structurally there is low demand for property, reflecting limited job opportunities.    

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2 hours ago, WinstonSmith said:

Based on my knowledge of the house market in my part of the northeast over the last three years (two bed terraces from 95 - 70k, three bed detached from 135 - 100k) I'm wondering if we're not all guilty of looking to the heavens for a sign when in fact there's a bloody great big one right in front of our eyes.

I know it's not a revolutionary thought as it's been covered on here before, but a "crash" implies a sudden occurrence, when what may in fact be happening is regional and gradual.

I'd be interested to read any other thoughts on this.

Do you own a home in this great value, "HPC'd" area?  In the North East.   

It's a market out there.  Where you see value in your region, others see other costs involved.

Others see value in £1m+ range Cheshire.   Others don't.

Others point to £220,000 'solid value' in Blackburn ("buy before prices take-off"), whereas others don't see that value.

Bit sexist but I give him a pass because was about Premiership Football, and he's an old French styler meaning no harm about it....

Quote

Arsene Wenger (2002):  "Everyone thinks they have the prettiest wife at home" - May 2002, in response to Sir Alex Ferguson's claim that Manchester United had been the best side in the Premier League since Christmas that season.  

Many think they know the market better than everyone else.  I know I don't, against all those who look at others as mindless animals. 

People take their positions in the market.  Buyers, owners, renters, BTLers.

Quote

Many of us think that the entire market pricing structure is driven by the high priced segment, as all other properties are priced based on compromises versus the ideal (location, size, commuting etc).

...schools etc

Market is full of so many millions of different positions.  Of course someone earning £200,000 a year many see things differently to some others on HPC, but they certainly don't need any HPCers permission to buy/rent... whatever.  Market.   Older owners see things differently, including some in DM who are expecting another HPI +50% by 2040.

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I can't see how it is anything other than the music stopping in London.

There always was a significant amount of new-builds coming to the market in 2017 - most planned before S24, Brexit, Stamp  Duty and the rest.

So you have an over supply of properties that people can either only barely afford or simply cannot afford.

The LL market has dried up, and in some cases may be selling themselves due to S24.

The best hope London has is naive FTBs such as myself or foreign investors chasing their 20% price cut due to the pound.

My experience is that there is a number of properties in decent areas have been reduced 2 or 3 times and still on the market after 6 to 8 months - once this tips past 12 months, I think it will become more of a story and more people will get nervous. (realistically, the asking prices are still way too high for most folks) 

From there I could see a slow steady minor decline in London over 2017, and then potential carnage next year or in 2019 when S24 comes into play proper.

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23 minutes ago, Confusion of VIs said:

In Blackpool prices for well built semis and detached houses, even in areas you wouldn't mind living in, are now well below the their rebuild costs.

So yes there has been a HPC in some areas but does this count when it happens where structurally there is low demand for property, reflecting limited job opportunities.    

Properly tracking the market there for a year... and I agree.   Always kept an eye on it before that.

Many of the properties I favourited have sold/gone Sold STC in recent times.

There are advantages and disadvantages, and for each of us to make a decision in the market.  

If I was early 30s/mid 30s and had £100K I might be drawn more Blackpool way, to put down a big lump on buying a well-build house with a small mortgage.  

Others choose to pay/borrow big for a newbuild 1 bed small flat in Depbtford London way at £490,000.   

Although in many other ways there is a lot to think about in weighing up the value.   The Blackpool choice might not be the correct one for many people.   Who knows... could be a HPI+++ future for years in the areas of high demand and prices (with demand high for many good reasons).  Many believe it will be.   And other regional areas may decline further.  Market.

Quote

 

Coglan says many unemployed people from all over the North West move to Blackpool. "'Transients' are a problem in Blackpool. A lot of people with no connections to the town and a high level of social need come here," he says.

http://www.bbc.co.uk/news/magazine-34571608

 

.... I thought the info I was looking for in that article, but must be elsewhere.   Something about Gov giving Blackpool a big annual subsidy (£millions) to help with these extra issues/costs?   And it all adds up.  Local NHS etc.   

Edited by Venger

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20 minutes ago, london_thirtythree said:

I can't see how it is anything other than the music stopping in London.

There always was a significant amount of new-builds coming to the market in 2017 - most planned before S24, Brexit, Stamp  Duty and the rest.

So you have an over supply of properties that people can either only barely afford or simply cannot afford.

The LL market has dried up, and in some cases may be selling themselves due to S24.

The best hope London has is naive FTBs such as myself or foreign investors chasing their 20% price cut due to the pound.

My experience is that there is a number of properties in decent areas have been reduced 2 or 3 times and still on the market after 6 to 8 months - once this tips past 12 months, I think it will become more of a story and more people will get nervous. (realistically, the asking prices are still way too high for most folks) 

From there I could see a slow steady minor decline in London over 2017, and then potential carnage next year or in 2019 when S24 comes into play proper.

Obviously if China goes pop at some point before 2019 then watch the chaos unfold, no longer a distant dream but an increasingly mentioned risk factor in past few months.

Take a step back and think "what GOOD news is out there right now". There's your answer.

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Sure it's regional, and micro markets too. Family properties I've looked at in and around Didsbury, South Manchester, are being sold within the week at silly peak prices. All I can hope for is that London continues to fall and the ripple effect speeds up a bit.

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7 minutes ago, Barnsey said:

Obviously if China goes pop at some point before 2019 then watch the chaos unfold, no longer a distant dream but an increasingly mentioned risk factor in past few months.

Take a step back and think "what GOOD news is out there right now". There's your answer.

The capital controls are already lowering demand and causing problems with off plan purchases.

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32 minutes ago, LC1 said:

Sure it's regional, and micro markets too. Family properties I've looked at in and around Didsbury, South Manchester, are being sold within the week at silly peak prices. All I can hope for is that London continues to fall and the ripple effect speeds up a bit.

Have also got my eyes on South Manc and Cheshire, some less affluent areas flatlining but as you say in nicer bits, transactions rapid, gonna take a bit more patience methinks but the record high personal credit could hit home soon for many.

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1 hour ago, Confusion of VIs said:

In Blackpool prices for well built semis and detached houses, even in areas you wouldn't mind living in, are now well below the their rebuild costs.

So yes there has been a HPC in some areas but does this count when it happens where structurally there is low demand for property, reflecting limited job opportunities.    

Thats the same for Scarborough, a town with much nicer areas than Blackpool.

Like most Norther towns, the number of transaction fell off a cliff in 2002ish. And remain there.

There's not enough sales to clear the probates, never mind other reasons for selling up.

I dont think its low demand. The prices are too much for the wages/mortgage.

A 50 year old with a house for sale in 2002 is now a 65 yo with the same house for sale in 2017. Every year, a few 1000 in Scabby die.

The number of transaction points to trouble as IRs go up - even slightly. There's just not enough mortgages to clear the market.

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23 minutes ago, Barnsey said:

Have also got my eyes on South Manc and Cheshire, some less affluent areas flatlining but as you say in nicer bits, transactions rapid, gonna take a bit more patience methinks but the record high personal credit could hit home soon for many.

I get the feeling that some see Manchester as the 'new London' so fill yer boots, prices to the moon! Not going to happen, of course, but it becomes a self-fulfilling prophecy in the short term. Hoping something triggers a sharp decline, this year ideally. Not holding my breath though.

Edited by LC1

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1 hour ago, This time said:

The capital controls are already lowering demand and causing problems with off plan purchases.

I wonder what percentage of London has been bought by Chinese investors? 

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29 minutes ago, LC1 said:

I get the feeling that some see Manchester as the 'new London' so fill yer boots, prices to the moon! Not going to happen, of course, but it becomes a self-fulfilling prophecy in the short term. Hoping something triggers a sharp decline, this year ideally. Not holding my breath though.

As I've mentioned on here before, I often find the prices in the nicer bits of Manchester harder to justify (vs potential earnings in the local job market) than London. As you rightly say, many have sold up here in the SE and got a house in an equivalent area up there for half price, bargain! That half price house being 400k. And next thing you know, local families now rapidly pushed out, so have to look at surrounding towns and thus the snowball effect of financial cleansing continues.

Am I being naive in assuming there are fewer areas of prosperity in Manchester therefore the nice bits are more insanely priced vs the not so great parts, more of a clear divide than the gentrification of London?

Lots of Asian investment up there too courtesy of property conventions/fairs held globally.

One thing I do understand is that when HPI goes crazy, that assumed wealth inspires rapid credit debt accumulation, happening right now, just as it did 05/06.

But what happens when all these long 0% interest periods end and those folks can no longer balance transfer to another card due to a declining credit score or drying up of offers (which I now see happening due to squeezed profits), or the impact of inflation starts to hit debtor JAMs in the coming months, never mind inevitable mass job losses from companies moving to the EU to secure their futures.

I don't think we need a significant IR hike to get this started, a small one would help, but maybe we just require a bit more patience, let all bubbles do their thing, as they always do, and keep yourself in a safe position, as an unleveraged, "free" renter.

Most media/property outlets predicting stagflation at worst, as they predictably would, but that assumes nothing gets worse, and that housing supply remains constricted. Hopefully BTLers getting rid will change that come April 18 onwards. 

Edited by Barnsey

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41 minutes ago, spyguy said:

Thats the same for Scarborough, a town with much nicer areas than Blackpool.

Like most Norther towns, the number of transaction fell off a cliff in 2002ish. And remain there.

There's not enough sales to clear the probates, never mind other reasons for selling up.

I dont think its low demand. The prices are too much for the wages/mortgage.

A 50 year old with a house for sale in 2002 is now a 65 yo with the same house for sale in 2017. Every year, a few 1000 in Scabby die.

The number of transaction points to trouble as IRs go up - even slightly. There's just not enough mortgages to clear the market.

Blackpool prices in decent areas seem to have reached a level where they are clearing, a couple of friends recently had to sell recently and both found buyers within weeks. Both well built 4 bed detached houses in good areas and both sold for around £180k (probably about 2002 prices).

Blackpool's biggest problems are the huge rundown areas where BTL is concentrated, no sane OO would ever buy in these areas and with C24 selling to a LL is no longer an option (unless you are prepared to sell at a price that gives a  +10% net yield).  

I don't know Scarborough so cannot compare the two. 

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1 hour ago, Barnsey said:

Am I being naive in assuming there are fewer areas of prosperity in Manchester therefore the nice bits are more insanely priced vs the not so great parts, more of a clear divide than the gentrification of London?

I thinks that's exactly it. I've not lived here long (not part of the SE exodus) but I can see that there's a few good areas that are very geographically constrained, Didsbury, Charlton, Heatons, and that these are just way out of whack with the rest of Manchester. A lot of BTL too, from what I can tell. 

Perhaps Venger or others might have some better insights into the dynamics in this part of the world...

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You don't need to look far to see what a HPC smells like. London and South has had a similar level of hyperinflation, Luton +20% in one year, fugly Watford semis asking for three quarters of a million. 

By Margaret Canning

August 23 2012

A spokesman said house prices had peaked in the third quarter of 2007 and had fallen by 53% since.

Economist John Simpson said it would be “excitable” to suggest that Northern Ireland had experienced the world’s worst property crash.

“Northern Ireland had the most embarrassing hyper-inflation in house prices in 2005-2006, worse than anywhere else in these islands.

“We are now living with the consequences of that, and many people are having to get used to the idea of being in negative equity over the next 20 years.”

http://m.belfasttelegraph.co.uk/news/northern-ireland/plummeting-northern-ireland-property-prices-tumble-by-53-in-five-years-28784285.html

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1 hour ago, LC1 said:

I thinks that's exactly it. I've not lived here long (not part of the SE exodus) but I can see that there's a few good areas that are very geographically constrained, Didsbury, Charlton, Heatons, and that these are just way out of whack with the rest of Manchester. A lot of BTL too, from what I can tell. 

Perhaps Venger or others might have some better insights into the dynamics in this part of the world...

Charlton = Chorlton you mean? :)

I don't know that area very well (apart from a few trips to Horse & Jockey pub and beer on the big green outside.. way back).  There's a couple of other HPCers who know Chorlton really well, including a long-term homeowner who would welcome a big HPC.  Has younger people in mind.  

Didsbury.... ?  Only passed through there a few times recently, and don't have any insight to what could going on, or about the money.  Pal bought in 2011.  HPI galore since then.  Such houses been selling for £200K-£250K more in recent times. 

Video:  I Think We're In Didsbury.   Always makes me laugh.  Laying it on thick.  There is a lot to like about Didsbury... and clearly some willing to pay big prices for property for it.

Rented in Heaton Moor way back.  Always enjoyed living there.  Someone in regional forum, a few years ago, claimed most Heaton Moor houses are never sold, they just pass from generation to generation. (hehe/grrr... might have been some truth in that, but things can change).

Sometimes read The Heatons Property Blog.  (EAs)   Lot of entries targeted to BTLers and Investorz.

http://theheatonspropertyblog.com/       

 

Although this entry, and others very similar to it, has seen me pull away from research for a while.  Just going to allow the frenzy continue, and position against it.  All I can do, even though others tell me it's a HPI+ future. 

Quote

 

Nov 2016

http://theheatonspropertyblog.com/property-prices-in-sk4-have-risen-by-214-since-2000/

Landlords have reasons to be cheerful, with an element of younger people in SK4 choosing to rent rather than buy. There are certainly benefits to renting, including the ability to simply call the landlord if there are any issues around your rental home, allowing you to save on large repair costs. The lifestyle of a renter also provides flexibility, which is very important to some people.

It is harder for young people to save for a deposit in an age where Apple launch a brand new product every six months, or the latest HDTV is readily available. Renting is a choice, and we are developing a mindset more akin to the Europeans with regards to it. In fact, the fascinating figures show the percentage of households privately rented in SK4 have risen from 10.2% in 2001 to 15.1%, according to the last census.

Landlords can enjoy even more good news as demand for — and prices of — rental accommodation continue to rise. The knock-on effect also means higher-value properties in SK4, which also benefits homeowners. While this is ultimately positive news, it does not negate the fact that there are tenants with ambitions of owning their own home in the future, and excessive rental hikes need to be tempered so they are still able to save for a deposit if they so wish.

Average-Heatons-1024x425.png


 

 

 

CtUHD6Jr.jpg

 

 

4 hours ago, LC1 said:

Sure it's regional, and micro markets too. Family properties I've looked at in and around Didsbury, South Manchester, are being sold within the week at silly peak prices. All I can hope for is that London continues to fall and the ripple effect speeds up a bit.

Witnessed that.   As Dorkins suggested, 'the crisis' (HPI++++) won't go on forever.  Things could turn quickly (yes that is simply hope).

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