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Nationwide House Price Index - Apr 2020


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Why do they put out figures if there are no transactions ?

It just makes the figures highly suspect, with massive error bars on what the "true" situation is.

Surely if you were interested in maintaining the idea that the market was still strong you would halt the compilations until there was enough data, which implies they aren't interested in doing this.

 

 

Edited by Gigantic Purple Slug
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41 minutes ago, Gigantic Purple Slug said:

Why do they put out figures if there are no transactions ?

It just makes the figures highly suspect, with massive error bars on what the "true" situation is.

Surely if you were interested in maintaining the idea that the market was still strong you would halt the compilations until there was enough data, which implies they aren't interested in doing this.

 

 

They're probably something ridiculous like +15% mom, which they will then point to as the anchor point for when the market "crashed".

Or it's -15% mom which will justify much gnashing and wailing about how the entire housing market needs a "bail out".

Clowns.

Edited by Smiley George
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They should go to jail for market manipulation... They quickly claimed the Boris Bounce (which didn’t actually appear on the Land Registry), but now the pandemic effect on the data gets delayed continuously.

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Friend of mine is desperately trying to complete a purchase at the moment (Scotland). He reckons even if prices drop considerably he's still more likely to get a mortgage now than later. Hes not particularly well paid, local council admin, and buying an ex council semi. Looking at sold prices that house increased in price from £82k in 2004 to £115k now. He might be right but I suspect he won't be a disaster for him either way. 

A couple in plastic jobs struggling to buy a £500k new build will probably think the same way. Losing a job, or reduced wages due to furlough is tomorrow's problem for them but losing that house purchase is an immediate problem. 

 

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“But the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy. “These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude"

...........

 

I just had to take a peek at whatever meaningless  fantasy number they were going to come up with knowing  it would  mean nothing to me, good or bad(and lets face it is was always going to be good), but the above quote says it all for me. We could have an asteroid hit Milton Keynes and wipe out half the UK population and Nationwide weeks after would be saying a similar thing. 

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Post lockdown the banks will have to tighten up lending. For me that's the game changer. Never mind supply and demand, job losses etc. Valuers will be under strict instructions, game over.

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10 minutes ago, MarkD said:

Post lockdown the banks will have to tighten up lending. For me that's the game changer. Never mind supply and demand, job losses etc. Valuers will be under strict instructions, game over.

I think that sums it up nicely.

Nationwide amused (or annoyed) me recently by sending me a letter telling me that they were reducing their overdraft rate to just under 19%.  Fortunately I don't need their overdraft but seriously, 19% when the base rate is virtually 0%.

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The figures are so mangled... 'hedonic regression' also leaves it open to arbitrary inputs. 

If we had a period where only London houses sold, the index would not be reporting that the average price rose to £500,000. Instead it compares the selling price against what they think the property should be worth using variables they decide. As I understand it, the average selling price is a fiction, whereas Joe Public may take it to be the absolute average selling price. 

Somehow nobody ever gets round to correcting that, but if it was the absolute price it would be all over the place.

So remarkably it could be possible that if they apply a coronavirus penalty into their benchmarked values and compare house prices to that, they could be stable for some time.

And I bet there is no allowance given for the real value of money. At the lower end of the market in Greater London, I can see so many properties that have lost 10% off their peak prices, and that was 2 years ago. In real terms, that might be 15%.

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The headline number is old, as explained in the report:

Quote

 c80% of cases in the April sample relate to mortgage applications that commenced prior to the lock-down,

Then there is the further distortion that its buyers most anxious to buy (i.e. those most likely to be paying over the odds) who proceeded.

The conclusion is also not that optimistic.

Quote

“These same measures should also help ensure the impact on the housing market will ultimately be much less than
would normally be associated with an economic shock of this magnitude.

i.e. house prices will fall by less than expected given the worst economic shock in a century.

That still implies a crash is probable.

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39 minutes ago, gp_ said:

i.e. house prices will fall by less than expected given the worst economic shock in a century.

That still implies a crash is probable.

Does it though? 

The latest stats are that it's about a quarter of the workforce that's been furloughed, made redundant or otherwise lost work, with over 75% of them being furloughed. Unemployment will still be less than Greece, Spain or Italy in normal times. Of those people losing jobs, I'd anticipate a majority of them will be lower paid staff who can easily be got rid of (ie no expensive payouts) or the self employed who may or may not be able to "turn key" their businesses at a later date. 

Either way, none of these people were in the market for a mortgage pre virus and they won't be after. Meanwhile, management and above are still in work, qualified professionals and the rest are safely tucked up working from home. Successful self employed and contractors will have a cushion to lean on. 

If anything, the idea of owning your own home with outdoor space and a spare room probably just became a whole lot more attractive to a lot of people now that the idea of rolling lockdowns is in the public mindset. 

Government are chucking cash at what they see as a problem. Banks are giving grace periods on mortgages. The homeowning, "aspirational" demographic are still getting paid. I doubt anybody wants to be going in and forceably removing peoole even in the event that forced sales did start up. 

House sales are likely to start moving again at end of May as lockdown conditions ease and you just know the government will have the housing market on its list of things to "get Britain moving" again and you also just know that public sentiment will endorse that as we all know house prices are sacrosanct. 

The only thing I see changing is some more buy to letters bring pushed out in the latter part of the year as the economy catches up with them but (speaking from personal experience of dealing with these people) banks will treat this with kid gloves and the pent up demand from young couples with cash saved up at the end of 6 months of either official or self imposed lock down with their family or housemates (let's face it, work from home isn't going away any time soon now) will pick off those cheaper, first time buyer houses off ex btlers and if they don't, the usual cash buyers will. Sure the banks will be ready and waiting with some nice high LTV products for first time buyers (when have thry ever given a ****** about the caps, soft or otherwise?

It only takes a few transactions to kerp the plates spinning and if they can avoid the forced sales long enough to get a few in the bag, sentiment remains. 

Sorry to sound pessimistic but let's face it  this is not a normal scenario. The "rules" don't apply here; we are way off the beaten track and the vested interests want the housing market up and running still. 

I think you're going to be disappointed, to be honest. Either way just don't pin all your hopes on this (like brexit before it) and if something does happen it's a bonus. 

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31 minutes ago, Hullabaloo82 said:

 

Meanwhile, management and above are still in work, qualified professionals and the rest are safely tucked up working from home. Successful self employed and contractors will have a cushion to lean on. 

 

My other-half just had a conference call on redundancies. They are going to cut from the management layer. A few months ago they were promising no redundancies.

We don't know how many other companies will use this as a pruning exercise and where the pruning will be.

I know contractors and self employed who would consider themselves successful but have high debts. This applies in some cases to both earners in family and they need both to service the debt.

 

Edited by Flopsy
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50 minutes ago, Hullabaloo82 said:

Does it though? 

See US jobless claims - 30m+ and thats the ones who managed to register.  I somehow doubt the UK will be immune to this kind of shock, especially since much of the new jobs created are zero-hour service sector types (i.e. real middle class job growth isn't doing so well).

Don't even get me started on the amount of inefficiencies in UK PLCs; I've built multiple revenue streams off it!  

The pin has arrived it seems.

Edited by blackhole
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1 minute ago, blackhole said:

See US jobless claims - 30m+ and thats the ones who managed to register.  I somehow doubt the UK will be immune to this kind of shock, especially since much of the new jobs created are zero-hour service sector types (i.e. real middle class job growth isn't doing so well).

Don't even get me started on the amount of inefficiencies in UK PLCs; I've built multiple revenue streams off it!

Haven't you just answered your own question though? If most of the people losing jobs are effectively people in zero hours or similar which are designed to be disposable and fluctuate with demand, how does that impact house prices when the only people using mortgages are relatively steadily employed younger people and an increasingly smaller proportion of landlords?

Of course there's anecdotal evidence of cuts in more senior jobs but broadly speaking what I'm seeing (from a role which involves exposure to a lot of different organisations) is that people are trying to keep hold of experienced staff or those with money invested in them as trainees so they can try to hit the ground running as and when a sense of normalcy returns. 

Despite the blanket assumption that if the US sneezes the world catches a cold, the Yanks are not the best comparators as their approach (loading up unemployment benefits rather than trying to encourage employers to keep jobs alive) is different to Europe. 

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40 minutes ago, Hullabaloo82 said:

Haven't you just answered your own question though? If most of the people losing jobs are effectively people in zero hours or similar which are designed to be disposable and fluctuate with demand, how does that impact house prices when the only people using mortgages are relatively steadily employed younger people and an increasingly smaller proportion of landlords?

Of course there's anecdotal evidence of cuts in more senior jobs but broadly speaking what I'm seeing (from a role which involves exposure to a lot of different organisations) is that people are trying to keep hold of experienced staff or those with money invested in them as trainees so they can try to hit the ground running as and when a sense of normalcy returns. 

Despite the blanket assumption that if the US sneezes the world catches a cold, the Yanks are not the best comparators as their approach (loading up unemployment benefits rather than trying to encourage employers to keep jobs alive) is different to Europe. 

Agree with both of your posts. I do think Air bnb and some landlords are in for a rough time but I expect the banks will be told to delay and pray on those debts or the govt will take them for a discount maybe. 

I bought a few years ago. While it's a bit of a rough house (fixer-upper) it's in a nice town with a fab garden and lots of space inside. I've been dreaming of extending and redeveloping for a few years until we got locked in and I've never loved this place so much. I certainly can't imagine being stuck in the tiny flat i rented while I saved up for this. 

I've had a 10% salary cut effective 1 May (global finance role in large software company) but other than that it's all good and actually I'm at least saving that reduction by not being able to go out. 

Plus the government has already thrown so much liquidity into the system and eased monetary policy that I can see inflation as a problem... possibly even stagflation. If a vaccine or treatment breakthrough or some other good news (maybe 75% of us have had it and it's going to fizzle out regardless like Sars 1) it'll be guns blazing for anything debt driven until they pull that liquidity back in but I expect they'll use the lagging unemployment numbers as justification enough to delay that as long as possible.

Personally it'd be sweet if I could get a nice remortgage deal next year when my fixed term is up :) 

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38 minutes ago, Hullabaloo82 said:

Haven't you just answered your own question though? If most of the people losing jobs are effectively people in zero hours or similar which are designed to be disposable and fluctuate with demand, how does that impact house prices when the only people using mortgages are relatively steadily employed younger people and an increasingly smaller proportion of landlords?

Many of these "zero hour" types rent.  So there's your first 2nd order effect - rental capacity will soon be greater than demand.  Consumption of services, goods, takeaways reduced.  Lots of impacts.

Secondly, those "zero hour" types also have layers of people above them managing, coordinating etc.  A quick google on Uber, Lyft as one specific example shows redundancies and furloughs across the board.  

39 minutes ago, Hullabaloo82 said:

Despite the blanket assumption that if the US sneezes the world catches a cold, the Yanks are not the best comparators as their approach (loading up unemployment benefits rather than trying to encourage employers to keep jobs alive) is different to Europe. 

The UK furlough scheme only delays the inevitable.  The most immediately impacted industries (Airlines) already showing their cards with redundancies.  Again, 2nd order effects are often overlooked in these scenarios.  

And yes, when the US sneezes, the rest of the world does catch a cold; consumption of goods & services from USA consumers (supply chains and what not) is huge driver.  

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2 minutes ago, Unmoderated said:

Plus the government has already thrown so much liquidity into the system and eased monetary policy that I can see inflation as a problem... possibly even stagflation. If a vaccine or treatment breakthrough or some other good news (maybe 75% of us have had it and it's going to fizzle out regardless like Sars 1) it'll be guns blazing for anything debt driven until they pull that liquidity back in but I expect they'll use the lagging unemployment numbers as justification enough to delay that as long as possible.

Liquidity from the government wont necessarily result in a faster vaccine.   I don't think they can print ones way out of this - see the oil sector as a reflection of serious job destruction for example. 

3 minutes ago, Unmoderated said:

Agree with both of your posts. I do think Air bnb and some landlords are in for a rough time but I expect the banks will be told to delay and pray on those debts or the govt will take them for a discount maybe. 

For 2008 level issues - sure I'd actually agree with what your saying (as banks to ride it out).  From what I can see from the likes of Moody's etc its appearing closer to 30%+ defaults within months being projected.  Be interesting to see if they can ride that sort of level out...

I'm not sure the central banks can bail out everything due to the sheer scale and impact, is what i'm saying.

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  • 415 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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