Jump to content
House Price Crash Forum
Sign in to follow this  
munimula

Retail Blues Are Not Over Yet

Recommended Posts

According to the Office of National Statistics (ONS), retail sales rose more quickly than expected last month. But they put in their weakest quarterly performance in a year.

Sales rose 0.7 percent in March which was more than double analysts' forecasts. So far so good. However, for the first quarter of 2006 as a whole retail sales fell 0.7 percent from the previous three months -- the first drop and weakest figures since February 2005.

Prices fell by 1.1% compared to the same time last year, as retailers offered discounts to counter the effects of competition and the worst start to the year for a decade.

"While the data is on the face of it good, the weakness evident in this report suggests that the consumer sector remains weak," said Gavin Redknap, economist at Standard Chartered.

The underlying slowdown came as sales at household goods stores fell. This comes despite recent signs of strength in the housing market.

Retailer GUS owner of DIY shop Homebase, recently predicted that the home improvements market will stay weak this year. An optimistic view some would say. Others have the DIY sector out for the count for some considerable time in the future, suffering from a change in fashion as much as anything else.

The Bank of England has been counting on a consumer spending recovery to drive economic growth this year . But with the underlying rate of sales growth dipping into negative territory that revival seems far from assured.

The good news/bad news from the ONS, did not dampen corporate activity in the retail sector. Particularly in book selling, where rumours and bids continued to swirl.

Monday saw colourful entrepreneur Tim Waterstone announce his aim to buy back the bookstore which bears his name for up to £280m from HMV. Waterstone has wanted Waterstone’s for some considerable time. He believes it is operating inefficiently and that he can work his retail magic with the chain.

And of course he has done it before. In 1991 he sold the chain to WH Smiths, only to buy it back again with HMV 1998. Waterstone tried to buy it from HMV 2001, but failed.

So buying and selling Waterstone’s has been something of a career for Sir Tim. One that nearly didn’t start off when he left his original plans for the enterprise on a bus (we're not joking, its true).

Regarding his latest offer (which is kept securely), Waterstone said bank finance had been obtained 'in principle', and that he was working with unidentified private equity interests and Anthony Forbes Watson. Watson is a former chief of the Penguin Group, so presumably knows a thing or two about book selling.

Waterstone’s bid is equivalent to 70p a share at £280 million. However it is conditional on HMV's not proceeding with its plans to buy rival bookstore Ottakar's. According to Waterstone’s consortium, HMV’s acquisition of Ottakar’s would make “revitalisation” of Waterstone’s, “more difficult”. Though exactly how and why remains obscure.

Ottakar’s might not be a problem however. WH Smiths is said to be interested in acquiring the chain, as are several Irish companies. Many feel that ultimately HMV will eventually lose the bidding war.

Book retailing has its attractions. Sales are still rising. But both Ottakars and Waterstones have their problems. Analysts point out that both chains are saddled with high rents that blunt their competitive edge.

In addition both chains combined, still come to less than 325 stores. This is fewer than the national reach of supermarkets and, of course, vastly smaller than web stores.

So Waterstone will have a task on his hands with Waterstone’s. If any difficulties arise however, he can always sell it. Again.

Higher unemployment, recession and resulting HPC is all on track...

Share this post


Link to post
Share on other sites

Higher unemployment, recession and resulting HPC is all on track...

The Bank of England has been counting on a consumer spending recovery to drive economic growth this year . But with the underlying rate of sales growth dipping into negative territory that revival seems far from assured
.

The Miracle Economy must maintain forward momentum or die. HPI and MEW are essential to Gordon's dream of perpetual economic motion. When spending stops the econmy retracts and down it all comes. Boom-bust is built in to the cycle.

Share this post


Link to post
Share on other sites

Higher unemployment, recession

Wrong logic. No more relevant to the housing market than to the price of gold or google shares. In 2006,houses are a commodity and if anything, recession will increase demand for houses from people looking for a safe home for their cash.

Share this post


Link to post
Share on other sites

Wrong logic. No more relevant to the housing market than to the price of gold or google shares. In 2006,houses are a commodity and if anything, recession will increase demand for houses from people looking for a safe home for their cash.

I really really believe, after watching the market closely now for 3-4 years that we have reached the finaly tipping point.

My parents are getting no interest in their property on the market - high priced properties simply now too expensive to sell.

Bottom of the rung properties experiencing some kind of last gasp desperate attempt by FTBs to get onto the ladder.

2-bed flats priced at £280K in Bristol - I mean FFS this is simply ridiculous.

The economy deteriorating is very very relevant. Unemployment up a further 13,000 in March, that's up 14 out of the last 15 months.

A country relying on consumers to drive it's growth when they are loaded up to the eyeballs with debt at the LOWEST INTEREST RATES EVER. Wake up and smell the coffee dumsunreader.

Share this post


Link to post
Share on other sites

Wrong logic. No more relevant to the housing market than to the price of gold or google shares. In 2006,houses are a commodity and if anything, recession will increase demand for houses from people looking for a safe home for their cash.

The problem is that in a recession unemployment levels rise causing homes to be sold. When asset bubbles burst people tend to invest what they have in cash and not chase falling values downward. The rush is to sell assets as fast as possible to stem losses.

You are right in seeing houses as a commodity. This is particularly true in a speculative market such as the UK. Commodity trading is volatile and prices go up as well as down.

The recession of the early 90's saw some sharp drops in houses and I suspect the same will be evident at the end of this present cycle.

Share this post


Link to post
Share on other sites

Interim results from ;

McCarthy & Stone PLC

25 April 2006

'We are seeing some signs of increasing buyer confidence and although it is too

early to assess how the market will develop, we now believe that there is an

opportunity for the Group to exceed last year's sales of 1,983 units...."

".......The Group has continued to find the land market competitive, especially in the

Midlands and North West. Planning issues continue to act as a restraint on land

acquisition and the 'moratoria' on new housebuilding consents in parts of the

North has had a direct impact on our North West Region. Despite the slowdown in

the volume of housing transactions over the last 18 months, the vendors of land

have not reduced their price expectations and at the same time build costs have

continued to move forward.

The Group's total land holdings have an average plot cost of £39.0k which

equates to approximately 23% of the average selling price recorded in the last

six months......"

Share this post


Link to post
Share on other sites

I really really believe, after watching the market closely now for 3-4 years that we have reached the finaly tipping point.

My parents are getting no interest in their property on the market - high priced properties simply now too expensive to sell.

Bottom of the rung properties experiencing some kind of last gasp desperate attempt by FTBs to get onto the ladder.

2-bed flats priced at £280K in Bristol - I mean FFS this is simply ridiculous.

The economy deteriorating is very very relevant. Unemployment up a further 13,000 in March, that's up 14 out of the last 15 months.

A country relying on consumers to drive it's growth when they are loaded up to the eyeballs with debt at the LOWEST INTEREST RATES EVER. Wake up and smell the coffee dumsunreader.

Mimula,

With repect I think you are looking at the housing market also using the wrong logic. What you say is fine using the logic of the last century when houses where primarily bought by people has homes. Most housing transactions in 2006 are by undertaken by investors or by people already in the market moving up and down the ladder. We now have a totally different situation where housing is seen by those with capital as an investment in the same way that gold is an investment. You may as well argue that the price of gold makes it too expensive for the person on average income. I'm not saying I agree with this but in a country where the infastructure for maintaining a decent society have all become subject to the forces of capitalist greed then I'm afraid that to think that housing should be any different is being misguided.

Share this post


Link to post
Share on other sites

Mimula,

With repect I think you are looking at the housing market also using the wrong logic. What you say is fine using the logic of the last century when houses where primarily bought by people has homes. Most housing transactions in 2006 are by undertaken by investors or by people already in the market moving up and down the ladder. We now have a totally different situation where housing is seen by those with capital as an investment in the same way that gold is an investment. You may as well argue that the price of gold makes it too expensive for the person on average income. I'm not saying I agree with this but in a country where the infastructure for maintaining a decent society have all become subject to the forces of capitalist greed then I'm afraid that to think that housing should be any different is being misguided.

Ok, so by your own admission prices are set for a massive fall because as soon as it becomes common knowledge that housing is no longer a good investment there will be nothing to prop up this market.

It's different this time....right? :lol::lol::lol:

Share this post


Link to post
Share on other sites

Ok, so by your own admission prices are set for a massive fall because as soon as it becomes common knowledge that housing is no longer a good investment there will be nothing to prop up this market.

It's different this time....right? :lol::lol::lol:

You could say the same about gold. What is the yield on gold?

Share this post


Link to post
Share on other sites

You could say the same about gold. What is the yield on gold?

Housing and gold are not the same think, they are completely different.

The average Joe on the street goes and gets a mortgage for a house because they want somewhere to live or they want to join the BTL party. They are constrained by what they can borrow to buy the housing and their incomes and employment security and the cost of the other things they have to spend their money on - petrol, energy, council tax etc etc. These all have constraints on the affordability of housing.

The average Joe does not buy gold, professional investors do and people that need gold to make things.

Share this post


Link to post
Share on other sites

Housing and gold are not the same think, they are completely different.

The average Joe on the street goes and gets a mortgage for a house because they want somewhere to live or they want to join the BTL party. They are constrained by what they can borrow to buy the housing and their incomes and employment security and the cost of the other things they have to spend their money on - petrol, energy, council tax etc etc. These all have constraints on the affordability of housing.

The average Joe does not buy gold, professional investors do and people that need gold to make things.

No. You are still stuck in the mind set of the last century. remember, judging by the number of FTB's entering the market, the "average joe" neither buys houses or gold. Houses are a more attractive investment than gold in that people always need houses but people do not always need things made from gold.

Edited by nodumsunreader

Share this post


Link to post
Share on other sites

No. You are still stuck in the mind set of the last century. remember, judging by the number of FTB's entering the market, the "average joe" neither buys houses or gold. Houses are a more attractive investment than gold in that people always need houses but people do not always need things made from gold.

sorry...I forgot....it's different this time :lol::lol:

Share this post


Link to post
Share on other sites

I really really believe, after watching the market closely now for 3-4 years that we have reached the finaly tipping point.

My parents are getting no interest in their property on the market - high priced properties simply now too expensive to sell.

Bottom of the rung properties experiencing some kind of last gasp desperate attempt by FTBs to get onto the ladder.

2-bed flats priced at £280K in Bristol - I mean FFS this is simply ridiculous.

The economy deteriorating is very very relevant. Unemployment up a further 13,000 in March, that's up 14 out of the last 15 months.

A country relying on consumers to drive it's growth when they are loaded up to the eyeballs with debt at the LOWEST INTEREST RATES EVER. Wake up and smell the coffee dumsunreader.

and people are finding more bizarre and arcane reasons for 'why it's different this time'

Wrong logic. No more relevant to the housing market than to the price of gold or google shares. In 2006,houses are a commodity and if anything, recession will increase demand for houses from people looking for a safe home for their cash.

Bit like the last days of 1999 with internet stocks - anyone remember Boo.com? :lol::lol:

Share this post


Link to post
Share on other sites

of course, house prices will continue to increase more than wages for ever more!

I do not know, but what I do know is that the relationship betwween the cost of a house and the average income is far less relevant than it used to be..

Edited by nodumsunreader

Share this post


Link to post
Share on other sites

Housing and Gold are different...

Gold is bought and paid for in full.

Most houses in the UK are leveraged with high mortgages, on margin in effect. These margin purchases will be wacked when the payments become too high to pay.

The same situation happened when the US had the great depression. Margin accounted for most of the equity bubble then as margin accounts for most of house purchases today.

Interest rate hikes will pop it - that is for sure.

Share this post


Link to post
Share on other sites

I do not know, but what I do know is that the relationship betwween the cost of a house and the average income is far less relevant than it used to be..

You really aren't very bright.

It is very relevant for those that are able to show a bit of forward thinking. Housing is very unaffordable and will fall as soon as there is a shock to the system which inevitably at some point there will be, whether it is higher oil prices, higher inflation or higher unemployment. The fact that house prices:av earnings are at an all time high and have deviated from the average so much would suggest to most intelligent people that prices will have to fall. Somehow, there are plenty of people out there, including yourself that just refuse to accept this. Perhaps because you have so much to lose.

As I stated earlier, my anecdotal evidence of house sales in cornwall is that the market has died - very quickly. With the deteriorating economy and ever increasing oil prices and energy prices we really should be heading over the edge anytime soon. My parents were convinced they would get an immediate sale, afterall there is so much demand in cornwall - isn't there? They can't even get anyone to come and have a look. Where is all this demand? I can't help it but it gives me a smug sense of satisfaction as I told them the market might not be what they expected :)

The US could lead the way - their property market has just gone into freefall and it's worth remembering where the global economic engine is and how relevant this is.

People have become adverse to risk but risk is still out there and growing all the time.

Edited by munimula

Share this post


Link to post
Share on other sites
In 2006,houses are a commodity and if anything, recession will increase demand for houses from people looking for a safe home for their cash.

In a recession you tend to get deflation of prices, so one of the safest places for your cash is... in cash.

More to the point, if there's a recession in the UK, why would anyone put their money into an overpriced house when they could ship it abroad to invest in countries whose economies _aren't_ in a recession?

You see it really is different this time: it's pretty much trivial today for anyone to move money around the world, whereas it was still difficult and time-consuming in previous recessions (if not near impossible, with currency controls), unless you were rich.

Share this post


Link to post
Share on other sites

You really aren't very bright.

It is very relevant for those that are able to show a bit of forward thinking. Housing is very unaffordable and will fall as soon as there is a shock to the system which inevitably at some point there will be, whether it is higher oil prices, higher inflation or higher unemployment.

As I stated earlier, my anecdotal evidence of house sales in cornwall is that the market has died - very quickly. With the deteriorating economy and ever increasing oil prices and energy prices we really should be heading over the edge anytime soon. The US could lead the way - their property market has just gone into freefall and it's worth remembering where the global economic engine is and how relevant this is.

People have become adverse to risk but risk is still out there and growing all the time.

You have one view I have another. You believe that HP's are fundamentally a reflection of the ability of people getting onto the housing ladder. I believe that this used to be true but that current evidence of house price stability in the face of FTB non-affordability shows that HP's are now a reflection of investor sentiment in the same way that any other commodity is. Why otherwise have prices not fallen from their peak? Should HP's fall, then IMO it would be as a result of investors finding a safer home for their money and not as a result of FTB non-affordability.

Share this post


Link to post
Share on other sites

You have one view I have another. You believe that HP's are fundamentally a reflection of the ability of people getting onto the housing ladder. I believe that this used to be true but that current evidence of house price stability in the face of FTB non-affordability shows that HP's are now a reflection of investor sentiment in the same way that any other commodity is. Why otherwise have prices not fallen from their peak? Should HP's fall, then IMO it would be as a result of investors finding a safer home for their money and not as a result of FTB non-affordability.

Surely there's a fundamental flaw in your argument though? If FTB's can't afford to buy the properties, then why would they be able to pay sufficient rent to an investor who bought the property?

Share this post


Link to post
Share on other sites

Surely there's a fundamental flaw in your argument though? If FTB's can't afford to buy the properties, then why would they be able to pay sufficient rent to an investor who bought the property?

I think this is a losing battle FreeFall.

You just can't get some people to take off their blinkers

Share this post


Link to post
Share on other sites
If FTB's can't afford to buy the properties, then why would they be able to pay sufficient rent to an investor who bought the property?

Magic.

That really does seem to be what the 'price will only go up' nutters believe, because there's no rationality behind their claims.

Share this post


Link to post
Share on other sites

Surely there's a fundamental flaw in your argument though? If FTB's can't afford to buy the properties, then why would they be able to pay sufficient rent to an investor who bought the property?

Aha now were getting somewhere. If an investor puts his money into gold, he does so on the basis that gold will increase in value over time. There is no yield on gold, it is just an investment, no dividend, no rent, nothing, only the prospect of future increase in value. Now just suppose that investors think of housing in the same way.....makes the argument over rent levels redundant don't you think?

Share this post


Link to post
Share on other sites

Aha now were getting somewhere. If an investor puts his money into gold, he does so on the basis that gold will increase in value over time. There is no yield on gold, it is just an investment, no dividend, no rent, nothing, only the prospect of future increase in value. Now just suppose that investors think of housing in the same way.....makes the argument over rent levels redundant don't you think?

You are confusing 'amateur BTL' with 'investor'

Real property investors will have sold their properties and cashed in on this new commodity.

The market is being propped up by amateur BTL - the reason I call them amateur is because it is because the yields to not stack up and with the risk to property prices on the downside it is definitely not an investment.

Amateur BTL are relying on properties to go up - just to cover their costs (rent voids, buying costs, repairs etc) and most would agree the market has been flat since mid 2004. So any BTLs since then have proably lost money, especiall on the new build flats that have gone down in value and are widely reported to have been sold for more than surveyors can even value them at!

So these amateur BTLers are relying on their own incomes and nothing changing in the economic environment for them to be able to hold onto these properties. They also rely on the rents to at least cover the mortgage costs which in many cases they are not.

And many have spread the equity thin - buying several BTL properties so the changes in the market required for them to start suffering massive losses are very small.

There is absolutely noting in your argument for this situation to remain sustainable.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 302 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.