An Ea's View

[Mildura]

I've followed this board for the last couple of years, mainly to read property related information, not because I've been expecting a huge crash. I've worked for 3 different firms of estate agents over the past 12 years. So before anybody else points it out, yes i did miss the last crash and it is now clear how 'undervalued' property was back in 1995 - just a shame i didn't spot that fact at the time or else i'd have borrowed as much money as possible, bought as many houses as i could and probably be able to retire by now!!

Back to the present and it seems things are beinning to change. Let me outline a few things first. My office is in Surrey town - proper commuter belt territory - lots of city bankers & lawyers. Market conditions can vary considerably between different areas so it is hard to get a national picture.

It seems that after 5 interest rate rises in the last twelve months (or is it 6....?) and prices having risen in my area up to 20% in some cases during the same period the Great British Public have decided to become a little more cautious! Houses that 4 months ago would have given me 4/5 different offers to choose between are now having 20 viewings before an offer materialises! It had to happen sooner or later. Prices can't rise at that rate at the same time as borrowed money is becoming more expensive.

The main difference is that now some of the homes we're trying to sell for £700-800k are total 5hit£. There are still plenty of buyers areound if you've got a decent house that you're not asking embarassing money for. But when the market changes (feels a bit like 2005...) it's the dross you get left with. A few of the houses I'm marketing must be £150k too much !! Now, i accept that EA's have to shoulder a chunk of the blame for the overvaluing that goes on, BUT if i were to give totally realistic valuations i'd only end up with about a third of the houses i have at the moment. If you haven't got a place on the market there's no way you can persuade the owner to lower the price/accept a lower offer or be lucky enough to stumble accross some nutter who thinks it's their dream home. If you haven't got a place on the market, there's no way to earn a fee from it!

I reckon we're heading for 2-3 years of zero price rises and probably some falls. A 15% drop where i am would only bring us back to where we were at christmas and i can't see anything worse than that. Most people who have bought property in the last couple of years are unlikely to be trying to sell within the next couple of years. And the price of your house is only relevant when you need to sell it. The cost of any finance borrowed against the property is the critical figure. With interest rates where they are at the moment this crash is most unlikely to happen. Add another 1.5% on and things would get interesting - but i'm not convinced that's hugely likely. But then again, i'm not an economist, coz if i was i wouldn't be stuck in my current employment!!

Be interesting to see what the next few month's will bring. From a business point of view i couldn't give a stuff whether prices were rising, falling or doing nothing much at all - as long as people still wanted to move house. From i personal point of view i would rather prices dropped a bit because the 'next rung on the ladder' is a blo0dy long way away!! We shall have to wait and see....

Let's hope this riduculus HIPs balls-up doesn't put too many people off selling as reduced suply is unlikely to help matters... Will keep you posted!

Ps - Is our favouite LFC fan, teddyboy, still around these days..?

[newaccount99]

Thanks Mildura!

It's great to have a 'real live' EA on the board posting their experiences at the front line.......regardless of whether they are bear or bull.

[FTB2B]

The cost of any finance borrowed against the property is the critical figure. With interest rates where they are at the moment this crash is most unlikely to happen. Add another 1.5% on and things would get interesting - but i'm not convinced that's hugely likely. But then again, i'm not an economist, coz if i was i wouldn't be stuck in my current employment!!

Ahh, that'll be the sweet smell of 2 million fixed rates popping into a crushing SVR rate then... mmmmm

[bazzzzzzz]

Keep posting Mildura.

Interesting read.

[frugalista]

And the price of your house is only relevant when you need to sell it.

I don't think this is right. If you are in negative equity when your mortgage fix ends you will not be able to remortgage and you will go onto the SVR!

frug.

[Killer Bunny]

It seems that after 5 interest rate rises in the last twelve months (or is it 6....?)

If you haven't got a place on the market, there's no way to earn a fee from it!

Good bearish stuff except that you know nowt that matters so your forecast opinion is worth jacksh1t as far as I'm concerned. Don't you mean ridiculous commission? Fees?!!! My 4rse.

[headmelter]

Mildura,

What's your take on Tesco entering the housing market?

Edited July 20, 2007 by headmelter

[BufferBear Bitcoin Bull]

Good bearish stuff except that you know nowt that matters so your forecast opinion is worth jacksh1t as far as I'm concerned. Don't you mean ridiculous commission? Fees?!!! My 4rse.

You been out on the town

[DabHand]

Welcome and cheers for the post.

A 15% drop where i am would only bring us back to where we were at christmas and i can't see anything worse than that.

What does this mean? You cannot imagine it or you refuse to consider it properly? i.e. When you try to visualize larger falls and begin to structure reasoning behind it does it squirm away from you? Thats cognitive dissonance for you

[Si1]

Welcome and cheers for the post.

What does this mean? You cannot imagine it or you refuse to consider it properly? i.e. When you try to visualize larger falls and begin to structure reasoning behind it does it squirm away from you? Thats cognitive dissonance for you

err, I'm pretty sure that everyone, bull and bear on this forum including me, is a victim of cognitive dissonance, as I perceive it, the stakes are so high.

[DabHand]

err, I'm pretty sure that everyone, bull and bear on this forum including me, is a victim of cognitive dissonance, as I perceive it, the stakes are so high.

Not me chap, l'm special.

When l read stuff l dont agree with l feel myself getting irritable, and l want to stop. Now that would normally be a classic symptom of c.d. However its not, its because what l am reading is always demonstrable ******, and because l can't directly engage the author to either clarify or argue my position l lose patience.

Outside of social relationships, cute animals or anything that is not based clearly on emerging aggregate patterns of cause and effect, I actually don't have an opinion on anything. l simply see my "view" as an output of various informational inputs. Yes l understand there are certain individual functions that help form that view, but l strongly believe that if people are provided with the necessary accurate information, and enough first or second hand empirical knowledge they will come to the same conclusions.

Some topics can clearly be ringfenced in this way, where applying any ego to the equation is at best a waste of time, and at worst disruptive. I am quite able to reverse such an opinion in seconds base on new info, as l do not hold any current opinion as a valid recursive input.

As you can imagine, l'm great pub company.

Edited July 20, 2007 by DabHand

[cynic]

From i personal point of view i would rather prices dropped a bit because the 'next rung on the ladder' is a blo0dy long way away!!

Given that HPs are cyclical (until houses cease to be treated as investment we'll always have boom and bust) and given that we can't say anything useful about the cycle length (it's always going to be longish, variable, and we can never be sure that the timing of a peak or trough will exactly suit our requirements) can you explain why, as someone who wants to move up a rung, you "would rather prices dropped a bit"? Why not a lot?

A big fall would put you quids in and a big fall doesn't preclude a fortuitous massive rise at a later date to coincide with your trading-down or emigrating.

[The Colour]

The main difference is that now some of the homes we're trying to sell for £700-800k are total 5hit£. There are still plenty of buyers areound if you've got a decent house that you're not asking embarassing money for. But when the market changes (feels a bit like 2005...) it's the dross you get left with. A few of the houses I'm marketing must be £150k too much !! Now, i accept that EA's have to shoulder a chunk of the blame for the overvaluing that goes on, BUT if i were to give totally realistic valuations i'd only end up with about a third of the houses i have at the moment. If you haven't got a place on the market there's no way you can persuade the owner to lower the price/accept a lower offer or be lucky enough to stumble accross some nutter who thinks it's their dream home. If you haven't got a place on the market, there's no way to earn a fee from it!

A great piece of wisdom there. Thats how the market begins to suffer from oversupply. Its not as you say the sensibly priced nice homes, but the build up of flotsam and jetsam, the cr@p that no-one wants to buy that starts to clog up the system. Once this flotsam gets to a critical mass, we have oversupply.

[Guest Skint Academic]

err, I'm pretty sure that everyone, bull and bear on this forum including me, is a victim of cognitive dissonance, as I perceive it, the stakes are so high.

What about if you have given up caring about what happens to Britain because in your mind you have already emigrated?

I don't want to stay here anymore even if I could afford a house. I only want to move back if I can buy outright a small-holding in the highlands of Scotland. A correction will have to happen sometime, even if it's just because inflation brings down real house prices. But it's clear to me now that even if an HPC happened tomorrow that it will still be many years before I can be self sufficient in the highlands. So my plans have changed. I'm now wondering whether I can get through life without needing a mortgage.

I'm just on here to vent my spleen and to learn to recognise the different stages of an asset bubble.

[bobthe~]

Mildura,

You're not in the Esher area are you?

That pretty much sums up what we are seeing as ex prospective buyers. Some expensive house nicely done up, next to main roads for nearly 800k. Good houses being snapped up quickly (although none have actually come on the market for weeks now). It's the flight to quality. People suddenly wake up to the fact that houses are very expensive and so aren't prepared to buy anything any more at any price. It's a Wile E Coyote moment, although because property is illiquid, it doesn't happen so quickly.

Being in a very good position as almost "cash buyers" (although we are trying to find somewhere to rent instead now), we are getting a few calls about chains breaking as people get cold feet. The prices are still out of our range, although we did hear of a 1.05million valued house being offered at 850-900 because the chain broke just before completion (buyer couldn't raise the money, there's a thing).

That's already a 20% drop, but still out of our reach.

So are you seeing more chains collapsing (compared to before?) due to fear or finance tightening?

[Rachman]

There's a house near me that went up at £1.5M a month ago. It was reduced two weeks ago to £1.35M and yesterday it was cut to £1.225M.

When it went up I said the missus, it's probably worth £1.2M. Is it the sellers or the agents that are putting the silly prices on them ? These people have tainted theirs (and will no doubt be a laughing stock amongst neighbours).

But I agree, there's little supply - anything with 4 beds plus a proper garden and garage that's in reasonable nick is still shifting - provided the seller is not a joker..... - I think Exclusivelysurrey and Foxtons valuations may have something to do with the delusional asking prices as they try to seek a proper foothold in the market...

[starsign]

Thanks for an interesting perspective, it is always good to hear opinions from EAs.

To the few posts saying "you know nothing" or the like, just because the opinions are not proclaiming the onset of a crash does not mean that it is any less valid then your own.

Interesting about the 15% cut taking prices back to start of the year...this triggered some thoughts: I wonder how many people on here believe that a 20-25% crash is likely...probably a lot. 50% crash? I'm not so sure. I wonder how long they've been waiting for that 25% crash...if it is any more than 2 years then chances are that a crash would only take you back to near what prices were then. If you CHOSE not to buy then and have been renting for that time then if a 25% crash comes you've missed out on repaying your mortgage and won't be any better off price wise.

This is not meant as a "buy property now" post, just thoughts on trying to predict property prices.

[THE BALD MAN]

Thanks for an interesting perspective, it is always good to hear opinions from EAs.

To the few posts saying "you know nothing" or the like, just because the opinions are not proclaiming the onset of a crash does not mean that it is any less valid then your own.

Interesting about the 15% cut taking prices back to start of the year...this triggered some thoughts: I wonder how many people on here believe that a 20-25% crash is likely...probably a lot. 50% crash? I'm not so sure. I wonder how long they've been waiting for that 25% crash...if it is any more than 2 years then chances are that a crash would only take you back to near what prices were then. If you CHOSE not to buy then and have been renting for that time then if a 25% crash comes you've missed out on repaying your mortgage and won't be any better off price wise.

This is not meant as a "buy property now" post, just thoughts on trying to predict property prices.

How have you missed reapying the mortgage if you have been saving an equivalent amount? Also if the return on your savings is greater than the rent what have you lost. the only lose if property is rising and you have missed the cheap leverage.

The other issue is that in a rising market it is more difficult to buy the property you want because of competition. In a falling market people are often looking to off load quickly.

Also I believe when we talk about the large percentages these are mainly in London. In the real world this is not the case

[Hatchet Man]

Good bearish stuff except that you know nowt that matters so your forecast opinion is worth jacksh1t as far as I'm concerned. Don't you mean ridiculous commission? Fees?!!! My 4rse.

Oh how fame goes to people`s heads, ever thought of taking up a new career in the Diplomatic Service ?

[starsign]

How have you missed reapying the mortgage if you have been saving an equivalent amount? Also if the return on your savings is greater than the rent what have you lost. the only lose if property is rising and you have missed the cheap leverage.

The other issue is that in a rising market it is more difficult to buy the property you want because of competition. In a falling market people are often looking to off load quickly.

Also I believe when we talk about the large percentages these are mainly in London. In the real world this is not the case

fair point about investing the difference between rent and mortgage. I don't agree that it is only London seeing large yr on yr growths - I own in the SE and now live near Manchester and both have seen strong growth. So I am not speaking for the whole country or for all types of property, but I can definitely say that double digit yr on yr growth is not just London.

[stillill]

thanks Mildura for taking the time to post. Doesn't sound too bad to be honest (given I'm sure a lot of FTBs are holding off because they don't want to get ******ed in a crash, but can afford it if things stable).

[Si1]

fair point about investing the difference between rent and mortgage. I don't agree that it is only London seeing large yr on yr growths - I own in the SE and now live near Manchester and both have seen strong growth. So I am not speaking for the whole country or for all types of property, but I can definitely say that double digit yr on yr growth is not just London.

whereabouts nr manchester, out of interest?

[Mildura]

Good bearish stuff except that you know nowt that matters so your forecast opinion is worth jacksh1t as far as I'm concerned. Don't you mean ridiculous commission? Fees?!!! My 4rse.

Well, thanks for your constructive comments FP. What a spot of luck it is to have someone like your good self on hand to provide us all with more meaningful opinions

Riciculous commissions.... - don't use an EA then, i'm not aware that it's compulsary - i'm sure next time you sell you'll simply pick up a buyer for your house with your bread and milk from Tesco!! Best of luck!!

[Mildura]

Mildura,

You're not in the Esher area are you?

That pretty much sums up what we are seeing as ex prospective buyers. Some expensive house nicely done up, next to main roads for nearly 800k. Good houses being snapped up quickly (although none have actually come on the market for weeks now). It's the flight to quality. People suddenly wake up to the fact that houses are very expensive and so aren't prepared to buy anything any more at any price. It's a Wile E Coyote moment, although because property is illiquid, it doesn't happen so quickly.

Being in a very good position as almost "cash buyers" (although we are trying to find somewhere to rent instead now), we are getting a few calls about chains breaking as people get cold feet. The prices are still out of our range, although we did hear of a 1.05million valued house being offered at 850-900 because the chain broke just before completion (buyer couldn't raise the money, there's a thing).

That's already a 20% drop, but still out of our reach.

So are you seeing more chains collapsing (compared to before?) due to fear or finance tightening?

Not in Esher, but not a million miles away!!

Haven't had people dropping out because they've got cold feet (yet!) many of the sales i'm dealing with currently were agreed before the last rate rise so those buyers have still got half-decent fixed rates.

If i were you i'd sit tight. not much is likely to come on before beginning of Sept so no point rushing around at the mo looking at the cr@p that's already been on a month.

[Flat Bear]

Add another 1.5% on and things would get interesting - but i'm not convinced that's hugely likely. But then again, i'm not an economist, coz if i was i wouldn't be stuck in my current employment!!

Be interesting to see what the next few month's will bring.

Think your about right. Because of the higher amounts of debt base rates around 7.5% could see a number of people struggle.

With the global interest rate cycle likely to "force" UK base rates to 7.5% before the end of 2008 I think the next year will be very interesting indeed.

It will be a bit like adding little weights onto a seemingly already over stressed cable and each time thinking how remarkable it still hasnt snapped, until....