2005 Stand-off

[the end is a bit nigher]

Around here there seems to be a stand-off between buyers and sellers - only the cheapest houses being sold but prices not being reduced. This happened in 2005 when as a result of only cheaper houses being sold, prices around England were reported by the Halifax as having fallen around 10% on average (9.6% in Harrogate). Now this was most likely a statistical anomaly, i.e. if you stop selling 4 bed houses for £500k but keep selling the smaller version for £200k then the average price of 4 bed houses will fall. However, without a cut in IRs to bail them out as in 2005, will this lead to real falls? I think so.

[aussieboy]

Around here there seems to be a stand-off between buyers and sellers - only the cheapest houses being sold but prices not being reduced. This happened in 2005 when as a result of only cheaper houses being sold, prices around England were reported by the Halifax as having fallen around 10% on average (9.6% in Harrogate). Now this was most likely a statistical anomaly, i.e. if you stop selling 4 bed houses for £500k but keep selling the smaller version for £200k then the average price of 4 bed houses will fall. However, without a cut in IRs to bail them out as in 2005, will this lead to real falls? I think so.

Price indices are mix adjusted.

[the end is a bit nigher]

Price indices are mix adjusted.

Does that always take into account the proportion of houses actually sold or does it work to a standard formula? Much as I would have loved prices to have really fallen by 10% in Harrogate, i'm not sure that on a like for like basis they actually did.

Looking at the actual sales during 2005, the number of sales over £300k was minimal, whereas there were still plenty of sub-£300k sales. That suggested that the average price had fallen due to the actual sales mix.

I'm perplexed now

[aussieboy]

Does that always take into account the proportion of houses actually sold or does it work to a standard formula? Much as I would have loved prices to have really fallen by 10% in Harrogate, i'm not sure that on a like for like basis they actually did.

Looking at the actual sales during 2005, the number of sales over £300k was minimal, whereas there were still plenty of sub-£300k sales. That suggested that the average price had fallen due to the actual sales mix.

I'm perplexed now

Don't ask me... Spline is the man. I would imagine that type of house is proportional to price of house (studio -> mansion)

[Dopamine]

This fits exactly with what I with my untrained eye see around my way. Here (S Wales), prices haven't moved much since 2005, apart from the bottom of the market. Sub £120K still selling, albeit much more slowly. Anything £200K + not shifting, but few prices dropping and most people taking stuff off the market. Bit of a phoney war at the moment, with few obvious forced sellers (evidence would be big price reductions). How much longer can it go on for?

[waitingandsaving]

Even the stuff that's less than £120k has stopped selling here, and 10% of houses are reduced in price (including the sub £120k!) in the weekly paper. Stuff is sticking at the top and bottom ends of the market, but the mid range properties seem to be selling (or it could just be that they're not the ones I notice week in week out in the paper).

[strbear]

TEIN

I think you're right about this - there are a few unique factors to the Harrogate market

1) Its a self contained market - more people move within Hgate rather than in and out

2) There is a very limited new build capability

3) House prices are massively disconnected from "average" salaries

I think what happens is those who want to trade up get more for their money but at a certain point you need to make a BIG jump to see the difference - I'd say this is around £250 K and 500K - so the sub 250K market moves whilst the 500K market stagnates - afterall how can you afford to add 200K to your mortgage if you eraning an average salary.

Its also the aspirational nature of the mid value Harrogatians - some of them would rather hold tight than than be seen to have sold their property for less - so my view is when it does go its going to go in a very big way, it might just be some time whilst this stand off holds.

Regards

SB

[cells]

people are still pricing houses higher and higher yet no one is buying

my next door neighbour has just put up his 3bed end of terrace for 330k, but there are slightly larger SEMIS for 270-280 within a 2 min walk of his place. Even a very large 5 bed semi for 360k.

i laughed my **** off when i saw £330-340k for his property. i think he would be lucky to get 275k and would probably have to sell for 250k in this climate. either way HAHAHHAa

[cells]

Oh and another neighbour, across the street, the moron bought his house 3 bed semi for 120k (developer) in april 2004. He knocked it down totally, then spent a good part of two and a half to 3 years building a 5 bed house.

I have no idea what he spent getting that built, but I assume destroying the old one and buying thins one in London probably cost him £150k.

He is now trying to sell the property for £475k (already dropped it by 10k after no interest)

So far I make it.

Bought for 120k, spent 150k. stamp tax. Total of 270k spent. Then the interest lost on that money at 5% per year over 3 years is 42.5k. selling and buying fees of 5k

So far the total cost to him 317.5k.

The problem is, he will not sell that property for 475k here. He would be lucky to get 350k for it. A 10% profit, which will be falling all the time

[aussieboy]

Bought for 120k, spent 150k. stamp tax. Total of 270k spent. Then the interest lost on that money at 5% per year over 3 years is 42.5k. selling and buying fees of 5k

So far the total cost to him 317.5k.

The problem is, he will not sell that property for 475k here. He would be lucky to get 350k for it. A 10% profit, which will be falling all the time

Given that you've already applied a cost to his debt (5%), you need to calculate his return to his equity. If he was 90% geared, and assuming he gets the 350k, then he's made a 100% return on his equity over three years, which is not bad as anyone would agree. And if he's managed to live there then you need to add in his imputed rent to his return.

[sign_of_the_times]

I see quite a lot of boards around Harrogate / Knaresborough that have been stuck on sold for ages. Its obvious they can't get or maintain the suckers at the bottom of the chain. I'm sure some people dont revert the board back to "for sale" when they lose their buyer (looks bad on the agent and what would the neighbours say??!)

[cells]

Given that you've already applied a cost to his debt (5%), you need to calculate his return to his equity. If he was 90% geared, and assuming he gets the 350k, then he's made a 100% return on his equity over three years, which is not bad as anyone would agree. And if he's managed to live there then you need to add in his imputed rent to his return.

he did not live there, no one did as a house was flattened and a new one built

and it assumes he sells for 359k. i reckon he will keep it priced at 475 for a while (as he has already dropped 10k). he will then probably drop it to 450k in some 4-6months. Then to some 430k in 4-6months after that.

chasing the market down

there is a far nicer house for sale in a nicer position and i think its a bit larger too. for 360k and he is asking 475

[the end is a bit nigher]

.....afterall how can you afford to add 200K to your mortgage if you eraning an average salary.

hi strbear

bloomin' good question - i read the other night that Harrogate has more millionaires per head than anywhere else in the country - I can imagine it but never really been sure where they all get their cash from!

having said that, I believe Ilkley is pretty similar in all aspects you describe? - house prices are pretty extortionate there too

cheers

TEIN

[kagiso]

he did not live there, no one did as a house was flattened and a new one built

and it assumes he sells for 359k. i reckon he will keep it priced at 475 for a while (as he has already dropped 10k). he will then probably drop it to 450k in some 4-6months. Then to some 430k in 4-6months after that.

chasing the market down

there is a far nicer house for sale in a nicer position and i think its a bit larger too. for 360k and he is asking 475

You also need to account for all the time he spent working / managing the project during those three years.

[HPC Convert]

- there are a few unique factors to the Harrogate market

While the market is a factor of many micro markets, no micro market is unique and all are affected by macro issues such as afford-ability and sentiment etc.

[aussieboy]

You also need to account for all the time he spent working / managing the project during those three years.

Sure - but if it was a tear down and rebuild then that shouldn't have been too substantial. Even with the worst case pricing, he's done well... extremely well if he gets >350k.

However, I would agree that he's very optimistic with his asking price which I think was the initial poster's point.

[strbear]

hi strbear

bloomin' good question - i read the other night that Harrogate has more millionaires per head than anywhere else in the country - I can imagine it but never really been sure where they all get their cash from!

having said that, I believe Ilkley is pretty similar in all aspects you describe? - house prices are pretty extortionate there too

cheers

TEIN

TEIN

Do you mean the article in the telegraph?

http://www.telegraph.co.uk/property/main.j...e-dales-121.xml

I'd agree with you about the Ilkley market - on page two of the article it says its the most expensive town in the North with average prices of over £300K. I think the money in Harrogate/Ilkley comes from two areas - those with high incomes (Financial Services in Leeds, Lawyers etc) and those with their own businesses - I wonder how many of the millionaires get there due to the value of their house and how many have the liquid assets to support such a lifestyle? It used to be that southerners moving North could buy in the Duchy and still have £500K left over but those days are long gone - buying in Ilkley isn't far off buying in Chelsea these days.

Anyway the test of time will tell - is it real money or debt? I think I know the answer but we'll see over the next few quarters,

Regards

SB

[Wad]

While the market is a factor of many micro markets, no micro market is unique and all are affected by macro issues such as afford-ability and sentiment etc.

I tend to agree with the previous comments on Harrogate. At the top end it is also very under mortgaged with a lot of very wealthy retirees - its especially over endowed with widows toting big life insurance payoffs and company pensions from their husbands. Few people at that level HAVE to sell. Lower down the price scale people move in and out with jobs and so it is more sensitive to the overall state of the economy.

I think that is the reason the top end just stagnates is that no one has to take a price cut to make the sale and mostly they will just withdraw a property rather than take less than they hoped for. At the bottom end they just have to go wth whatever the matrket will give them.