Falls Of 75%!

[BufferBear Bitcoin Bull]

http://www.thisismoney.co.uk/mortgages/hou...p;in_page_id=57

Property confidence crash as 75% see falls

Simon Lambert, This is Money

27 December 2007

Confidence in the property market has crashed with three quarters of people predicting house price falls in 2008 - and just one in five believing the average home will rise in value.

Crisis of confidence: More than half of people polled by This is Money said house prices would fall by 11% or more next year, with just one in five forecasting a rise in value

for 12 years'

A poll of more than 4,000 people by This is Money has revealed that 75% expect property to fall over the coming year and 52% say prices will drop by 11% or more.

A fall of 11% would wipe £21,500 off the price of the £194,895 average home, according to the Halifax house price index.

Just 19% of those polled by This is Money believe house prices will rise in 2008, while 6% say that prices will remain flat. The results of the poll conducted during December stand in stark contrast to the optimistic mood a year ago, when one third of people said prices would increase by more than 6% in 2007. The December 2006 poll showed 55% believing prices would rise in 2007.

A further decline in affordability, a gloomy economic outlook and warnings that lenders will have to tighten borrowing criteria in the wake of the credit crunch have all contributed to the change in sentiment during 2007. Meanwhile, the Northern Rock crisis which brought the first run on a British bank for more than a century struck a high profile blow against consumer confidence.

This is Money's December 2007 poll revealed that 9% believed prices would rise a modest 1% to 5%, while 5% forecast substantial growth of 6% to 10%, and a hardcore of optimists said prices would rise 11% or more in 2008.

Those who were bearish on property greatly outnumbered the bulls, with a dip of 1% to 5% called by 10% of those polled, while 13% said prices would drop by 6% to 10% and 52% forecast substantial falls of 11% or more.

House prices have risen to record highs in 2007, with the average UK home according to the Halifax house price index peaking at £199,600 in August, before three successive monthly falls took the average value back down to £194,895 in November.

Halifax's November index, its most recent data, shows prices having risen by 6.3% over the past 12 months – down from an 8.9% annual rate of inflation recorded in October. Nationwide's house price index said the cost of the average UK home was £184,099 in November and the annual rate of inflation was 6.9%.

Will there be a house price crash? The property industry has forecast a gloomy 2008 with Halifax, Nationwide and the Royal Institution of Chartered Surveyors (Rics) suggesting prices will remain flat over the year ahead.

Rics said house prices will end the year broadly unchanged but should prices soften, pent-up demand from first-time buyers will buoy the market. The organisation said that while demand has fallen, it is also significant that new instructions to sell have slipped back.

It said that as in 2005, when the property market took a breather, unless there is a sharp rise in new sales instructions to accompany the drop in new buyer enquiries, it is unlikely there will be a great fall in house prices.

Simon Rubinsohn, Rics chief economist, said: '2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform. The effect of the credit crunch will dissipate slowly meaning that those seeking to obtain finance in the first half of 2008 may struggle.

'However, the employment picture should remain firm throughout the year, helping to prevent significant numbers of repossessions and the subsequent influx of supply into the market. This should ensure that house price growth remains broadly flat over the course of the year.'

* 4,274 people were polled by This is Money between December 5 and December 24, 2007

Edited December 27, 2007 by Buffer Bear

[Fairies Wear Boots]

Six months ago if you said houses would start falling in price to the average person in the street, they'd laugh at you. Now three in four think so themselves. Spring bounce my ass .

[redwing]

This is great news.

The sample size of this survey is about 4 times bigger than a lot of the political opinion polls. And it's a repeat of the same questions from last year.

This is real, uncontrovertible proof that sentiment has changed radically.

We can now have the self-fulfilling prophecy of:

the majority thinks prices will fall >> the majority hang off buying (or try selling up) >> slump in demand >> falling prices.

[crouch]

This is great news.

The sample size of this survey is about 4 times bigger than a lot of the political opinion polls. And it's a repeat of the same questions from last year.

This is real, uncontrovertible proof that sentiment has changed radically.

We can now have the self-fulfilling prophecy of:

the majority thinks prices will fall >> the majority hang off buying (or try selling up) >> slump in demand >> falling prices.

This logic doesn't work. If the number of people who don't sell is the same as won't buy then demand may be unaffected and prices won't fall. I think they will but not by your logic.

[Dr House]

This is what we have really been waiting for. All through last year in particular, wise posters like RB etc were saying nothing will change until sentiment changes...and this echos a lot of informal AOL surveys etc.

Once Joe le Public has decided en masse, there is nothing Gordon can do to manipulate the facts or interest rates etc..... this will be the worst news of all to him and Darling...................

[Guest Mr Parry]

This is what we have really been waiting for. All through last year in particular, wise posters like RB etc were saying nothing will change until sentiment changes...and this echos a lot of informal AOL surveys etc.

Once Joe le Public has decided en masse, there is nothing Gordon can do to manipulate the facts or interest rates etc..... this will be the worst news of all to him and Darling...................

They'll still have big pensions.

[Fairies Wear Boots]

They'll still have big pensions.

Yeah, but Dictators like to stay in power.

[mattley]

The sample size of this survey is about 4 times bigger than a lot of the political opinion polls.

But it's a far more skewed group, People who partake in a TiM poll are far more likely to be better informed than Joe average. Sentiment is obviously turning, but 75% is a way away just yet.

[Mr Yogi]

This logic doesn't work. If the number of people who don't sell is the same as won't buy then demand may be unaffected and prices won't fall. I think they will but not by your logic.

The logic works fine.

As people believe that their property is falling in value, they will be increasingly desperate to sell; initially to maximise prifits already made, then to minimise losses, and ultimately to avoid the trap of negative equity.

There are always the same number of buyers as sellers. All that changes is the price.

[damianlsmith]

The logic works fine.

As people believe that their property is falling in value, they will be increasingly desperate to sell; initially to maximise prifits already made, then to minimise losses, and ultimately to avoid the trap of negative equity.

There are always the same number of buyers as sellers. All that changes is the price.

Why would someone sell if they are going to lose money? If they can currently afford their mortgage, then they have no reason to sell as they will not gain anything by doing so in the long run.

You can not deny that eventually property prices will increase to levels that they are now if a crash occurs.

Also - supply and demand is a basic ecomonic fundamental which does drive prices. If there is no supply, then prices wil be high. If there is no demand, prices will fall.

Look at Whale meat these days, fightfully expensive, yet easy to catch....

[crouch]

The logic works fine.

As people believe that their property is falling in value, they will be increasingly desperate to sell; initially to maximise prifits already made, then to minimise losses, and ultimately to avoid the trap of negative equity.

There are always the same number of buyers as sellers. All that changes is the price.

Oh dear!

Some people may be desperate to sell but the majority won't; if they can service their debts they'll sit this one out. You underrate the inertia of most people.

There have to be the same number of buyers and sellers at the point of exchange; that is a tautology but we aren't talking about the point of exchange we are talking about the numbers who wish to buy and the numbers who wish to sell. Why do these numbers have to be the same? Prices respond to this imbalance.

[redwing]

Why would someone sell if they are going to lose money? If they can currently afford their mortgage, then they have no reason to sell as they will not gain anything by doing so in the long run.

Because sentiment has changed. They now think that the price of the asset they hold will fall in value over the next year.

There's the encouragement to sell now: in order to lose less money by selling now rather than later.

[homeless]

nice to see a little bullish sentiment on the board again from the above 2 posters, however the important thing they miss out is the btl market.

BTL is not a house to live in its a buisness, and from now on till the next housing boom a very poor buisness.btl is the very main thing that has kept ftb out the market.btlers are not intrested in 500k houses there intrested in the lowest end of the market generally, where the ftb looks.

this is where the flood of property for sale is going to come from.

being a bit contrary kind of fellow im almost tempted to be a bull, i get upset when i feel im following the crowd.

Edited December 27, 2007 by homeless

[damianlsmith]

Because sentiment has changed. They now think that the price of the asset they hold will fall in value over the next year.

There's the encouragement to sell now: in order to lose less money by selling now rather than later.

Where is this encouragement coming from? That same asset that may drop next year will according to history and trends eventually bounce back to be worth more than what it is today in probably 5 years at the most.

The average person on the street is not going to sell now and gamble losing their home on the basis that there might be a crash. - far to risky

There of course will be a number of people that will sell, but I cant see it being the "encouraged" thing to do

[redwing]

But it's a far more skewed group, People who partake in a TiM poll are far more likely to be better informed than Joe average. Sentiment is obviously turning, but 75% is a way away just yet.

Sorry, you've got me there. How do you know about the skew in the sample? You must have more information than there is in the article.

I read:

4,274 people were polled by This is Money between December 5 and December 24, 2007

It doesn't say anything about sampling methodology. But my educated guess (based on experience working in the direct marketing industry) is that getting 4000 interveiws completed by phone could take about that long without using a large agency.

[damianlsmith]

nice to see a little bullish sentiment on the board again from the above 2 posters, however the important thing they miss out is the btl market.

BTL is not a house to live in its a buisness, and from now on till the next housing boom a very poor buisness.btl is the very main thing that has kept ftb out the market.btlers are not intrested in 500k houses there intrested in the lowest end of the market generally, where the ftb looks.

this is where the flood of property for sale is going to come from.

being a bit contrary kind of fellow im almost tempted to be a bull, i get upset when i feel im following the crowd.

Good point - however long term the clever BTL'ers who say invested two years ago will probably be fine. I would also go as far as to say that, when they did buy this year or last, they expected to top up the mortgage every month. So unless they run out of renters, then most will probably ride it out till things pick up again.

[Paddles]

Good point - however long term the clever BTL'ers who say invested two years ago will probably be fine. I would also go as far as to say that, when they did buy this year or last, they expected to top up the mortgage every month. So unless they run out of renters, then most will probably ride it out till things pick up again.

What a truly bizarre business strategy; make a large capital investment and take out a loan that requires monthly servicing which can't be covered in total by the income generated by the capital investment.

I hope to dear God that these people aren't running my pension funds.

[gravity always wins]

Why would someone sell if they are going to lose money? If they can currently afford their mortgage, then they have no reason to sell as they will not gain anything by doing so in the long run.

funily enough a lot of people did precisely this last time some of the obvious reasons may be: divorce, death, marriage, expanding family, new job etc.

Oh dear!

Some people may be desperate to sell but the majority won't; if they can service their debts they'll sit this one out. You underrate the inertia of most people.

Prices margins etc. the majority who don't sell will as you already know have absolutely no affect on prices

Good point - however long term the clever BTL'ers who say invested two years ago will probably be fine. I would also go as far as to say that, when they did buy this year or last, they expected to top up the mortgage every month. So unless they run out of renters, then most will probably ride it out till things pick up again.

Sounds very unconvincing and hopelessly unrealistic

Nice to see some Bulls popping in for a bit of a bashing

[damianlsmith]

What a truly bizarre business strategy; make a large capital investment and take out a loan that requires monthly servicing which can't be covered in total by the income generated by the capital investment.

I hope to dear God that these people aren't running my pension funds.

No it probably does make sense to you, the thing is, as you are probably well aware, property prices on average since the beginning of time go up. Yes there are falls, but long term it will go up and this what they are looking at.

The are simply leveraging their money, just like another managed fund, it will have it bad times, but on the whole it willl most likely rise.

[Wad]

Lets correct the terminology of the survey here:

A survey said that 75% think that house prices will fall in 2008 - the other 25% are desperately hoping they will not fall but have yet to make the psychological shift to accepting that they will!

[Paddles]

No it probably does make sense to you, the thing is, as you are probably well aware, property prices on average since the beginning of time go up. Yes there are falls, but long term it will go up and this what they are looking at.

The are simply leveraging their money, just like another managed fund, it will have it bad times, but on the whole it willl most likely rise.

Yes, "property only ever goes up". Except when it doesn't.

Making a capital investment with the knowledge that I'll have to keep pumping money into it to be able to keep the asset still seems well, insane, to me. What if I lose my primary source of income and can't continue to subsidise the asset?

As a previous poster said yesterday, nice to see the bulls are still around to add a counter opinion, though.

Edited December 28, 2007 by Paddles

[DoctorJ]

No it probably does make sense to you, the thing is, as you are probably well aware, property prices on average since the beginning of time go up. Yes there are falls, but long term it will go up and this what they are looking at.

The are simply leveraging their money, just like another managed fund, it will have it bad times, but on the whole it willl most likely rise.

I have friends who have the same 'long term' view of the market.

A friend of mine has just bought a 500K house this year on an interest only mortgage. His reasoning is that "over any 10 year period house prices will always be higher after 10 years". I have to admit it makes some sense.......but why not wait and pick up some bargains? That 500K mortgage is going to feel like a real weight during any period of neg eq.

[thedebtisreal]

Good point - however long term the clever BTL'ers who say invested two years ago will probably be fine.

I spat my lunch over my keyboard when I read that!

Thank you Damian, you have made my day!

[Selling up]

It doesn't say anything about sampling methodology. But my educated guess (based on experience working in the direct marketing industry) is that getting 4000 interveiws completed by phone could take about that long without using a large agency.

There was an online poll. I saw a link to it on HPC.co.uk, and I voted "fall".

If an online poll was the entire source of the figure, it will be very skewed, not least from all the bears like me who had been encouraged to visit from HPC.co.uk.

[damianlsmith]

Yes, "property only ever goes up". Except when it doesn't.

Making a capital investment with the knowledge that I'll have to keep pumping money into it to be able to keep the asset still seems well, insane, to me. What if I lose my primary source of income and can't continue to subsidise the asset?

As a previous poster said yesterday, nice to see the bulls are still around to add a counter opinion, though.

I guess most 'insane' investors look at the potential leveraging that can be gained by purchasing property.

There are of course risks that go along with this, such as loosing your job etc, but you need to weigh these factors up before purchasing.

I have a property in NZ which I have to put in a $100 a week to top up the mortgage or $5200 per year.

I purchased the property with 60k deposit, in the time I have bought it it , I have paid approximately 11k in mortgage, insurance and rates, however in the time I have owned it is has gone up in value by approximately 25k.

So for the 11k I have spent I have potentially gained 14k (gross) if I sell tomorrow, sure that is not allowing for the potential interest gain by depositing the 60k say in the bank, but even so that would only be worth about 8k net PA.

The market might fail tomorrow and I could end up with a big lemon, if I do, so be it, but I am prepared to take the risk and I have a long term view that it will go up even if it does crash in the mean time.

I am sure most of you will love what I have written here, and I may have some flawed logic, by all means tell me as I am prepared to listen.

Edit : I am from NZ so I bought this property as I was nervious about not being able to afford one when I got back.

Edited December 28, 2007 by damianlsmith