High Probability Of The Average Price Dropping Closer To The £200,000 Level Before The End Of Year.

[vision (not Vision EA)]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

Potential buyer behavior is always driven by reports and headlines like this, the market will stay dead until the media changes it's tune.

It's not actually all that difficult to get a mortgage,(if you are waiting for an abundance of deposit free mortgages to return, forget it) and it is possible to buy property at a substantially reduced price, but the people are scared witless into waiting until they are told it is safe to buy.

And the Piper advanced and the children followed,

And when all were in to the very last,

The door in the mountain-side shut fast

[RajD]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

Potential buyer behavior is always driven by reports and headlines like this, the market will stay dead until the media changes it's tune.

It's not actually all that difficult to get a mortgage,(if you are waiting for an abundance of deposit free mortgages to return, forget it) and it is possible to buy property at a substantially reduced price, but the people are scared witless into waiting until they are told it is safe to buy.

Your post is a fine example of why people should spend more time reading what other more knowledgable people have written before they start posting on a forum.

[talksalot81]

You are right, it is not hard to get a mortgage. The problem is that £100k mortgages do not pay for properties with £200k prices! It does not matter what the media reports, the sellers have to accept that the mortgages available to their potential buyers just cannot pay the prices they are asking. I do not really understand how you think that the local media can manage to convince multinational banks with billions of write-offs and losses to start lending more money! It seems to me that the media is doing the only thing any of us can in order to encourage the market - take the prices down to the money available!

I do not see why this concept is so difficult to accept. If a business prices a commodity too high, it either cuts it down to a level that the market can afford/attain or it goes out of business. Why should the housing market be 'different'?!

[trebor21]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

Potential buyer behavior is always driven by reports and headlines like this, the market will stay dead until the media changes it's tune.

It's not actually all that difficult to get a mortgage,(if you are waiting for an abundance of deposit free mortgages to return, forget it) and it is possible to buy property at a substantially reduced price, but the people are scared witless into waiting until they are told it is safe to buy.

And the Piper advanced and the children followed,

And when all were in to the very last,

The door in the mountain-side shut fast

If high house prices continue then in a few years so many people will be lumbered with paying nearly all their income on a house that other areas of the economy will be hit, car sales, holidays, high street etc. Estate agents and the construction industry had an extremly good few years, they should have set aside for rainy days! No one complaint when they were making hugh profits and young people were living on the edge paying 200k for a starter home!

I couldnt belive how lazy some estates agents actually were 9 months ago and even today, if you wanted to view a house which the estate agent had the keys it was next to impossible to get a time past 9-5 monday to friday! How many viewings do estate agents actually attend with potential buyers when the house is inhabitated, none in my experience! Maybe they should get off their fat asses and try and sell some houses! Visit with viewers point out the positives!

Working around potential buyers viewing needs not when suites the estate agents 9-5 schedule! Anyone with the attitude ill only do 9 -5 in the current environment deserves to be sacked!

Its not as if everyone stopped selling houses, there is 1000's waiting to be sold!

If you want sales do some hard negoiting with Sellers to bring the prices down.

[Belfast Boy]

You are half right. You just got this totally the wrong way round!!!

If I remember the story correctly. The Piper led all the children out of the town into a cave - never to be seen again!

Pied Piper of Hamelin = media, EA's, banks, government leading all of our young people into an over priced house, with massive mortgage - never to be seen again!

Edited August 7, 2008 by Belfast Boy

[shipbuilder]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

Potential buyer behavior is always driven by reports and headlines like this, the market will stay dead until the media changes it's tune.

It's not actually all that difficult to get a mortgage,(if you are waiting for an abundance of deposit free mortgages to return, forget it) and it is possible to buy property at a substantially reduced price, but the people are scared witless into waiting until they are told it is safe to buy.

And the Piper advanced and the children followed,

And when all were in to the very last,

The door in the mountain-side shut fast

Vision, I completely agree - let's see more of these headlines and hopefully they will drive the market down to reasonable levels.

True, it's possible to buy at a reduced price now but again you're correct - people should wait until the prices drop further - why risk negative equity?

How terrible it would be if people were led into negative equity in a dropping market - never to be seen again!

Of course, anyone truly acting in the interests of home buyers should be talking down still unaffordable prices to a level that will secure a sustainable and steady market for us all in the future.

Any estate agent acting in the best interests of homebuyers would undoubtedly agree.

That was what you were saying wasn't it?

[beta_version_squeak]

I couldnt belive how lazy some estates agents actually were 9 months ago and even today, if you wanted to view a house which the estate agent had the keys it was next to impossible to get a time past 9-5 monday to friday! How many viewings do estate agents actually attend with potential buyers when the house is inhabitated, none in my experience! Maybe they should get off their fat asses and try and sell some houses! Visit with viewers point out the positives!

Working around potential buyers viewing needs not when suites the estate agents 9-5 schedule! Anyone with the attitude ill only do 9 -5 in the current environment deserves to be sacked!

This was a major problem for me when I viewing houses last summer. None of the big estate agents would do a viewing later than 5:30pm/6pm... and it was impossible for us to get from work and through the traffic to make the viewing on time... Surely anyone buying a house has a job... and many jobs are 9-5pm... What do the estate agents expect us to do? Waste vacation days!?

[Sogy]

What do the estate agents expect us to do? Waste vacation days!?

Oh, they didn't need us those days! They herded viewers in droves, at times convenient for themselves, and their contempt was almost palpable. There were enough sleazy "businesslike" types, apparently representing Kerryvestors, taking down notes, and for them it was work, and they were the only ones for whom th agents cared. It's so funny to hear their admonitions now!

[JoeDavola]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

You refer to a drop to average prices of £200,000.

Do you think this is an affordable price for an average house in NI?

With an average full time wage of £21K, that is 9.5 years wages...

...except it isn't because the take home pay on £21K is £16,177...so it's really 12.5 years of take home pay...

....oh, and over 25 years at 7%, you will actually pay £429K to the bank, over 26 years take home pay...

So, to buy the average house, the average wage earner should have to give a bank every penny they earn* for 25 years of their life.

*I know I am greatly simplifying things, and not taking the effect of inflation into account over those 25 years....but even bearing that in mind, do you really think this is what the average house should cost?

Edited August 7, 2008 by JoeDavola

[Traktion]

So far, vision has contributed nothing, other than presenting an easy target to take pot shots at.

vision, in all honestly, I'd quit while you're not too far behind. Your posts only damage the support for your cause.

[yadayada]

Repeated media reporting like this from so called 'experts' is proving to act as a self fulfilling prophesy.

Potential buyer behavior is always driven by reports and headlines like this, the market will stay dead until the media changes it's tune.

It's not actually all that difficult to get a mortgage,(if you are waiting for an abundance of deposit free mortgages to return, forget it) and it is possible to buy property at a substantially reduced price, but the people are scared witless into waiting until they are told it is safe to buy.

And the Piper advanced and the children followed,

And when all were in to the very last,

The door in the mountain-side shut fast

Can you think of any reason to buy if stamp duty might be removed soon? I can't

[YoungFTB]

Ulster Bank have already predicted that the average NI home will drop to £175K by the end of the year. We are already 18% down in 6 months, so I think 30% down by the end of December is very possible.

30% down from (£250K peak) is £175K, another 20% in 2009 and prices will be closer to affordable levels.

I think we'll see the biggest drops in the first 2 years and then the speed of decline will slow down after 2009.

[JoeDavola]

30% down from (£250K peak) is £175K, another 20% in 2009 and prices will be closer to affordable levels.

Closer, but still not affordable IMHO. That would give an average price of £140K which is still too high I think.

I think we'll see the biggest drops in the first 2 years and then the speed of decline will slow down after 2009.

You could well be right - although part of me thinks it could take 3 years, as alot of people don't seem to want to reduce their prices. I get the feeling that some people would be prepared to leave a house on the market for years at bubble prices, rather then sell below 'market value'.

Edited August 8, 2008 by JoeDavola

[vision (not Vision EA)]

You refer to a drop to average prices of £200,000.

Do you think this is an affordable price for an average house in NI?

With an average full time wage of £21K, that is 9.5 years wages...

...except it isn't because the take home pay on £21K is £16,177...so it's really 12.5 years of take home pay...

....oh, and over 25 years at 7%, you will actually pay £429K to the bank, over 26 years take home pay...

So, to buy the average house, the average wage earner should have to give a bank every penny they earn* for 25 years of their life.

*I know I am greatly simplifying things, and not taking the effect of inflation into account over those 25 years....but even bearing that in mind, do you really think this is what the average house should cost?

I can't say what an average price should be, to do that I would need to be fair and say that everybody should get the chance to buy an affordable home, because I just couldn't exclude lower earners. This would be nonsense though, because there will never be enough housing to supply this whim, prices will always be out of reach ie unaffordable to large chunks of society for this reason.

Affordability level is the ceiling set by buyer demand in that pressures on the market drive up prices in high demand times, and drive down prices in low demand times. As prices have gone up they have made homes less affordable, similiarly as they have dropped they have become more affordable. Homes are more affordable now than they were this time last year. If prices are to fall to ave £200k then they will be even more affordable, but affordable to fewer buyers than say an average of £150k would allow and so on. The average price level needed to enable all average full time wage earners to buy an affordable property would need to be very much lower, perhaps half that, but the lack of housing supply makes this impossible, and in any case if we somehow managed to force prices back down to this level, what would happen is as buyers buy the demand will put the stock under pressure to yield higher selling prices, meaning that the average price would rise up all over again and once again and incrementally more people will be priced out of the market. We'll soon be right back were we are now, complaining becauise homes aren't 'affordable'.

The only safe way to keep prices down, defeat market forces and satisfy demand is to keep an adaquate level of low price supply available at a fixed selling price. Unless the goverment is planning to do this I do not see how obtaining and then maintaining a sufficiently low affordable ave house price is ever going to be possible.

[talksalot81]

This word affordability is being used as if it is a fairly simple thing. I strongly debate the statement that affordability is better now than a year ago. Prices are significantly lower but the availability of credit is such that the statement is almost certainly false. How much can an average person borrow? Take the example of a couple each earning £20k and with a 20k deposit. A year ago they could certainly have had access to £250k, possibly £300k. At present, they would be VERY lucky to have access to £200k total. So they potentially can afford about 30% less now than a year ago, given that prices have not dropped anywhere near that much, the affordability has become worse inspite of prices dropping.

[JoeDavola]

Thank you for taking the time to reply, vision.

I can't say what an average price should be, to do that I would need to be fair and say that everybody should get the chance to buy an affordable home, because I just couldn't exclude lower earners.

I think everyone should have a chance to buy an affordable home - yes, even people on low wages. It would not be impossible at all if houses were not so stupidly overpriced. I'm not saying everyone should live in a mansion, but I don't see how housing cannot be affordable to all.

there will never be enough housing to supply this whim, prices will always be out of reach ie unaffordable to large chunks of society for this reason.

I remember when I was a child everyone I knew had parents who were able to own their own house, and they were far from rich...alot of them only had one parent working, and not in a job that paid fantastically well, but they were still able to afford a home - up until a few years ago house prices were still affordable; buying a house was not the near-impossible task that it has been this last couple of years. What has changed in the last few years that suddenly means that people can't afford to buy a house? What justifies these massive price increases?

If there's not enough 'supply' then how come we aren't seeing masses of people living in the streets or hearing about several families living in the same house because there isn't enough housing to house the population?

if we somehow managed to force prices back down to this level, what would happen is as buyers buy the demand will put the stock under pressure to yield higher selling prices, meaning that the average price would rise up all over again and once again and incrementally more people will be priced out of the market

Again, you refer to 'this level' as if it is some sort of deviation from the norm; prices in NI have never been anywhere near as unaffordable as they are now. They will only rise again when people think they can make a quick buck by buying a house and then selling it on a year later and make tens of thousands; this will not be possible in a falling market. I'm not saying a bubble won't happen again, I'm sure it will because people are both stupid and greedy, but it won't happen as soon as prices become affordable, as you seem to be saying here.

Edited August 9, 2008 by JoeDavola

[YoungFTB]

You could well be right - although part of me thinks it could take 3 years, as alot of people don't seem to want to reduce their prices. I get the feeling that some people would be prepared to leave a house on the market for years at bubble prices, rather then sell below 'market value'.

I think next year when we are in a recession the unemployment figures will rise sharply and repossessions and forced sales will force a lot of people to reduce prices. Hopefully by the end of 2009 most sellers will realize that there will be no quick recovery. All of this is just my opinion of coarse.

[Belfast Boy]

As prices have gone up they have made homes less affordable, similiarly as they have dropped they have become more affordable. Homes are more affordable now than they were this time last year.

I agree. House prices are more affordable now, than last year. They will be even more affordable next year - 100% guaranteed! They may even be affordable the year after that - 2010.

However, house prices are still far from being fundamentally affordable based on a persons income today.

Many of the people I work with openly admit that they could not afford to buy the house they currently own today. They all managed to buy in the 1990's before the bubble.

I wonder how many people could not afford to buy the house they live in, at today's prices?

Current house prices are just not affordable by any normal measure.

Edited August 9, 2008 by Belfast Boy

[pod]

I wonder if this is also happening in NI?

http://uk.news.yahoo.com/rtrs/20080808/tuk...nt-fa6b408.html

A growing number of private tenants are falling behind on their rent, potentially damaging the ability of landlords to pay creditors, insurance group AXA said on Saturday.

[shipbuilder]

Vision, are you suggesting that things have changed and there's some new magical paradigm of affordability here? Your arguments are all old, predictable and completely discredited. What's affordable?

Well the 'experts' would suggest a red brick semi with garden and garage in E Belfast for about 180K to be a 'bargain' no doubt. In comparison to last year, maybe, but looking just a bit closer......I, for example, know of such properties in a decent suburb of Birmingham that were selling last year at market peak for £160-170K.

Look like such a bargain now?

[Potwalloper]

the market will stay dead until the media changes it's tune.

Never take any notice of anybody who doesn't know the difference between "it is" and "belonging to it".

[shipbuilder]

Think of how difficult it must have been for any logically-minded person to accept NI house prices over the last 3 years - 30%+ yoy growth, average prices in some areas greater than the most desirable areas of London. Even the most bullish of commentators in England saw NI as a crash waiting to happen.

So it must be equally as hard for some to accept that those days are no more - especially for those who effectively thought that they had won the lottery just by having a mortgage. The confusion, the denial, the half baked received arguments of 'lack of supply' and 'the peace dividend'. The misplaced sense of a 'right' to a certain price. I can even understand the temptation to believe that price will settle at some permanently higher level - I can understand why many want to believe it.

However the reality is that it won't happen because there is simply no support at levels above the traditional 3x salary. Never has, never will be. It will be a struggle for many to accept this, but the quicker we all do, the less pain for everyone.

[mnc]

Think of how difficult it must have been for any logically-minded person to accept NI house prices over the last 3 years - 30%+ yoy growth, average prices in some areas greater than the most desirable areas of London. Even the most bullish of commentators in England saw NI as a crash waiting to happen.

So it must be equally as hard for some to accept that those days are no more - especially for those who effectively thought that they had won the lottery just by having a mortgage. The confusion, the denial, the half baked received arguments of 'lack of supply' and 'the peace dividend'. The misplaced sense of a 'right' to a certain price. I can even understand the temptation to believe that price will settle at some permanently higher level - I can understand why many want to believe it.

However the reality is that it won't happen because there is simply no support at levels above the traditional 3x salary. Never has, never will be. It will be a struggle for many to accept this, but the quicker we all do, the less pain for everyone.

Vision, I am too young to remember, but I do know from family history that to own the family home was a privilege afforded only to a well off few, up until the 1950's and beyond.

By the time the 1970's happened it was commonplace to own ones own home, almost anybody could afford to buy existing ex rental stock as well as new built, and when Maggie made it possible to buy the Housing Exec rental you lived in, being able to afford to buy became a right to all, part of the culture.

As I have read on this site, it is true than most of the smaller housing of Belfast was built purposefully for the rental market and never intended to be owner occupied.

As home ownership progressed it became oversubscribed in the end, and that helped to force prices up to unaffordable levels. why that was is for many reasons, the peace dividend and an optimistic feeling of prosperity. Affordability is a modern concept that people came to expect, and in the end it was an overcooked concept that Europeans yet still cannot understand because so many of them still rent like our grandparents and great grandparents used to. Even if property become more affordable again due to price falls, it has to be probable that a larger proportion of people here will be forced to pay rent or will choose to, instead of the more expensive mortgage repayment.

[talksalot81]

Even if property become more affordable again due to price falls, it has to be probable that a larger proportion of people here will be forced to pay rent or will choose to, instead of the more expensive mortgage repayment.

A great many people here will disagree with that. One notable reason would be that the property will not be purchased for rental purposes if the mortgage cost is greater than the rental value - why would it? That would make it a net loss to the owner!

The reason people did not own their own homes was not because the daily cost of ownership exceeded the daily cost of rental, it was because the 'one off' cost of ownership was out of reach (i.e. the debt culture did not exist). I believe that for property to recover, it must either be accessible to the masses or it must be profitable to the few. Unless lending practice revert backwards by 50-100 years, I do not see how your assertion can become reality.

[shipbuilder]

As home ownership progressed it became oversubscribed in the end, and that helped to force prices up to unaffordable levels. why that was is for many reasons, the peace dividend and an optimistic feeling of prosperity. Affordability is a modern concept that people came to expect, and in the end it was an overcooked concept that Europeans yet still cannot understand because so many of them still rent like our grandparents and great grandparents used to. Even if property become more affordable again due to price falls, it has to be probable that a larger proportion of people here will be forced to pay rent or will choose to, instead of the more expensive mortgage repayment.

Home ownership becoming 'oversubscribed' as you say would have little effect on house prices - people either rent or buy - whichever they chose to do, the 'demand' for the housing stock remains roughly the same.

The problem in NI, though, was not that ownership become oversubscribed, but that housing as an 'investment' became oversubscribed - the 'feeling of prosperity' came from cheap credit and the ONLY thing supporting prices at the bottom was credit-rich speculators competing with increasingly desperate FTBs.

The fact that neither of these supports exist anymore means that prices cannot stay at current levels, or any other fantasy 'permanently higher level'. As long as renting is cheaper than buying, property is unattractive for the investor and as soon as the cost of buying is on a par with renting, people will buy again - either way, prices will drop.