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

Head In The Sand Eas

Recommended Posts

Hi,

was looking at properties in NI and e-mailed an agent. as I'm based in england I asked what the market was like.

i got the following answer

"Certainly has become more quiet in recent months - Northern Ireland saw rapid increase in house prices in the last couple of years and has now started to level off a little. On the whole there hasnt been a drastic reduction in prices."

more quiet!

level off a little!

not wanting to cause an argument I have refrained from sending links to recent news stories etc.

Edited by johnsp

Share this post


Link to post
Share on other sites

Welcome.

I think estate agents only read the Helen Carson fantasy property league reports, in the Belfast Telegraph. How she can call herself a reporter I don't know?

Share this post


Link to post
Share on other sites

Incredibly, estate agents are no different from most of the population when it comes to house prices here - while making bearish sounds, scratch the surface and most believe that this is nothing but a temporary dip before prices go rocketing off again.

The ones still in business in 2 years time will be the ones that, instead of begging for market intervention, wake up now and start pushing prices down to a sensible level.

The hilarious thing is that enough mortgages probably are available to get the NI market going again, just not at current price levels. If we all agreed to slash prices by 50-60% and start again, things could recover tomorrow, credit crunch or not.

Share this post


Link to post
Share on other sites

so what does everyone think a likely % fall from current levels is likely to be for NI?

It looks to me like building sites possibly went up more than property, what do people think prioces of sites will do?

Share this post


Link to post
Share on other sites
so what does everyone think a likely % fall from current levels is likely to be for NI?

It looks to me like building sites possibly went up more than property, what do people think prioces of sites will do?

I've said for a while that I think prices will fall 50-60% from peak, so that average prices will be closer to 100k, that the 180k which they are now (down from about 230k at peak).

The cost of land was what went up and therefore everything built on it becomes more expensive, whether it be building sites or completed homes. I should imagine many builders will go bust and the sites/houses remaining will be sold off cheap at auction. This will further decrease prices, putting further pressure on builders until more fold. The cycle will likely continue until all the builders who bought land at the peak prices have either gone bust or managed to slash their prices at a loss to get the liabilities (ie. depreciating "assets") off their balance sheets.

It can't be long now until we start hearing about lots of builders start going bust as the housing executive and the banks don't have the money or the will to bail them out imo.

Share this post


Link to post
Share on other sites
Incredibly, estate agents are no different from most of the population when it comes to house prices here - while making bearish sounds, scratch the surface and most believe that this is nothing but a temporary dip before prices go rocketing off again.

The ones still in business in 2 years time will be the ones that, instead of begging for market intervention, wake up now and start pushing prices down to a sensible level.

The hilarious thing is that enough mortgages probably are available to get the NI market going again, just not at current price levels. If we all agreed to slash prices by 50-60% and start again, things could recover tomorrow, credit crunch or not.

IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Share this post


Link to post
Share on other sites
so what does everyone think a likely % fall from current levels is likely to be for NI?

It looks to me like building sites possibly went up more than property, what do people think prioces of sites will do?

According to the Nationwide quarterly reports, Northern Ireland house prices have fallen by 18% in just 6 months.

As bank losses increase borrowing costs will rise and lending criteria tighten. Further constricting the availability and affordability of mortgages.

My opinion is that Northern Ireland house prices will fall back in line with incomes. The graphs below give a good indication of the level prices will fall to.

Traditionally people paid 1/3 of their income on housing. That translated to banks lending 3.5 times single income or 2.5 times joing income. The average income in Northern Ireland is around £21k. I see the average mortgage returning to around £70k-£80k with a monthly repayment of around £500.

In my opinion the average house will cost no more than £100,000 within the next 4 years.

That would represent a fall in percentage terms of 50-60%.

Share this post


Link to post
Share on other sites
Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Well, in the case above, you'd have lost nothing by waiting 2 years. However, if the falls are more like 20%, then you have saved £12k.

Personally, I'd expect at least another 20% to come off relatively quickly before the price falls start to slow down. I've always thought I'd take another look at the market in a couple of years. I suppose that maybe 18 months, but who knows? I'm quite happy renting at half the cost of the mortgage I'd need to take out and pleased with the mobility it offers (maybe we'll move to Spain where my parents live - who knows?!).

In the end, a house is just a home. If they're cheap, it's a good idea to buy instead of renting. If they're expensive, it's a good idea to rent instead of buy. These price points are constantly adjusting and I believe we're still firmly in the latter.

Share this post


Link to post
Share on other sites
Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

That is a very good point. However... ;)

... after only 6 months, the falls are already much bigger than the 5% a year in your example. We are at 18% falls in 6 months from the Nationwide reports.

... and in todays market there are very few houses for sale at £120,000. There are houses at twice that price for rent at £500.

But lets look at your example.

How much would the mortgage payments be on a £120k house? 95% LTV repayment mortgage around £800? So you would have saved £300 a month for 2 years = £7,200. Then if you buy in 2 years, your new mortgage would be £12,000 + £7,200 = £19,200 smaller for 25 years!

Your example only really works when the value of a house is 10% above the cost of a mortgage with similar repayment i.e. when buying is nearly as cheap is renting. What size is a repayment mortgage today for £500 a month? £60,000? If you use those figures your example will be really good.

I know a friends mortgage is £515 a month for £72,000. But it is a fixed low rate for 2 years, going to reset in May 2009. So that is not a great example, but gives us an idea.

Edited by Belfast Boy

Share this post


Link to post
Share on other sites
IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Firstly, expecting prices to drop by only another 10% is extremely 'optimistic'. They'll go to something like 30-40% off of peak prices as they were so amazingly overpriced. Frankly, some current asking prices haven't dropped much from peak at all since the sellers are still in a state of denial. There is a long way down to go.

Secondly, every pound borrowed for a mortgage means more than two pounds to repay, and typical taxpayers will have to earn three pounds to cover that.

Thirdly, based on current price levels just the interest component on a 90% LTV mortgage typically costs more per month than rent.

Share this post


Link to post
Share on other sites
IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Dear of dear! I'm shocked that nobody has mentioned this to you yet but are you aware of the concept of "time value of money"?

In your example the person buying a house would spend >£12k on mortgage interest over the 2 year period. If they bought with cash they would lose all of the interest that they would otherwise have received if the money was in the bank.

If the house goes down £12k, you have LOST MONEY compared to a renter, who has simply spent money on rent (money that you would have spent on mortgage interest).

Share this post


Link to post
Share on other sites
IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Dear of dear! I'm shocked that nobody has mentioned this to you yet but are you aware of the concept of "time value of money"?

In your example the person buying a house would spend >£12k on mortgage interest over the 2 year period. If they bought with cash they would lose all of the interest that they would otherwise have received if the money was in the bank.

If the house goes down £12k, you have LOST MONEY compared to a renter, who has simply spent money on rent (money that you would have spent on mortgage interest).

Share this post


Link to post
Share on other sites
IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Great idea apart from if those who want or need to sell keep reducing prices until a bottom is found, you really think that you will be able to put your house back on for 50% more than this and sell it? Best option could be to reduce your house to a reasonable level sell it now before everyone else reduces theirs in 6 months time, rent for a few months then you have the cash in hand to act quickly!

Edited by trebor21

Share this post


Link to post
Share on other sites
IMO if people reduced their price by 50%-60% it wouldn't make a difference because it has been drummed into people that these things take time to sort out.

I think a large percentage of sellers today would like to sell but don't need to sell. If I was selling a house at the moment I would take it off the market, sit back and see what happens next year.

Just a thought but if a house today at £120k drops another 10% over the next 2 years (£12k) and you rent for 2 years at £500 a month (£12k) whats the point. This came up in a conversation a few days ago and I would be interested to hear what you guys think, at the time I didn't go into it to much because by that time half the conversation was about housing and I was getting bored.

Most people will buy at any price the banks will give them money, they don't think about affordability and think that the banks will look after their interests. If sellers drop by 50-60% more people will be able to get mortgages and it will make a difference.

Also not quite sure what you are referring to in 'whats the point?', but IMO the figures are wrong. You are not going to pay £500/month for a £120K house/flat, at least I wouldn't. I intend to rent my £220K flat for £500/month furnished. Having said that I know 1 person renting a much smaller place for £450 (I would have put it in the £120K area). Maybe rents in that sector are overinflated, but its also true that the more you spend on rent you get progressively more for your money. Anyway I always refer back to the cost of living against standard of living, and it is true now that for the price of a average mortgage you can live like a king by renting. There is a point as the market drops closer to the bottom that the loss of equity can equal the rent, but you are paying out more money on mortgage anyway, the loss of equity is irrelevant, its your monthly costs that matter. Eventually buying will be cheaper with a more reasonable pay-off period, but now I think the pay-off period is 5-10 years. This pay-off period drops rapidly as mortgage cost approach rents for the same house. It is basically the time it takes for the rent to rise to the level of your mortgage + some extra time to pay back the extra mortgage cost above the rent.

I really don't understand the point of taking a house off the market if you want to sell it. You are reducing your chances of selling in the inflated part of the market cycle. It doesn't cost anything (usually) to keep a house on the market. Unless of course you think that prices are nearly rock bottom and don't want to sell before the next boom.

Share this post


Link to post
Share on other sites
....down in price

yup sounds right :D

It's not hard to see why estate agents are feeling the pinch now after so long without income. I don't actually believe the tale that they made a fortune during the brief boom (most people know that commission rates fell rapidly in the competitive market) and it is also probably the case that most of the estate agent's investment were in property too, and those investments will now be in trouble too.

Let's take your typical small local estate agency for example:

Rent and rates £15,000

Staff £40,000 plus

Cars £10,000

Stationery £Hundreds?

Heat, electricity, phones, mobile phones £thousands?

Advertising £thousands?

Equipment and depreciation?

Repairs and maintenance £thousands?

Lets call it £90k per year plus, and that’s before the owners take a penny.

At a commission rate of £1,000, that means selling over 100 properties per year, just to break even. Even at a busy sales time, especially after tax, this typical sort of business won’t have had much to put by for a rainy day, let alone a couple of years of zilch income.

Share this post


Link to post
Share on other sites
It's not hard to see why estate agents are feeling the pinch now after so long without income. I don't actually believe the tale that they made a fortune during the brief boom (most people know that commission rates fell rapidly in the competitive market) and it is also probably the case that most of the estate agent's investment were in property too, and those investments will now be in trouble too.

Let's take your typical small local estate agency for example:

Rent and rates £15,000

Staff £40,000 plus

Cars £10,000

Stationery £Hundreds?

Heat, electricity, phones, mobile phones £thousands?

Advertising £thousands?

Equipment and depreciation?

Repairs and maintenance £thousands?

Lets call it £90k per year plus, and that’s before the owners take a penny.

At a commission rate of £1,000, that means selling over 100 properties per year, just to break even. Even at a busy sales time, especially after tax, this typical sort of business won’t have had much to put by for a rainy day, let alone a couple of years of zilch income.

Thats exactly why I wouldn't dramatically reduce the price of my house on the advice of an estate agent. The estate agents will start to get desperate for sales and they will obviously tell you to reduce the price to sell so they can get an income, however mortgages are expensive at the moment, until mortgage rates (svr) and fees return to normal you can't have a normal property market.

It would be interesting to see what the property market would be doing if the credit crunch was at an end.

Share this post


Link to post
Share on other sites
...however mortgages are expensive at the moment, until mortgage rates (svr) and fees return to normal you can't have a normal property market.

It would be interesting to see what the property market would be doing if the credit crunch was at an end.

As far as I know, todays mortgage rates are still historically low. The average being 8% since WWII.

The credit crunch is simply correcting the credit bubble which inflated house prices to unsustainable levels.

In my opinion, mortgages will return to their historical normal 3-4 times income. This will have an obvious and predictable effect on house prices. At todays income levels the average house price would be between £63,000 to £84,000. Prices will need to reach these levels before we can have a normal property market. At this price point sales will pick up again and the current backlog will start to clear. This will take many years.

Edited by Belfast Boy

Share this post


Link to post
Share on other sites
As far as I know, todays mortgage rates are still historically low. The average being 8% since WWII.

The credit crunch is simply correcting the credit bubble which inflated house prices to unsustainable levels.

In my opinion, mortgages will return to their historical normal 3-4 times income. This will have an obvious and predictable effect on house prices. At todays income levels the average house price would be between £63,000 to £84,000. Prices will need to reach these levels before we can have a normal property market. At this price point sales will pick up again and the current backlog will start to clear. This will take many years.

Check out CML Stats

http://www.cml.org.uk/cml/statistics

First Time Buyer, Lending and Affordability (dated 12/08/2008)

3-4 times income has never been the average according to CML stats, 3.36 has been the highest income multiple in 2007.

Average income of a ftb buying in 1993 was £15,997, however I don't think the average price of a house will return to the average in 1993.

Or maybe it will :blink:

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.

  • 395 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.