Is This It?

[Bobbins]

Is sentinment finally turning? Interest rates are up, unemployement is creeping up, repossessions on the up and bankruptcy is rocketing. Ernst and Young and chief economist are now broadcasting that house price falls and HPC are now becoming likely.

FFS even the Daily Mail and Evening Standard turning bear on the property market. It seems that every other day, there is a story about how messy the housing market may become in every newspaper and even on the BBC. Rewind 6 months and the stories where exactly the opposite.

I even feel that in London next years bonuses are already priced into the current market.

One more push would be nice, either another interest rate rise or a quick drop in the stock market. Once people get fear in their bones, and the perception is that no further capital gains are likely, the market will chase itself down.

Lot of people have called the top of the property market, but have we finally reached it? Even if we don't see a crash is this the highest property prices will reach?

Having read the depressing HPI stories in the press for 10 months of this year, the last two weeks has been a watershed.

Novemeber to March is a period in the housing market anyway, so we probably won't know much until March '07. However, that gives 3½ months for the press to continue there ever bearish themes, and really knock sentiment off its perch.

[drrayjo]

Sure hope so...

Can't hold out much longer and April 07 is when I am targetting a purchase as a family is forming (with a bit of luck!)

So as long as the peak we can see through the fog is indeed the summit, and not like my dad used to say when he took me hiking, "just one last rise before the top"!, then perhaps my luck's in. If not, whatever, I have to jump in anyway...

[Tempest]

As I say elsewhere, one more nudge somewhere will do it.

The MPC is paranoid about wage deals fuelling inflation! With money supply running at c14% a year! If wage deals are signifiantly above CPI/RPI (eg 4% or better) two more rate rises are a certainty. That will kill the market stone dead (if recent news has not already). Of course if wage deals are at or below CPI/RPI then they can;t keep up with HPs so there fore correction/crash! Win win now.

[Guest prudence]

Sure hope so...

Can't hold out much longer and April 07 is when I am targetting a purchase as a family is forming (with a bit of luck!)

So as long as the peak we can see through the fog is indeed the summit, and not like my dad used to say when he took me hiking, "just one last rise before the top"!, then perhaps my luck's in. If not, whatever, I have to jump in anyway...

For many reasons I can't see prices going much higher, and as it falls (to whatever degree) it will increasingly become a buyer's market. Whatever your family circumstances do you really want to buy when the market has so many reasons for being described as being in bubble proportions. You could have a long time ahead to regret it.

I don't know whether you are a ftb or someone who has str......d, but I would say to anyone whois out of the market now, weigh up the likelihood of risk vs. return before jumping in now. It seems such a strange time to do so, after either staying out (for whatever reasons) while it has risen so astronomically or having sold, intending to buy back in at a lower price. Do you think the chances of reward is greater than risk or vice versa. No-one has a crystal ball so one must therefore judge on probability. It means that one might end up making a bad call (whichever one does but at least it will be an educated bad call based on looking at the features of the market, wider economy etc - and never be disappointed if you leave a few percent for someone else............

Edited November 23, 2006 by prudence

[JustYield]

Is sentinment finally turning?

Yes.

Lot of people have called the top of the property market, but have we finally reached it?

I suspect not.

[Willy Weasel]

My answer to your question would be "Excluding London - YES". If we could strip London out of the House Price Indices next month I think we would see pretty well zero growth in prices.

I'm still amazed at the number of seemingly informed people in my office (property lawyers) who still don't expect nominal falls in prices.

My STR continues so, obviously, I'm a big VI now but I'm another one who's been predicting the crash since 2004.

For many reasons I can't see prices going much higher, and as it falls (to whatever degree) it will increasingly become a buyer's market. Whatever your family circumstances do you really want to buy when the market has so many reasons for being described as being in bubble proportions. You could have a long time ahead to regret it.

I don't know whether you are a ftb or someone who has str......d, but I would say to anyone whois out of the market now, weigh up the likelihood of risk vs. return before jumping in now. It seems such a strange time to do so, after either staying out (for whatever reasons) while it has risen so astronomically or having sold, intending to buy back in at a lower price. Do you think the chances of reward is greater than risk or vice versa. No-one has a crystal ball so one must therefore judge on probability. It means that one might end up making a bad call (whichever one does but at least it will be an educated bad call based on looking at the features of the market, wider economy etc............

I don't even need to do the risk/reward thing. I own a 2-bed property and it's too small. The only 3-beds I can afford are tiny boxes on housing estates so I'm waiting until the correction happens now however long that turns out to be.

[PropertyGuru]

no.

q107.

[Guest Cletus VanDamme]

no.

q107.

c'mon PG, we're nearly there now. Surely q207.

[Guest grumpy-old-man]

Is sentinment finally turning? Interest rates are up, unemployement is creeping up, repossessions on the up and bankruptcy is rocketing. Ernst and Young and chief economist are now broadcasting that house price falls and HPC are now becoming likely.

FFS even the Daily Mail and Evening Standard turning bear on the property market. It seems that every other day, there is a story about how messy the housing market may become in every newspaper and even on the BBC. Rewind 6 months and the stories where exactly the opposite.

I even feel that in London next years bonuses are already priced into the current market.

One more push would be nice, either another interest rate rise or a quick drop in the stock market. Once people get fear in their bones, and the perception is that no further capital gains are likely, the market will chase itself down.

Lot of people have called the top of the property market, but have we finally reached it? Even if we don't see a crash is this the highest property prices will reach?

Having read the depressing HPI stories in the press for 10 months of this year, the last two weeks has been a watershed.

Novemeber to March is a period in the housing market anyway, so we probably won't know much until March '07. However, that gives 3½ months for the press to continue there ever bearish themes, and really knock sentiment off its perch.

I called it about 2 months ago & said we were in the start of it b ut not many could see it.

I think I was right.

Q1 2007 being when the papers & news give mainstream coverage every week, seems it might have started a bit early.

[Opulize]

I even feel that in London next years bonuses are already priced into the current market.

At the top end could well be, although those slightly lower down the ranks will probably have to wait until payday early next year. Interesting quirk of the UK property market though - you can agree a sale price based on what you're hoping for and pull out last minute if you don't get it. This may involve losing a few quid for surveys etc but in the current frenzy it's likely people are doing this.

"Interesting" price action in West Kensington Q2-Q3:

http://www.upmystreet.com/property/prices/all/l/w8.html

[Guest prudence]

At the top end could well be, although those slightly lower down the ranks will probably have to wait until payday early next year. Interesting quirk of the UK property market though - you can agree a sale price based on what you're hoping for and pull out last minute if you don't get it. This may involve losing a few quid for surveys etc but in the current frenzy it's likely people are doing this.

"Interesting" price action in West Kensington Q2-Q3:

http://www.upmystreet.com/property/prices/all/l/w8.html

such a major change must have arisen from the sale of some very top-end properties

[Europa]

My answer to your question would be "Excluding London - YES". If we could strip London out of the House Price Indices next month I think we would see pretty well zero growth in prices.

I'm still amazed at the number of seemingly informed people in my office (property lawyers) who still don't expect nominal falls in prices.

My STR continues so, obviously, I'm a big VI now but I'm another one

Quite agree - outside the capital, the market seems pretty stagnant.

I'd be cautious when calling the top, however. We saw a similar change in sentiment last year (screaming crash headlines in the Express, etc) - led to a lot of disappointment.

[steve99]

What if, in anticipation of this the MPC starts lowering the rates, say 1/4% every couple of months, combine this with the newly legitimised 5x combined wages for 100 years mortgages, they may be able to pull of the trick of stagnation for a few years, whenever you think theyve run out of tricks they seem to be able to pull another one out of their arses.

[Willy Weasel]

What if, in anticipation of this the MPC starts lowering the rates, say 1/4% every couple of months, combine this with the newly legitimised 5x combined wages for 100 years mortgages, they may be able to pull of the trick of stagnation for a few years, whenever you think theyve run out of tricks they seem to be able to pull another one out of their arses.

Makes a change from pulling rabbits out of hats I suppose

[MarkG]

What if, in anticipation of this the MPC starts lowering the rates, say 1/4% every couple of months

The pound would be at one pound to the dollar... if not one to the yuan.

[PropertyGuru]

c'mon PG, we're nearly there now. Surely q207.

according to the chart, q107 will be seen as either the top, or a breakthruogh moment to a boom that will make the current boom look tame.

Edited November 23, 2006 by PropertyGuru

[Guest Cletus VanDamme]

according to the chart, q107 will be seen as either the top, or a breakthruogh moment to a boom that will make the current boom look tame.

Looking at the Nationwide's FTB affordability index, it seems there's still some way to go yet:

[PropertyGuru]

Looking at the Nationwide's FTB affordability index, it seems there's still some way to go yet:

kind of depends how they are defining affordability, doesn't it? In the last crash, you pretty much HAD to have a repayment vehicle of some sort. Lose that, and the REAL constrainer of affordability (prices) goes out the window. Instead, the effective interest rate becomes the constraint.

Anyway, I was talking about a real chart. Not some rebased VI spin doc.

But please take comfort from it if it makes you feel better.

[?...!]

Looking at the Nationwide's FTB affordability index, it seems there's still some way to go yet:

That chart is rubbish.

Why does Yorkshire and Humberside have the same weighting as London?

In fact why do all 14 regions start with the same weighting? Are they all exactly the same size?

Surely London should represent about 20% of the index?

Edited November 23, 2006 by ?...!

[tenroom]

The City bonus rounds will give us another shove upwards which should last till Spring and then that's it. I'm going to market with my gaff in December and getting out asap.

[smiley]

"according to the chart, q107 will be seen as either the top, or a breakthruogh moment to a boom that will make the current boom look tame."

Do you mean it will be the top or the breakthrough, or it will just be seen as such?

[subsidiser]

That chart is rubbish.

Why does Yorkshire and Humberside have the same weighting as London?

In fact why do all 14 regions start with the same weighting? Are they all exactly the same size?

Surely London should represent about 20% of the index?

The chart is indeed rubbish.

This is what the Nationwide says about how they compile the figures -

These indices measure initial mortgage payments as a percentage of take home pay for each region

Affordability is measured relative to the average in 1985, higher index values indicate worsening affordability

Initial mortgage payments calculated using new lending interest rate (source: CML) for a loan 90% of the typical FTB house price

Mortgage payments are for a capital repayment mortgage and are adjusted for MIRAS (Mortgage Interest Relief at Source) where appropriate

Earnings data is from the ONS Annual Survey of Hours & Earnings, and pre-1998 the New Earnings Survey; NES data has been adjusted to create a consistent series

Mean earnings for a full time worker on adult rates are used

Quarterly earnings data calculated using straight line interpolation; points after last annual observation extrapolated using average growth rates and hence subject to revision

Take home pay calculated using prevailing Tax & National Insurance Rates

I've been looking at The Nationwides raw data myself and using excel to draw charts from it. The shape of the graphs dont nest into each other neatly as the HPC version seems to show. In particular Scotland has a much flatter affordability profile.

None of the regions are above 100% yet - but all went above 100% before the last crash.

I think paradoxically that the more talk there is of crashes the more cautious people will be. If there is no wild overshoot a crash is less likely.

Get the nationwides data yourself if you want - Nationwide - various excel downloads

If I can start a conspiracy theory of my own - do you think the BOE was disappointed that the last interest rate rise didn't seem to affect sentiment and are trying to get a few friends to talk the market down?

Edited November 23, 2006 by subsidiser

[Risk/Reward]

Prudence and stability.

Dear old Gordon used to mention these old timers back in the late 1990's every other speech. When did you hear him lately mention them. He was the first one to start this splurge of spending what you dont earn and pay back time is here.

Watch for the tumbleweeds across Estate Agent doors next year as we get the perfect storm.

Higher Rates

Higher Taxes

Higher Unemployment

Oh I cant wait for the decade of decimation to start.

[Goat]

Looking at the Nationwide's FTB affordability index, it seems there's still some way to go yet:

Don't be taken in by the affordability argument.

That chart shows starting repayments. Don't forget that back in 1989 inflation was running at close to double figures so you were effectively paying off 10% of the mortgage every year - in a low inflation environment that simply does not happen. Also don't forget that as a % of income the repayment will fall quickly.

Try reworking that graph with a 10 year repayment mortgage - you'll end up with over 70% of THP which is above the 1989 peak. The difference of course is nowadays it will be 70% of THP next year; and the year after that and.................

[ukuser1]

If I can start a conspiracy theory of my own - do you think the BOE was disappointed that the last interest rate rise didn't seem to affect sentiment and are trying to get a few friends to talk the market down?

I agree with the initial poster of this thread that sentiment is finally turning, also with this last post: I do think that the BoE was disappointed the last IR didn't slow this madness now.

I fully expect a huge amount of non HPC news stories from the VI (Vested Interest) lobbies/groups in order to try and delay what I think has been overdue for sometime.

Also I think we can expect yet more silly ways to try and get people to overstretch themselves in terms of taking on increased mortgage/ debt.

The UK Housing Market looks to me like just one big massive pyramid selling scheme and when there are very few new entries at the bottom (i.e. FTBs) the whole thing falls.

Edited November 23, 2006 by ukuser1