Tuesday, Oct 10, 2006

Interest rate rise removed 10% of buyers from the market

Home.co.uk News: Homebuyer confidence remains strong

This article, originating from the Yorkshire Bank, is full of the usual VI spin, however a 10% reduction in buyers due to such a small IR rise must indicate that the market is finely balanced. A further rise, therefore, might have a much greater effect.

Posted by tinecu @ 09:55 AM (502 views)
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1. the bald man said...

Although this is a VI article there are signs that all is not well in the market. reduction in buyers. Preference to have disposable income. Not making offers.

Tuesday, October 10, 2006 10:37AM Report Comment

2. sold 2 rent 1 said...

I have been reading this blog for about a year now

I have taken the decision with my wife to sell our 2 houses (one in Reading and one in Dublin) and rent a nice detacted house before our new baby comes along in January.

Just been around the EA's to get some valuations done. They are saying that properties like mine (3 bed terrace) are selling in days and sometimes above the asking price. There are lots of buyers but virtually no sellers. My view is that there will be a HPC but not before a final spike in prices over the next 12 months. The graph on the homepage of this website is starting to show good momentum again

Looking at Ireland, even as EUR interest rates went up in the first 6 months of this year prices were still taking off. Only after 5 EUR rate rises are buyers now beginning to have second thoughts.

One of the best articles I have read recently is a review of Fred Harrsion's book: Boom Bust, House Prices, Banking and the Depression of 2010.
With residential property holding up and commercial property on a big increase this 18 year land cycle theory seems to be holding true.

My bet is on 2008 when HPC kicks off although it will take a fair amount of unemployment to get the ball rolling.

Tuesday, October 10, 2006 10:50AM Report Comment

3. denzil said...

sold 2 rent 1 said:
>>There are lots of buyers but virtually no sellers.

I'm seeing the same in Somerset and it's holding prices up. After a very busy Spring which saw a large clear-out of old stock there is a visible lack of property coming on to the market. I have friends who are Estate Agents who state the same but regardless of that I can see it with my own eyes whilst driving around the county. What's interesting is that the EA's state that normally with such competition for instructions prices should rise but they are static and if a vendor slaps a stupid valuation on a house it will not sell unless it is highly unique.

If interest rates rise very little and and there is no noticeable increase in the amount of stock on the market I can see some upward pressure on prices next spring, so if I was selling property I would wait until the Spring and reassess the situation.

Tuesday, October 10, 2006 11:28AM Report Comment

4. Nelson said...

Is the lack of property coming on to the market because people can't afford to move up the ladder at any level? I don't anyone considering moving up the ladder, friends with 3 bed houses are looking to move down despite having kids etc - and free themselves from what they realise is crippling debt, mortgages of 200k etc. And if people don't sell because they can't afford to move, how does this affect HPC possibilities?

Tuesday, October 10, 2006 11:48AM Report Comment

5. george monsoon said...

Disposable income is an issue for me at the moment. I am still struggling to save for a deposit, but with each passing day the deposit needs to look more like a mortgage amount its self. To add insult to injury, due to the increase in my cost of living I have had to halve the amount that I save each month. This will allow me to pay my increased fuel bills, increased council tax, increased insurance costs....etc.. I am really depressed. At this rate I will never have enough.

Tuesday, October 10, 2006 12:36PM Report Comment

6. talking rot said...


You and me both pal. There have been times in the last couple of years where houses were appreciating faster then I've been able to save. Waiting for the mystical HPC is like waiting for Godot. Sadly the 2 houses we almost bought in 2004 are now beyound our means and that is while we've managed to save about 500 per month.

Despite the many learned and true comments on this Blog, there is no sign of any crash or even a gentle decline, in my area. (Hampshire / Surrey border). We've got no idea what to do next either. Yes - it is depressing. I suspect that if we wait longer enough there will be a crash - house prices will fall from being wholly and totally unaffordable to merely very unaffordable. Tents are getting cheaper though.

Tuesday, October 10, 2006 12:59PM Report Comment

7. inbreda said...

Well George and TR - if you're feeling such pain due to the rise in bills, imagine how the idiots who bought at X times salary.

So you've gone from being able to save 500 quid a month to 250

Recent buyers are probably going from having nothing left at the end of the month to hocking the telly to pay this months mortgage - and turning a blind eye to the leaky roof.

The fact that you're feeling the pressure of utility bill rises is GOOD, because so will everyone else - and those that have been foolish will be hurting also.

Tuesday, October 10, 2006 01:29PM Report Comment

8. tyrellcorporation said...

I have to hand it to the VIs in all their myriad of guises from EAs to BBC hacks. With the sophistication and sheer bloody mindedness of their campaign, I am now thinking too that we've all ballsed up big time...

I'm not looking for a house so don't worry folks - mainly because I now can't afford one. My savings have shrivelled due to the hidden inflation rate coupled with all interest from my lump sum being used to pay my rent.

Clinging to the hope that bird flu or an asteroid strike will force HPC is, frankly, a bit desperate. Other 'possibles' on the horizon such as Iran (switching the oil off in response to sanctions) are, at best, a long shot. The last and I guess most probable is a US slow down but they'll just slash IRs in response to that so no joy there.

Sorry to sound so glum but at the moment HPC seems as far off as ever... In the meantime, my partner is expecting again, I have a 2 year old without a bedroom and we're stacked liked Poles in a two bed flat paying a grand a month to stand still.

When my teachers said 'in the future you'll have so much time on your hands and people will be playing badminton all day', I should have realised they were actually talking about their future in the public sector!!! my life currently bears little relation to their pearls of wisdom!

Gnnnnaaarrrrrrrrrr! rant over...

Tuesday, October 10, 2006 02:00PM Report Comment

9. uncle chris said...

I suspect this is a southern thing, because I really don't see it in North Wales. I've been monitoring the number of houses listed on local EA websites since the beginning of the year, and there has been nothing but an upward trend (around 50% by my overview of 8 agents). One - http://www.bowensonandwatson.co.uk/ResidentialSalesSearch.htm - is currently listing 350 homes on its site, up from 178 on Jan 1st 2006. The relatively cheap houses (those around 100,000) are selling ok, but very few of the 200,000 plus are moving. Although many have come down in price, there appears to be a stand-off on prices, no doubt fuelled by the VI media. Personally, I'll keep renting until it makes sense to buy, as there is a plentiful supply of rental properties - even if I have to wait until the 2010 world economy collapse. The only question is, where to stash my money where it will be safe - National Savings Bonds perhaps?

Tuesday, October 10, 2006 02:04PM Report Comment

10. Inflation Is Eating My Savings said...

Advice would be appreciated- I just put an offer of 130 k on a property in Dundee (145k fixed price- Scottish system folks). This is unconventional and I met considerable resistance from solicitors who tried to stop me even putting in the offer. One agreed finally. Not surprisingly the offer was flatly rejected- the Scottish system is by its very nature inflationary. I would like to by a house but am still happy renting. The income multiple is reasonably comfortable, I could afford the whole price- I just don't want to- why the hell should I throw the kitchen sink at it?

What is the next step? It's been on the market 6 weeks without any action- previously an offers over property. Up the offer? Let them stew then up the offer? Or just let them stew? Waiting for a crash is one thing. Driving prices down would seem to be necessary for this to occur.

It appears that the solicitors here are very well organised against the peppering of properties with low offers. Any similar reflections?

Tuesday, October 10, 2006 02:10PM Report Comment

11. tyrellcorporation said...

The trouble with the SW of England is that it's a hot spot for Londoners buying property. Either as second homes or as their main residences (white flighters, downsizers Hugh Fearnley Whittingstalls, Marie Antoinetta's etc). You won't believe the number of Porsche Cayennes I see tootling round the streets of Exeter - and this is in a City where the average wage is about 20k!

In a nutshell, I need to move up country and stop pretending I can live like Jim Bergerac...

Tuesday, October 10, 2006 02:21PM Report Comment

12. Elpapasito said...

TCorp George TalkingRot, Hang on in there. It has dragged on far longer than any of us hoped. Your situation feels bad but paying extortionate rent to the bank as many recent FTBers and Upgraders must be doing will be far worse. Keep looking for good value rentals. 1k for 2 bedrooms is deal you might be able to do better on wherever you are in the country.

Tuesday, October 10, 2006 02:35PM Report Comment

13. holding out said...

I'm from south shrophire and it's not so much that houses are selling really quickly. It is that very little seems to be coming on the market the local EAs seem to have the same bunch of massively overpriced houses that aren't selling that they've always had.
Every now and again a new one is added and it either joins the slow moving line or goes almost immediately.

I'm in a rental and they seem to move very quickly - I was scouring the websites of local EAs and on mailing lists etc.. and yet everytime something came up it was snapped up before I was even offered a look. I'm in now (Sorry TC but 600/month gets a 3 bed detached).

It is pretty depressing news at the moment. Could it be the calm before the storm ? or is it just depressing.

Tuesday, October 10, 2006 02:38PM Report Comment

14. tyrellcorporation said...

Nope, it's just depressing! :(

Someone say something to cheer me up... I'm polishing the Luger again!

Tuesday, October 10, 2006 02:42PM Report Comment

15. harold said...

sold 2 rent 1

Good comment. I would agree that we will probably see a final spike in prices over the next 12 months - another reason why Blair is confident of staying until next summer.

I have a theory that even Blair has been surprised by how long the boom has been sustained, hence his comments at the beginning of this parliamentary term about quitting - he thought the economic game would probably be up by now and therefore out of office. Of course, the fact that globally central banks have continued with lax, irresponsible monetary policy has allowed him to continue in office, sadly. In my view this lax monetary policy is in part due to the present crop of western 'leaders' having unfinished political business (i.e., war), and therefore have, by necessity, to continue the economic conditions which maintain them in power. That is, conditions which give the appearance of affluence - loads of cash, quite literally. It will not last, and 5 mins after confidence plummets while inflation goes in the opposite direction Blair and co. will be out the back door.

However, I quite accept that this is of little comfort to those of us who feel they have missed the boat.

Tuesday, October 10, 2006 02:55PM Report Comment

16. sold 2 rent 1 said...


Don't despair with HPC.
For most people it is pot luck when they buy their first house. If you are born at the right time and hit 25 at the bottom of the property cycle then you are lucky.
I was lucky and bought my place back in 1994. Still, my mistake was that I never traded up during the boom.

The way I look at it, the average person will see 2 (possibly 3) big property crashes (that they can buy into) in their lifetime. The crash that is approaching in the next 12-24 months is an event that doesnt happen often (18 years if you buy into Fred Harrisons book). It might be better off focussing on the bigger picture rather than day-to-day news events.

If a HPC started today then it would probably not be worth buying until 2009-10 anyway. If the crash starts in 2008 then the time to buy will be 2011-12.

A HPC will almost certainly be accompanied by a large rise in unemployment. When the crash happens the priority will be to hold onto your job. Saving cash for a deposit will be a secondary objective.

For those who can come out of the other side of the recession with some savings, a job, and NO negative equity then there is a huge buying opportunity.
These opportunities will not just be in the UK. Places like Spain, Florida and Ireland will have a huge oversupply and rock-bottom prices.

I know it must be hard watching and waiting for the HPC.
Buying now would be a mistake.

Did anyone read the article?
What did you think?

Tuesday, October 10, 2006 03:01PM Report Comment

17. uncle chris said...

I was quite happy to wave the boat off a couple of years ago as it looked seriously in danger of capsizing. Although it's made it out of harbour, I'm still happy watching from the safety of the shore as it rolls around precariously in the swell. It's quite simple really, when it makes financial to buy I will. Until then, renting allows me, and others, to save a nice safety net whilst those at sea struggle with mal-de-mer. I've owned several houses in the past, but have never felt so stress-free about things (property-wise) now that I'm renting.

Tuesday, October 10, 2006 03:11PM Report Comment

18. Miniftse said...

sold 2 rent, i liked the book, reckon, gordon is aware of this and thats why we recently saw him push blair out of office so his doesnt get his fingers burnt.

Tuesday, October 10, 2006 03:24PM Report Comment

19. paul said...

Hang on. If prices rise any further then they will be pushing 10x the average salary.

If the average person needs 10x their salary to buy the average house, then the market go up much further, unless the banks get even stupider about their lending, which they're not going to do.

It's worth remembering that while the UK and US are the money printing presses into overdrive to stave off recession, other countries are selling goods to keep the wolf from the door.

I can't see much future in that.

Tuesday, October 10, 2006 04:56PM Report Comment

20. inbreda said...

Agree - why do you need anything to cheer you up? Just look at the graph on the home page and you can see that there's not been a great deal of movement in the last couple of years. Things are clearly not going to sky-rocket again. The only question is whether they can hold their value - and whether they can or not is it really worth ploughing your entire life into a house and risking a fall from the current dizzy heights?

Over the last couple of years the graph looks quite choppy - wouldn't want to have been a property developer in that market at that time. But it will take a long time (perhaps the entire buy>develop>sell process twice over) before these props of the housing market decide to call it a day and walk away. The snowball effect is only just starting. Personally i think that without a shock (rise in unemployment, IR hikes) the housing market will still collapse but it may take 2 years before it becomes visible.

If you're a real HPC'er then you're in this for the long run !!!

Tuesday, October 10, 2006 05:02PM Report Comment

21. paul said...

The outlook is far from rosy for hpi.

This temporary honking and braying from the papers betrays a feeling of uncertainty, and in reality, the effects from city bonuses will not be widely felt.

Remember, according to the way the statistics are compiled, an EA only needs to sell one property a month for 10% more than last year to claim a 10% rise in prices, and achieve the resulting effect on market expectations, by shouting long and hard enough.

I'm very much hoping that economists will look at these figures and start scratching their heads at how a 10x average salary market is sustaining itself, and conclude that it isn't. The trouble is they are mostly hacks for papers with property sections with EA advertisers.

So for the bought-and-paid-for hacks, there's not much sense in looking the gift horse in the mouth.

Tuesday, October 10, 2006 07:21PM Report Comment

22. European Bear said...

Inflation is eating my savings

Good for you for putting in an offer under the fixed price. What your next step should be all depends upon how much you really want this place. If you are prepared walk away, let the seller stew. They may get back in touch with you if no one else is interested in the place. Make sure that your solicitor has "noted your interest" with the seller's lawyer so then the lawyers are obliged to keep you informed of any activity on the property, (surveys, other notes of interest etc). The downside with fixed price is that if someone else offers the asking price, then the property is sold - it's a done deal. The upside for the buyer is that it means the seller is really keen to sell the property.

If you are fairly keen on the place you could wait for a little while and point out any negative features of the property you have noticed and then grudgingly put up your offer a little. You could also say that your second offer is your final one and time limit their response, e.g. give them 48hrs to accept or reject it. If you haven't already had the place surveyed, make your offers subject to survey, so you don't incur any unnecessary expenses.

I'm no expert on properties in Dundee, but unless the market is cooling in this part of Scotland, be a bit wary of fixed prices as I said previously it means the seller is really keen to sell or even needs to sell the property fast. If you don't already know why the property is fixed price try to find out, ask the seller why it is fixed price and if your not convinced try to do a bit of dectective work to find out if it is a bad street or if there are neighbours from hell etc. In a rising market it can be a sign of a greedy seller who has actually overpriced the property but is trying to appeal to FTBs and other buyers with lower savings becasue the buyer knows exactly what he or she has to borrow and can budget more easily. This trick was prevelant in Edinburgh a few years ago when prices were rising there rapidly.

Tuesday, October 10, 2006 09:37PM Report Comment

23. Nohpc said...

Tyrellcorporation paying a grand a month for rent not including council tax.. just buy your own place for god's sake. Interest only on 200000 pounds is less than that!! Stop throwing your money away.

Conflict of interest: Now in so much positive equity I can have a money bath

Tuesday, October 10, 2006 10:40PM Report Comment

24. bidin'matime said...

A bubble that can't be pricked by anything as it expands will eventually collapse under it's own weight. My guess is that stagnation will kill it off - the surge in property investment that has caused the surge in prices has been financed by increased borrowing and nothing else once everyone has borrowed as much as they can afford, the surge must stop in the same way that speeding traffic on the M25 bunches up, everything will come to a grinding halt.

The pool of potential buyers is not infinite once they have all stretched themselves to climb as far as they can up the property ladder, they will have to rest until wage inflation allows them to climb further. With wage inflation at around 4%, likely to be more than offset by higher bills, tax increases and/or general economic downturn, the market is likely to completely stagnate.

A stagnant market with prices at their peak can only mean one thing the possibility of a fall. This will deter buyers and will certainly deter the BTLs, so making it a self-fulfilling prophecy.

Once the money pot has run dry, the chickens will come home to roost. Its just a matter of time. Anyone who buys now will be left with a decade of misery.

Tuesday, October 10, 2006 10:54PM Report Comment

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