Friday, Nov 24, 2006

Good schools price premium falling...

Firstrung: House price premium for good school catchment areas falling dramatically - RICS

The RICS survey results show that despite high demand for property in good school catchment areas, the value-added-premium that potential buyers are willing to pay for the privilege is falling.

Posted by converted lurker @ 01:00 PM (440 views)
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5 Comments

1. grasuth said...

I this the first sign of a crash? Not conclusive evidence on its own, but potentially an indicator of the unaffordability of houses and the future direction of HPI. At the risk of oversimplifying things, I really do think a house price crash is inevitable. It is a question of the effect of greed and self-interest in a market that isn't working properly. The only regarding a crash is the issue of timing. Given the availability of sufficient money house prices could continue to 20, 50 or 100 times average earnings. There is already a clear disconnect between prices and earnings, so at what point do lenders and buyers believe that houses are overvalued? One's self-interest is egging on the other. A fall is in neither party's self-interest. This is not an example of a market working well.

I don't think that there is such a thing as a stable market in anything - you name it petrol, bread, or bricks and mortar. Prices must vary around an average given local variations in supply and demand - that much is surely true. But what we're talking about here is a variation well in excess of a sustainable average. I think that the belief that prices will tail off at some new, higher (yet still unsustainable) average is a myth. If the market being bouyed up by that self-interest and fear (as reported in the BBC and elsewhere, that much they have right), then the same forces that are driving the market to extravagent highs will drive it as surely in the opposite direction - why should buyers and sellers motivations suddenly change just because the market has turned? Because of this, the 'market' will over-compensate.

Look at the US, which is similar to the UK experience in many (but not all) respects. They may be ahead of us somewhat. House prices there fell by 10% in a single month. This has affected the US Dollar and may cause a recession there, if MEW is affected (which I think it will be). All this because of a risky approach to investment in a single asset, which Governments all over have only been too happy to allow. Thanks.

PS Anyone who says that speculation forms a small part of HPI and that this is due to supply and demand aren't paying attention. Just look at the disconnect between rent and mortgages. These people are confusing houses (which you can buy with a mortgage) and housing (which you can rent or buy), Any explanation, Kate??

Friday, November 24, 2006 02:58PM Report Comment
 

2. Mikexx said...

Under normal market conditions I would agree with you. However through the continued high demand for housing I don't think there'll be a crash, more a stagnation. The US is very different in that they have recently built loads of houses but the population hasn't increased at the same rate.

Unfortunately houses and housing go hand in glove. I think we'll see a spiralling increase in rents as time goes by too. There are two types of landlord. One is for long term; and the other is more fickle, willing to enter or leave as the smart money dictates. There is also the resistance of entering and leaving the market which may distort the rent vs mortgage difference argument.

Friday, November 24, 2006 04:06PM Report Comment
 

3. Techmind said...

Perhaps this is telling us that the people who are buying houses at the moment aren't expecting (don't forsee being able to afford) children...?

Saturday, November 25, 2006 02:35PM Report Comment
 

4. Enuii said...

In my Good School Catchment Area the majority of properties being built are flats (oops sorry executive/lifestyle apartments and duplexes) and guess what loads of them are empty. One very nice block built on my Pub has only sold 16 out of the 47 units in 12 months, another built on my Petrol Station is permanently half empty so there's plenty of empty property to choose from. The only problem is that this type of property is not suitable for raising a family which ties in with what Techmind said. If you FTB's can't afford to have children flats will do very nicely (if they can afford them) so there's no point paying a premium for that 4-Bed Detached, at this rate the only people breeding will be on benefits in your local council estate.

Saturday, November 25, 2006 07:35PM Report Comment
 

5. d'oh said...

Or there is little wiggle room to bid up the houses in good cachment areas as those of child bearing age are struggling to buy a house anywhere?!

Sunday, November 26, 2006 01:11PM Report Comment
 

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