Tuesday, Nov 28, 2006

House prices still not reached tipping point?

Firstrung: House prices up 7 percent annually 1.2 percent monthly - Land Registry

Robust house price appreciation continues (average price increases 1.2 per cent in October to 171, 709). House prices in England and Wales have continued to exhibit strong growth. This month's data shows a monthly increase of 1.2 per cent and an annual increase of 7.0 per cent. This increase means that the average property price is now 171,709.

Posted by converted lurker @ 12:58 PM (433 views)
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1. uncle chris said...

Not to forget, the Land Registry figures contain all the MEWing activity, which probably masks the true state of house prices. That is to say, if you remortgage and the bank agrees to raise the valuation on your house (i.e. give you a bigger load) then this will appear in the Land Registry figures as a rise in the house prices even though no tranfer of property has taken place. My own survey of a local town over the past year suggests that around 30% of land registry entries were never listed for sale in local estate agents.

Tuesday, November 28, 2006 02:42PM Report Comment
 

2. Sam said...

looks like we're in for another rate rise then. Again, it's patchy but the trend is still up. I'd guess it's people maxing out on mortgage multiples and BTLers -- the biggest gains are at the bottom of the market for the basic flats and below average housing doesn't hold well for future comunites.

It's intresting that Hammersmith and Fulham saw a rise of 15.1 percent. I think this would be down to it's proximity to Chelsea and perhaps the expansion of congestion charging.

Still believe it's too expensive and will not be buying any time soon.

Tuesday, November 28, 2006 02:43PM Report Comment
 

3. converted lurker said...

you sure about this Chris???

Tuesday, November 28, 2006 02:53PM Report Comment
 

4. David20040_0 said...

Up they go

Tuesday, November 28, 2006 02:57PM Report Comment
 

5. rich said...

I'm actually starting to suspect there may not be a crash.

The key question in my head is, would the government try to stop inflation by raising interest rates when there's so much debt? Surely if even a relatively small percentage of borrowers defaulted on their debt then the major lenders would lose all their liquidity and may cause a financial crisis. Inflation might be the safer option for a career politician.

Tuesday, November 28, 2006 03:13PM Report Comment
 

6. inbreda said...

Fortunately, the BoE is independent.

D'oh!!

Tuesday, November 28, 2006 04:06PM Report Comment
 

7. rich said...

Independent of what? It's not independent of vested interests, and unlikely to be completely independent from the government either.

Even without the question of independence, would you prefer to be the governor who presided over a massive crash or the governor who presided over some inflation?

Tuesday, November 28, 2006 04:19PM Report Comment
 

8. uncle chris said...

Converted,

I know for a fact that a friend of mine re-mortgaged 2 years ago and his new mortgage value has appeared on sites like www.houseprices.co.uk, who I believe get their data from the LR. To be honest, I'm not sure if the LR have a method of excluding
remortgages from their HPI, but I've e-mailed them just now to confirm. There are no obvious statements on their website, just vague terms like "The Land Registry House Price Index (HPI) captures changes in the value of residential properties." and "The Land Registry data set is the only complete record of residential property transactions in England and Wales".

Tuesday, November 28, 2006 04:38PM Report Comment
 

9. Sam said...

Not sure Rich, remember this not a increase in the value of something by created wealth, it's because people think that property is gonna go up in value regardless. i.e. Bubble.

Family member just bought a property, cannot afford the payments. so he's staying at home with his parents and renting it out untill things get better.

best of luck to him.

Tuesday, November 28, 2006 04:39PM Report Comment
 

10. waitingfor hpc said...

let them go higher.

Tuesday, November 28, 2006 05:08PM Report Comment
 

11. Hook Line And Sinker said...

Rich,

Unfortunately, most of the global property market is in this bubble and not just the UK.

Many high profile economies are caught up in this and it's now out of the control of any individual. It's a comforting thought that the likes of the BOE, FMOC, IMF or anyone else could prop up this market when it turns bad.

But the simple reality is that just as market forces created the stampede for property during the period of emergency low interest rates post 911, the stampede to get out of the market will cause it to crash.

All of the normal, sensible and proven rules of investment all go out of the window whenever there is the 'herd speculation' that is now typical of the housing markets around the globe.

The small panic signals are evident right now.

We have record lending figures.

We have record multiples being loaned to the young and vulnerable members of our community, who know nothing other than appreciating house prices and who are being motivated onto the property ladder by sheer worry.

We have the $US depreciation and growth slump around the corner.

We have this year recorded record fuel and other commodity prices.

We have arguably hidden inflation figures.

We have mixed messages from all price indexes nearly every day.

We have enormous levels of debt.

And still the banks loan more. And why shouldn't they?

They will care nothing for those trapped in negative equity for the next 10-20 years.
Not a thought for all those newly created 'property developers', all slashing prices in the hope of finding a FTB to offload their liabilities onto.
No problem with putting people onto the streets with re-possesion (that nasty forgotton word from the early 90's).

But the lenders are only helping to fuel the fire and cannot be held accountable for all the pain to come.

Greed and pure, outright speculation have been in the driving seat of the property markets around the world since 911.

I'm with the famous and successful American investor who recently passed comment on asset prices at a small business dinner:

'The party is usually at it's liveliest right before the end'.

Add these words of Warren Buffet to the list of panic signals above and the picture becomes very clear indeed.

Tuesday, November 28, 2006 05:14PM Report Comment
 

12. Chillilizard said...

rich

just what i was thinking - but won't inflation weaken the pound exchange rate? (As overseas investors withdraw their money)
A weaker exchange rate will cause the bank's borrowing costs of overseas money to rise, both from raising interest rates to attract overseas investors, and from being able to purchase less overseas currency in the money markets.

So the end result looks the same, less money, higher interest rates.

I'm always doubtfull of chains of reasoning like this, because these chains don't include the degree of each effect.

This scenario also depends on a few things:
firstly that inflation is being accurately reported - many at HPC would love to comment on this.
secondly that the international community adjust the pound exchange rate; they could just let the inbalance of payments escalate (look at China and the US at the moment)




Tuesday, November 28, 2006 05:19PM Report Comment
 

13. Inflation Is Eating My Savings said...

rich, you are correct, the question is when to time entry into the market- depends upon the level of inflation (usually hidden/lied about)

Tuesday, November 28, 2006 06:14PM Report Comment
 

14. C'mon Correction said...

Rich - question is to what extent can inflation go up without interest rates joining them. Surely the money markets would pull from Sterling, thus creating more inflation (imported inflation at that) ? Also the banks and lenders will see all their debts being eroded in value seriously - thus leading to major credit tightening, bank mortgage rates rising and extra financial fees (can anyone tell me reasons why credit isn't tightening currently, and under what circumstances it will) in order to re-coup costs.

I only understand the basics and would appreciate more knowledge being shed on the suggest that inflation can be 'let out the bag' - so to speak !

Tuesday, November 28, 2006 06:27PM Report Comment
 

15. Nohpc said...

Sorry uncle chris but I think you are wrong. The land registry compare the prices of the same house sold on two seperate occasions so MEWing does not affect them. House prices are still rising there is no doubt about that. This makes a correction more likely but less significant as a correction is likely to wipe out any very recent returns which were unexpected anyway. Easy come easy go, little high little low.

Tuesday, November 28, 2006 10:04PM Report Comment
 

16. p. doff said...

Don't think you are right about that one Uncle Chris. I do several remortgage valuations daily and I've never seen any of these appear on the LR records. Surveyors regularly use sites such as 'Nethouseprices' and 'Mouseprice' to obtain comparable sales evidence to support their valuations. I have an account with the latter. It wouldn't make much sense if we were just using some other surveyors guestimate remortgage valuation as opposed to hard sales evidence to back up our valuations.

Mind you, the data on these sites isn't 100% accurate as it must surely rely on somebody somewhere keying in data manually. I've come across spurious figures on many occasions - e.g. digits missed off selling prices, detached houses described as terraced etc. There are duplicate entries and some transactions don't seem to appear at all. I've seen some transactions shown on the site which I know fell through before the sale completed. There are also discrepancies at stamp duty band levels - e.g. you wont find many sales at 510K say, as the transaction usually goes through as a sale at just under 500K with the rest put down to carpets and fittings etc.

Still, these websites that provide easy access to the Land Registry data are a very useful tool; although it might depress any prospective buyer to find out how much (or little) the vendor paid for the house they are about to buy.

Tuesday, November 28, 2006 11:37PM Report Comment
 

17. David20040_0 said...

How many times, they are not going to crash.

High loan multiples, high immigration, lack of housing available. Prices are just going to keep going up.

Wednesday, November 29, 2006 10:49AM Report Comment
 

18. rich said...

Cheers for all the comments guys.

Just to reply to one point that caught my eye... Hook Line And Sinker reminded me that banks are continuing to lend, sometimes at crazy multiples. I have a hard time accepting that the banks are stupid enough to lend so much when there's a possibility of a crash coming (although I'd be interested to know where their economic advisers have invested). It makes me think they know something that I don't, and I suspect they think we're heading for a period of inflation instead (with high interest rates to allay the decrease in mortgage value).

Wednesday, November 29, 2006 11:31AM Report Comment
 

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