Thursday, Nov 02, 2006

Plea for no interest rate rise - Smartnewhomes.com

Firstrung: Interest rate rise next week will seriously dampen the housing market - smartnewhomes.com

David Bexon, Managing Director of SmartNewHomes.com, the UK's leading new homes website, offers a warning ahead of this month's decision on interest rates: "A rate rise in November would seriously dampen the market at this crucial time when it is slowly starting to show signs of growth. With predicted higher costs of transactions next year from HIPs, albeit slimmed down, a rate rise at this time could send house prices into reverse and seriously damage buyer confidence

Posted by converted lurker @ 11:43 AM (389 views)
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28 Comments

1. devil's advocate said...

Something needs to stop the runaway train.

Having been looking serious at buying this week. Have looked a couple of blocks of flat and particular streets that I have been monitoring for a while. One block of flats in Blackheath which has five separate buildings has had about five flats put on the market recently and half have sold. The highest selling price for these flat was 255,000 up to 2005, about 12 sold between 2003-2005 ranging 235k-255k.

The flat sold recently have been sold at 330,000 and one sold at 308,000 last month.

This is a common storey in the SE london and probably london as a whole. Another flat I was keen on in an othe road about amile away sold after a year on the market for 315,00, a new flat on that road sold yesterday for 365,000.

The market is booming at the moment. How can it keep on rising. It all smells like panic buying which makes me think that I should wait. The problem is I thought that 2 years ago!!!!

Thursday, November 2, 2006 12:28PM Report Comment
 

2. Maggots said...

and leaving rates alone will affect the longer term economic outlook

Thursday, November 2, 2006 12:45PM Report Comment
 

3. holding out said...

One way to stop a runaway train is a good crash!!

Did anyone see BBC news at 10 pm. It had Evan Davis talking about the Abbey 5*income story. He showed the same graph as the one on this site with the underlying trend line which shows how overinflated prices are. In addition he said "I would be gobsmacked if the BoE did not raise rates this month". He also said that a meeting he attended of city types a 6% base rate was mooted for the first time. He'll need to watch his back at the beeb (for both reasons!) . His obituary will doubtless be appearing shortly.

Thursday, November 2, 2006 12:49PM Report Comment
 

4. Distant_daz said...

Are there people kidding? Not more than 2 weeks ago there were reports of how the property market had 'shrugged off' the last interest rise and that it had no influence over buyers 'confidence in the market' and now its doom and gloom - even the thought of a small rise is a disaster! Bring it on then I say!

Thursday, November 2, 2006 12:54PM Report Comment
 

5. Cstanhope707 said...

Since when is it the role of the Bank of England to "prop up" one sector. I did not see any action when the IT Industry was taking a nose dive. Probalem is that this desparate attempt to prop up the overinflated housing market will end in tears.

If it goes to 7% I am going to write a letter to the DE explaining that with Silly articles house prices to double etc. they only have themselves to blame.

Crash by end of 2008 early 2010 woudl suit me I will then have a nice deposit and will just buy buy buy when all the suckers who fell for all this are stuck in a Debt rutt....

Thursday, November 2, 2006 12:56PM Report Comment
 

6. paul said...

DA, I am in very much the same situation as you right now, although I am looking at a slightly cheaper range of flats.

Evan Davies is a sensible economist. He gave a presentation at my old company AGM (retail company) and said that basically the current retail outlook will persist for the next 3 years at least - if you don't like it sell up now". Needless to say it didn't go down especially well with the crowd but there was a lot of economic sense in it.

If there is no rise this month, it will raise more questions than answers regarding impartiality and competing interests of the MPC members.

Thursday, November 2, 2006 01:05PM Report Comment
 

7. jimmytennor said...

Apologies if my post has been duplicated.

Hang on Devil's Advocate - are you now altering your opnion to be aligned with the posters on here?

Are you now stating that you agree with the majority on here, as opposed to your usual wax lyrical sentiments about HP increases?

Thursday, November 2, 2006 01:56PM Report Comment
 

8. devil's advocate said...

My opinion has not changed Jimmy. not sure which camp you think i'm in?

Thursday, November 2, 2006 02:48PM Report Comment
 

9. Sam said...

Yeah, kinda in the same situation as DA and Paul.

Although not being married, and without kids, I think I'm in a perfect position to keep renting a bed-sit close to work, and save up for a huge (not just large) deposit for the mid to long term future. Keep my most valued possessions in storage (at my mums), and just live the student life but with a proper salary and half decent food (my cooking's not up to scratch).

Im not worried about not being able to afford to buy a place in the future, stopped listening to propaganda ever since I was being told to worry about suicide bombers being the biggest threat to our society. Worst comes to worse, move to spain, canada, india .... infact a fair few places I think are a lot better to live than london.

Thursday, November 2, 2006 03:12PM Report Comment
 

10. jimmytennor said...

DA, apologies if I misunderstand your viewpoint, but all the posts, from your good self, seem to be that HP's will continue to rise, but now your saying that it's 'panic buying'?

Thursday, November 2, 2006 03:13PM Report Comment
 

11. devil's advocate said...

I think it is panic buying but thats not tosay that it will continue to rise. I hope they do crash but it seems less likely at the mo. If it does thne it will be years in the future. The problem is I have been waiting for a correction since 2004 and have lost a load of money now the market has rocketed. I must admit I have been panicking myself over the past week. The realisation has hit me that i'm getting priced out when I could have easily bought a few years back. Its a double edged sword, a fear of buying at the peak and a fear of losing loads of money when eventually get back on the ladder.

Thursday, November 2, 2006 03:44PM Report Comment
 

12. inbreda said...

DA - you can't say you have lost loads of money. It's all relative. If you'd invested in one of the IVA companies you could consider that keeping your money in property would have caused you a loss.

Thursday, November 2, 2006 04:03PM Report Comment
 

13. Rimmer said...

Cstanhope707

There are quite a few i know who have said similar, ie if it all crashes i will buy 5 houses and blah blah blah.................... anyway if you look how bad public sector finances are ( unless you beleive Gordon and Tony were talking taxes to save the planet ) most peoples bills and the cost of running a house are going to double, it may welll end up with people actually living in homes they need too rather than because they think its some kind of nest egg.

Thursday, November 2, 2006 05:00PM Report Comment
 

14. rich said...

>> DA - you can't say you have lost loads of money

Exactly. Even if you had bought in 2004 you haven't actually made any money until you sell up and walk away.

Thursday, November 2, 2006 05:36PM Report Comment
 

15. Chillilizard said...

DA - taking out a mortgage is really just buying an option on a house. Others in my family have bought, but they don't have any more money than me, until they sell. Which they will be doing soon. :)

As long as its cheaper to rent than to pay interest on a morgage, i'm happy to rent. I've put my money on the stock market. Everything works in cycles right? - well right now, i'd say make sure inflation doesn't get your cash.

Thursday, November 2, 2006 05:38PM Report Comment
 

16. dizzy said...

in response to DA, I also live in Blackheath, SE London and am currently renting,four months ago I would have agreed with him but on my street, of the four houses that sold quickly, two have fallen through and are now just sitting there. Also of the four houses three had no chain which suggests that people are selling up and renting because they realise that the market has reached the top.I am more convinced than ever that we have reached the pinnacle.Be patient,the houses that sell quickly in blackheath and Greenwich are 1m plus and we know the reasons for that.

Thursday, November 2, 2006 07:43PM Report Comment
 

17. Nohpc said...

rich by your reckoning you can't say you have lost money if there is a housepricecrash until you sell up and walk away. Which is true.
People keep saying it is not the bank of england's job to prop up the housing market. Well they managed to create a housing boom so now a bust would be even more embarassing. And if the housing market crashes so does the economy, the labour market etc. So although it may not be one of their prime directives it lies within the realms of common sense that they do not want the market to crash. I have a feeling from the VI stuff that 5% might actually be enough to stagnate the market completely. I think what we will see is 0% inflation and much fewer sales as happened in 2005. A lot of people who think a houseprice crash is a bad thing will actually benefit from it. Especially people looking to move up the ladder as long as they don't hit negative equity. However, the boe and government will be hated as much as the tories during the last hpc if they cause another one. I don't think they will get back into power for a long long time if it happens.

Thursday, November 2, 2006 09:21PM Report Comment
 

18. Nohpc said...

And dizzy.. selling without being a chain is normal in scotland. There is no such thing as a chain up here. This does not mean people are selling to rent. I would think very few people are going for this option. Sold 2 rent will probably break even if there is a crash as he has missed out on gains over the last few years so you can see it's not quite the financial savvy that people would have you believe. Also you have to factor in selling and buying costs which make it even less sensible. You need a fairly hefty crash for this to make sense. Although a mortgage is a huge financial commitment i enjoy having it and plugging away at it and seeing it shrink in size.

Thursday, November 2, 2006 09:24PM Report Comment
 

19. tyrellcorporation said...

A good friend of mine bought a two bed flat in Greenwich about a year ago. He was cock-a-hoop for about 6 months but he has now got an Aussie renting his other room (to help keep the ship afloat) and recently came clean to me that he was much better off financially when he was renting.

The shine has worn off and he's totally skint all the time - more importantly than that, his rosy picture of home 'ownership' is tainted with doubt. He 'only' coughed up about #200k. You imagine what the fallout will be when this current batch of misguided saps wake in a cold sweat and realise they've spurted half a mil on something that by any reasonable measure is worth only half that. Lets be honest, at the end of the day it's a pile of bricks and mortar. Common sense has left the building and sooner or later people will wake up to the fact they've been duped on epic proportions...

Unlike renting though there's no quick way out...

Thursday, November 2, 2006 09:39PM Report Comment
 

20. kpjcomp said...

tyrellcorp said->> The shine has worn off and he's totally skint all the time

Right On!!, totally agree. I was a home owner 6 months ago, yes when we first bought the house everything was new and exciting, but in the end it was just a home. And if you've spent all your monthly outgoings on paying the mortgage, it don't leave much to make it more homely. So I wonder what will happen when people start to realize this..

Thursday, November 2, 2006 11:42PM Report Comment
 

21. Nohpc said...

Kpjcomp you really think people are much more stupid than you are don't you. You think people don't realise that a big whack of their money goes into mortgage payments. They are told what the repayments are before they go into the mortgage. People want to own their own homes and always will. If there is a houseprice crash rents will equal mortgage payments again and therefore rent will be dead money. Rent is still dead money if you can cover enough of the mortgage to make the interest payments equal rent. And small flats and homes are the norm. They don't build them big anymore. Only the homes of old are spacious and I they will always be in very high demand.

With renting there is no quick way out either. You have to live somewhere right? So if rents rise what are you going to do.. this seems as likely as a houseprice crash to me with the huge increases in population and the smaller amount of buyers.

Friday, November 3, 2006 12:38AM Report Comment
 

22. The Bald Man said...

Nohpc. Two points rent is only dead mony if the underlying assumption is that property prices always rise.
The major advantage of purchasing is the gearing factor when markets are rising i.e. you leverage your the potential profit on own funds by adding another 5times from a building society. Of course the more gearing the more risk if Ir's rise and you lose your job.
The second point is that it looks that the exodus may be as great as the influx. The trouble is no one knows.

Friday, November 3, 2006 09:32AM Report Comment
 

23. paul said...

"If there is a houseprice crash rents will equal mortgage payments again and therefore rent will be dead money."

Not unless rents go up dramatically and banks instantly re-negotiate with all of their existing (overstretched) mortgagees.

Friday, November 3, 2006 09:47AM Report Comment
 

24. kpjcomp said...

Nohpc said...

>> Kpjcomp you really think people are much more stupid than you are don't you.

Now that response even from you Nohpc, was a bit donkey!!! Would'nt the same ring true for you in that case?
aka..everybody on this forum is more dumb than you. I beleive most people on this forum normally like your comments, so please don't spoil it!!

Friday, November 3, 2006 09:52AM Report Comment
 

25. Sam said...

lol, yeah rent is dead money.

What happens when lose lending and the money supply dry up (and they can and probably will) and HPI doesnt occur at the same rate as it has in the past. you end up playing intrest only and the house price stays the same.

you are now a tennent but have to pay for all those little repairs, building ins etc... well done your money is more dead than mine.

Friday, November 3, 2006 10:18AM Report Comment
 

26. Also Sold 2 Rent said...

Nohpc

"Sold 2 rent will probably break even if there is a crash as he has missed out on gains over the last few years"

Sorry to jump on the band wagon of people opposed to you, but I have to refute that one. I sold to rent in 2003 because everyone loved housing and hated the stockmarket, and they were over and undervalued respectively. A typical contrarian bet. I sold up with a profit of 120k, which after fees and buying a car left me with 100k. That went into the global stock market and has grown since then at around 25% a year and recently broke the 200k mark. How much luck is involved in all that I don't know (probably lots) but it sure as hell doen't sound like breaking even to me. And in the mean time I'm paying about 1k per month rent to live in a house that I could never afford had I bought it (about 4-500k). And the flat I sold has gone up in value by about 10k since I sold it, going by others in the area.

Friday, November 3, 2006 10:21AM Report Comment
 

27. Nohpc said...

I wasn't taking into account the fact that you have been a stock market whizz kid.

Monday, November 6, 2006 08:02AM Report Comment
 

28. This comment has been removed as it was found to be in breach of our Blog Policies.

 

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