Wednesday, April 4, 2007

Pace slowing but prices still rising

House prices up 2.2%over last quarter

House prices increased in every part of the UK in the last 12 months, but the rate at which they rose was quite different across the country. Northern Ireland and London stand out as the leaders with the fastest annual rates of house price growth in the UK. In contrast, the Northern and North West regions and Wales saw the biggest slowdown in the annual rate of house price growth...

Posted by converted lurker @ 10:03 AM (470 views)
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21 thoughts on “Pace slowing but prices still rising

  • Oh well, what can the MPC do?

    Is it just me, or is the latest peak on the graph on the housepricecrash homepage starting to look like the mother of all tsunamis? I wonder where it’s heading?

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  • I have to say houses around me are flying, no sooner has the for sale sign gone up and I’m thinking they’ll never get that price for that dump then the sold sign appears, I have to say that even i’m starting to think this bubble will never burst, mind you if it does it’s going to be a bigun.

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  • Thinking about it is the introduction of HIPS causing a rush to buy before it’s introduction as happened when double tax relief was phased out in 1988 which as we all know ended badly.

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  • converted lurker says:

    Oh contraire, strip out “that London” and N/Ireland/Scotland and the figures look v.weak IMHO. Look at the five towns cooling. Plenty of notes of caution. I’m still optimistic that 2007 will finish with HPI at 2%, that’ll be a reversal of approx. 8% YoY. Not that crash a lot hope for, but certainly the ‘managed correction’ that may be better for all of us, particularly if you fear the ‘dole queue’ for plenty we know caught up in this crazy industry, in all its manifestations.

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  • Around me – (Southeast) they have also been selling very quickly recently. I would say more quickly than before. With Mewing on the increase again as well it seems there are still hordes of Sheeple oblivious to what is coming round the corner to meet them.

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  • george monsoon says:

    All it will take is current interest rates to go up say 1% and anyone who has just sold their gran to buy a house will be up sh!t creek. Im sorry but I think there is a valid argument for interest rates to rise, not fall. Just look at the way the rest of the world is going, in particular Japan.

    Anyone care to add to this?

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  • george it does appear that the global trend in interest rates is upwards, the Yen is weakening again and this will put pressure on the BOJ to increase rates.

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  • The bubble is very unlikely to burst in the UK. I live in the E Mids and I have never seen houses sell for so much and so quickly, a house will have a for sale sign and within a week a sld sign will appear. The prices also seem to be rising at a phoenominal rate, at least £1k a month for a normal 3 bed detached.

    Even though the United States and the Republic of Ireland seem to be falling there seems to be very little indication of a crash coming over to our shores.

    It is interesting that everyone always predicts that a crash is just another year away.

    Yesterday there were some articles saying that housing was overvalued and that a correction is coming next year. I have seen similar articles since about 2003-4 about how next year there will be a crash, it is always ‘next year’, it feels like grasping at straws while all the while housing is going up and up.

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  • waitingfor hpc says:

    inflation is ground in now – i went to a conference yesterday with the major UK buyers of pulp paper, they predict price rises through till 2010 and shortage of supply!!! (already had a 40% increase in 12 months)

    interest rates have to go up to stop inflation moving through the economy and to stop debt levels increasing further. people will not learn with a soft landing …. this has been proved already with litttle prods from the bank and strong words from Mervyn. Even events in the US have not phased people.

    I see no solution except higher IR’s and some level of HPC. IMHO I think the banks are offering 10+ year fixed rate deals hoping people tie into these so if a HPC comes it will not throw everybody of track.

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  • Tony Marshall says:

    With the increase in money supply in double digits, interest rates will need to rise to head off the double digit inflation that would naturally follow.

    Mickey – re your point about HIPS – my first thought was that HIPS wouldn’t boost buyers, but there is a possibility that people decide to make that move ‘up the ladder’ before the introduction – particularly if they are selling a dump and buying newer…

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  • All booms go bust but the question is how big is the current boom, and therefore is it likely to go bust soon?
    Are real house prices up, or has inflation been underestimated? If you think the actual inflation rate is a good few points above the published figures, the housing bubble doesn’t look quite so bad. Maybe HPC should publish the cash prices on their graph, not the adjusted-for-inflation figures. Is it really an increase in house prices or a drop in the value of money?
    The Irish professor had a good point (for those of you that saw the article posted on HPC) – the value of houses usually has relatively little impact on the real economy and a crash in house prices can be sorted out by a dose of inflation and/or devaluation of the currency. The problem for Ireland is it’s in the Euro so can’t devalue, so unemployment is likely to be the outcome.

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  • I hate to say it but I think HPI will remain for the short term (next 1-2 years). My head tells me it cannot go on but what I see tells me it ain’t gonna end soon! I owned my own house in an afluent part of Essex until July 2006, when I decided to move to West Sussex (better schools etc.) The sale on my property in West Sussex fell through at the point of exchange so I made the decision to move into rented accomodation in West Sussex and allow my house sale to proceed. In all honesty, the only reason I went into rented and didn’t back out of my sale was because my son was offered a place at my 1st choice primary school and I felt it was a price worth paying. We had been looking for property in West Sussex from Jan 2006, and up until May 2006 we were able to travel to West Sussex on Saturdays for viewings and return again a week later for a second viewing if required. The 3 bed semi-detached Victorian/Edwardian cottages were ~220-270k depending on whether they required any work. For me, it was possible to reduce my mortgage by a few thousand and enjoy a better quality of life. However, I didn’t buy a house because although I liked the area, I didn’t rate the quality of property available and I didn’t want to rush in and buy badly. Since May 2006 everything changed, estate agents do block viewings and prices have gone up massively, houses are sold before they appear on Rightmove. I can give you one example of many, a 3 bed Victorian semi-det cottage in April 2006 was valued at 260k, did not sell and was taken down in July 2006. In Jan 2007 it was valued at 299k and sold in 1 week. The sale fell through in Feb 2007 but the property was remarketed immediately at 315k and sold again in 1 week! That sale is still proceeding. I have rented since July 2006 and pay 850 per month for a 3 bed semi Victorian cottage (valued at 320-340k). For me to buy this (and I have a 6 figure deposit) will cost me 1100 per month on a repayment at 5.25%. At the moment, it is not rocket science to see that for me it is better to rent and earn 5.8% on my savings than to buy an average, massively overpriced house. However, to be honest, I really only want to rent for a maximum of 2 years so unless some correction occurs within the next 18 months, I will probably commit to rent until my son leaves primary school and either relocate again or most probably emigrate. I am a PhD biochemist with a good job and fair salary but even with a 6 figure deposit, I cannot afford to buy an average quality 3 bed semi without taking on, what I consider to be a large mortgage. God knows how others are affording these houses, they either have fantastic salaries 100k+ or are mortgaged up to the hilt. I suppose it comes down to what you are willing to live with. Are my standards too high? Who is to say, but I certainly will not be lowering them to buy around here. Prices can drop, your standards should always remain high! As I said earlier, I do think a correction will occur but not in the timescale I would like it to! The place I am referring to is Horsham, recently voted 2nd best town in UK to live- good facilities, reasonable schools but poor quality housing at extortionate prices. Good luck to all.

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  • Cheekie Charlie says:

    Cyril I think if you look at wage growth over the past 10 years – I can directly compare my wage from then until now an increase of 30 – 40% max!!! – either its a boom or I’m very poor!!

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  • Cheekie Charlie,

    I fear that you are right on both points – it is a boom and you are poor (or at least poorer).

    We are slowly coming to the realisation that we have all been financially [email protected] by Tony B. Liar and Crash Gordon.

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  • Sonic – just because the housing market near you seems to be going “well” now, doesn’t actually tell you anything about the future, does it? If you have kids, I’m sure they’re growing in height now, but does that mean they will forever? They’ll end up very tall! The biggest recent crashes have followed the biggest recent booms – see dot.com bubble and Japanese housing for example – i.e. when prices are going up stupidly quick this is normally the sign that a crash WILL occur, not that it won’t (you don’t get crashes when prices only increase at the same rate as everything else, do you?). The fact that so many people have prematurely predicted the crash only proves how difficult it is to forecast these things – the argument that because Mr X was wrong in the past, Mr Y must right, is spurious.

    Dr K – you say you’re in a good job and yet can’t afford a house. And you say the rent is far lower than the mortgage. So that’s no first time buyers and no viable buy to let purchases in your area then – who is exactly is going to be purchasing at the bottom end of the market then? Take heart from your own words.

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  • Fahrenheit451 says:

    Hmm,

    Not saying you are wrong, but

    george monsoon said…
    “Just look at the way the rest of the world is going, in particular Japan”

    mrmickey said…
    “Yen is weakening again and this will put pressure on the BOJ to increase rates.”

    But the interest rate in Japan was dropped to 0% because the economy crashed and property spiralled down out of control a few years back (about 2001). Suicide rate went up, Lots of shops and some Big Businesses went bust. Even if the Yen weakens its not going to be anything like 5 years ago, Japan hopefully will get it together again. However do look at the Japanese property market and learn. There were very few property owners, typically anyone in an appartment in Tokyo would have a 100 year mortgage. And they all expected that their properties would be rebuilt, at most, every 20 years. It was a very strange economy. Also look at the probelms they had at this time, Kobe earthquake was an example.

    Now if the Kobe earthquake was not in Japan, say LA zone in the States, the economy around the world would have been affected.
    And if the US has effectively abandoned New Orleans, what would they do in LA and Silicon Valley, would it just be too big a problem?

    Moral of the storey …
    Don’t buy property in an eathquake zone.
    Don’t buy property in a hurrican zone. (eg Florida, Bahamas)
    Don’t sit under a volcano and wait for the special effects.
    Respect Mother Nature, she can squash us all without even knowing what happened.

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  • Fahrenheit451 says:

    Sorry to hear your storey Dr K.

    A friend was in a similar position when they got married, with 2 babies on the way they needed an house not a flat on the 3rd floor.
    Fortunately when they moved into rented while looking in a new area “to ease commuting so Dad could get home for the bed-time feed” they did not sell their old property. They rented it out. Therefore they kept a foot on the property ladder. However if prices keep rising they will find that the difference in price when the want a new property will increase. Conversely, if prices come down, the difference will decrease. At least they have a buffer in the old property, which helps pay the rent on the “temporary” rented house.

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  • Whichever way you look at it, GB houseprices are now horrendously overvalued compared to their European counterparts. Note the word ‘overvalued’ here. When something is ‘overvalued’ a correction invariably occurs to bring in line with it’s more commonly accepted value. A correction WILL occur.

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  • sold 2 rent 1 says:

    Dr K,

    Expect rampant HPI for the rest of the year, then a crash starting 2008.

    As for buying in 18 months time – forget it.

    I managed to persuade my wife to rent for 3 years (from Dec 2006).
    I have mentally pushed back the date to 2014.

    From the 2008/9 the economic turmoil that will hit the world will mean buying a house will be the last thing on our minds.

    My mate is currently buying in Horsham – 500K for a wreck of a 3 bed period property. He needs to spend at least 50K to make it nice.

    We all need to be very inventive to get through the next decade.

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  • s2r1,
    i don’t know if your comments are comforting or depressing! But i tend to agree with you. my son has only just started primary school so no need to do anything until another 5 years-perhaps your timescale is spot on. Good luck.

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  • Well i am currently in Arizona and the whole place is buzzing, for a country thats technically bankrupt you would think they had money trees growing.

    On the property front things are actually expensive even though you get more for your money, i say that when considering they have little land shortage in places like Arizona.

    I was just reading the story of the 102 year old man given a 25 year mortgage to make an investment, surely the world has to wise up soon .

    Sold 2 rent1 >>> i take it your mate has more money than sense then? Not that nice a town either truth be told.

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