Tuesday, September 4, 2007

The penny drops – and so does the price

House prices continue to cool

At last the penny seems to have dropped. Buyers are no longer willing to pay inflated prices so sellers have lowered their expectations.

Posted by su @ 08:37 PM (1020 views)
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13 thoughts on “The penny drops – and so does the price

  • Reads ok til the riddiculous ending statement:

    “However, the growing possibility that interest rates may have peaked and stabilising prices may reverse this trend and first time purchases are expected to pick up again in the next quarter.”

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  • I don’t believe they are blaming lack of FTBs on stupid little adjusted interest rates. Nothing to do with the fact that the average house is now in the region of £200,000. It’s the big numbers that matter. Interest rates of 10% would be okay if people only had to borrow 3 times their income instead of 5 or 6.

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  • Not sure I understood all of this: “30% of agents report 7% or more growth in house growth in August”
    – eh?

    Home-owners should be reassured that there’s a growing possibility that the rate of reduction in the growth of house price inflation is stabilising.

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  • I love the way it’s interest rates that are now the main reason for houses being unaffordable. Of course it’s not the already ridiculous asking prices continuously pumped up by estate agents that are making it impossible for buyers. A friend of mine is an estate agent in Tunbridge Wells and said it’s amazing at the moment, people are taking £20 -£30,000 less than the asking price to get rid of their properties. I asked her if she thought it was because they are worried about a crash and she replied ‘definately’.

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  • Ihopeitgoeswithabang says:

    I like this bit at the end :

    “However, the growing possibility that interest rates may have peaked and stabilising prices may reverse this trend and first time purchases are expected to pick up again in the next quarter”

    What? Peaked and stabilising? So that means if you are a first time buyer you can see interest rates stable but fairly high and house prices that are no longer increasing much. That’s supposed to make first time buyers start to rush out and buy something. That really depends on who is giving them unbiased financial advice.

    From where I am sitting its alot cheaper to rent – why buy!???

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  • Even in Scotland – supposedly an area where prices are still rising – property is not shifting very well. Sellers’ expectations for 15 – 20% over asking price have definitely cooled; they’re now willing to accept 3 – 4% over. (Note: this doesn’t show up in Rightmove’s statistics which are based on asking price.) The other option for sellers is to go for fixed prices which have been breeding like rabbits up here! (the fixed prices, not the sellers!)

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  • Sue

    Thank you for that bit about Rightmove’s statistics. I’ve been wondering about that, so if the recent survey says prices have gone up 1.1% in the south east do you have any idea what a truer figure would be? I am seeing reductions down here, and lots of the same sad properties have been on the market for well over three/four months.

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  • Starlight.

    The guys on this site who know what they’re talking about recommend looking at the land registry figures as they are the only ones which register actual selling prices rather than asking prices. You can access this info from a link on housepricecrash.co.uk. Click on “An overview of what’s happening with house prices in your area with the BBC” It’s on the left hand side of the home page.

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  • The bottom line is that far too many would-be FTB’s are priced out, leaving the market dependant on BTL speculators.

    They in turn need house price inflation to outstrip wage inflation by a margin of at least 2% just to break even. That is obviously unsustainable in the longer term.

    When the BTL brigade stop getting adequate returns, they will stop buying – although that may not happen overnight. When that happens, prices will be forced down towards levels that FTB’s can afford. When that happens, many BTlers will try to offload, and many FTB’s will hold fire until prices have stabilised – result: A crash.

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  • “purchases are expected to pick up again in the next quarter”

    Highly unlikely; hoping for improvements in the October to December Quarter is really clutching at straws. In the last eight years, the overall average price in the quarter Oct – Dec has only once been higher than in the previous quarter (Jul – Sep). One time it stayed about level. The other six times prices went down (but not enough to wipe out the increases from earlier in the year, of course).

    Su – there are pros and cons to all the house price indices, including the Land Registry, so the best advice is to read up on each of them and then weigh them up against each other. I’d certainly agree that the Rightmove figures tell us the least, particularly because they don’t take into account the times when sellers actually drop their asking prices (I believe?), but even this measure can be a useful, forward-looking guide as to sentiment. Certainly, if the Rightmove figures start going negative, we’ll definitely know the battle has been won! Land Registry does do actual sales as you say, but it isn’t mix-adjusted, so if a particularly high number of mansions sell one month, and then the next month it’s all terraced houses and flats, the overall average will be very skewed.

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  • Thanks for the extra advice, dugmug. Though doesn’t the Land Registry actually sort property into detached, semi, terraced & flat, which would lead to less skewing than in Scotland where all the figures are lumped together as you suggest?

    I’ve been following a particular type of property in a particular area within a certain price range which means I can judge more accurately what is happening in the housing market, at least in this small area. I’ve seen many properties stay on the market for ages, some eventually sell, some have to undergo a price adjustment – normally offers over to a fixed price just slightly above the offers over price, which is essentially an expected price drop but gives Rightmove the satisfaction of recording rising prices.

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  • Yes Su you’re right, if you look at the average price by breakdown between detached, semi-, terraced and flats, the picture should be truer than looking at the overall figure. Although also worth noting that there seem to be more high-value properties selling even though overall number of sales is lower – to some extent this would be expected if prices are rising anyway (with more properties achieving valuations in the higher price bands as valuations go up), but it seems to be more pronounced than that; the problem here is that high value sales alter the overall average to mask what is going on lower down in the market.

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  • dugmug. I so totally agree with you. I don’t know much about the situation south of the border, but there have been so many new housing estates springing up in Scotland. Most of this housing is more expensive than the ex-local authority housing or 2-bed cottages which used to make up most of the housing supply. Having said that, one of my friends sold his (ex-LA) house nearly 9 years ago – a similar one in the same area was recently advertised at more than double what he sold his for.

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