Tuesday, January 15, 2008

London crashing

House price index

Most areas of the capital experience a fall in average asking prices. Average prices of prime London property for sale finish the year 13.0% higher than in December 2006, although significantly down on the yearonyear peak of 31.2% witnessed in the boomtime of June 2007. Prime country property for sale in the South is hit hardest, with month on month prices down 1.9% in the South East. Rental values of prime London rental property decline in December, down 0.1%, due to unprecedented unrented stock and weakening corporate demand. HURRAH!!!!!!!!!!!!!!!

Posted by confused76 @ 10:37 AM (1810 views)
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22 thoughts on “London crashing

  • LONDON RENTALS
    Stock levels remain buoyant, with significant rental property development taking place across the capital contributing to the rise in available
    rental stock. In addition, many homeowners struggling to sell their property may have been keen to rent their property out until a more
    suitable time to sell arises. The recent ‘credit crunch’ has led to a slowdown in corporate recruitment in the capital, eroding a key
    proportion of the demand historically seen for prime rental property.
    Central London is proving to be the most resilient of all the prime London regions, being the only area to report an increase in rental
    values, although only marginally up, at 0.3% monthonmonth.
    Given the high volume of rental supply on the market at the moment, we do not expect rental values to increase over the coming
    months.

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  • Still a long way to go before we can really start talking about a crash.

    I’m very disappointed with the double digit growth; it’s isn’t good news. Hopefully 0% times are ahead.

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  • Hpwatcher
    Watch the report again. Price growth from June has been ZERO NADA NIL or actually a small drop!! If you finish the year at 13% from June 30% that means you have been losing ground in the second half, dont you?
    The december figure of 0.1% or 1.2% annually says it all (especially if primelocation, an EA, is running the numbers)
    I suggest you hpwatch forward not backward
    Also watch the chart in the report… where do you see price growth???? please tell me

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  • voiceofreason says:

    But let us not forget immigration, housing supply shortage, demographics.
    Surely we are not building enough houses ?
    According to Gordon Broon we need to build 3 million more homes.

    Let us not lose sight of what the industry was saying but a few months back…

    and now we get “Given the high volume of rental supply on the market at the moment, we do not expect rental values to increase over the coming months”

    Just proves our point. That high prices were caused by over supply of credit.

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  • tyrellcorporation says:

    @HPWatcher ‘I’m very disappointed with the double digit growth’

    yeah but what does the slow-down curve look like? It may be accelerating down from summer 2007.

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  • “Prime country property for sale in the South is hit hardest, with month on month prices down 1.9% in the South East”

    Folks -1.9% monthly = -25% annually (compounded)

    In Surrey, Kent, etc.!!!!!!!!!!

    This is a CRASH. Period, no discussion. Lets have the celebration party!

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  • Sitting Tight says:

    Bye Bye nasty smug ‘ I value this property at….’ estate agents. Get a real job. Party on

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  • ”ZERO NADA NIL or actually a small drop”

    @confused76 – I know it’s good, but still isn’t the same as either a crash or a significant drop – which is what we all really want to see. I am still looking for clear and unambigious indications that things are changing. So far the signs are good, but still not the watershed that will have the EA’s & VI’s in retreat. Perhaps the headline got me over excited; I was hoping to see a drop of at least 1-2% reported in the article!

    Hopefully the next few weeks will really see things hotting up….or cooling down.

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  • ”This is a CRASH. Period, no discussion. Lets have the celebration party!”

    I really hope so!

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  • Guys
    It sounds some of you may be misreading the price index chart on page 1.
    Those are actual prices (not price growth). Price index in prime london is down from 116 to 113, which means prices are down 2.5% in 6 months, or 5% on an annual basis. This is a CRASH!

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  • hpwatcher

    I am really confident about the downtrend to continue, given the large stocks of unsold properties that have to clear out, also feeding into an increase of rental stock (as frustrated sellers decide to hold on and rent out) which in turn is killing the rental market and the BTL demand as a result. It is a self reinforcing down spiral that I do not see what in the world can stop

    Any view on this?

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  • The stock levels graph on page 3 is my personal favourite. ‘Supply and demand, supply and demand’… well for every 100 houses for sale in December 2006, in December 2007 there were 175!! Oops. Can’t see demand increasing any time soon, so some of those sellers might be getting a bit twitchy by March 2008…

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  • Once the rot sets in, that will be it. All the retailers are in recession now – year on year sales down (relative to RPI ).
    The engine of growth (i.e. debt) has run out of steam, and now people in the UK will have to start earning their money again instead of just borrowing it.

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  • Sold My Soul To The Never Never Never says:

    Confused 76 – Comment 6 – Does that also mean that Prime Country falls in Berkshire if compounded annually would be nearly 50%!!

    Based on the fall of of 3.8% in December.

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  • Simon_trinity says:

    “Prices of prime country property for sale fall by an unprecedented 1.3% between November and December, with asking prices across all regions in significant decline.”

    Unprecedented. Significant decline. And all this from an estate agents’ agent. Sounds like the real thing to me!

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  • 7. hpwatcher said…
    I am still looking for clear and unambigious indications that things are changing.

    When I look at the chart, I see a graph that is not erratic (i.e. a few bad months are NOT coincidence. It is not fluctuating crazily), and 6 months of – admittedly notconsistently lower values, but certainly enough poor performance over a sufficiently long period ot have knocked the confidence out of the market. Add to this the reduced deals on the market and the reduced LTVs (this is a BIG one!!), and it is inevitable. This year I think we will see prices falls doubling month on month.

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  • @C76. Can’t see new ‘unsold to rent’ properties denting the rental market. These are either currently BTL or owner-occupied, and if they’re taken off the sales market they are likely to remain owner-occupied or BTL (owners have to stay put, or landlord has to find tenants again).

    The majority of sellers will have a large amount of equity, so they are not really taking a loss – sale prices just nominally lower than at the peak of the market in Summer 2007. The year that was.

    I’m predicting one of two scenarios:

    1. Declining real disposable incomes lead to an agonising and slow long-term HP decline in prime areas, with a much steeper effect for city centre new build flats which have always been priced at the top-end for a limited market of younger singletons and couples.

    2. The wheels fall off. Faltering HPs stop MEWing resulting in reduced discretionary spending. The millions of jobs created in the ‘Service Sector’ are finally seen for what they really are – a modern luxury which can no longer be paid for. Restaurants and hotels close. Poles go home. Less demand for houses. Rising unemployment results in more house reposessions, and at auction the price drops through the floor. Debt that has accumulated all over the Western world is called in and cannot be repaid. Financial layoffs, as it becomes clear that derivatives are just another form of debt creation. The huge public sector deficit (biggest in Europe) which has always been unsustainable finally leads to mass public sector layoffs. More repossessions. More ‘luxury flats’ at auction for a fraction of their sale price. I buy a yacht and sail around the Caribbean until it’s all over.

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  • george monsoon says:

    You know its a crash when the flagship properties are being slashed in price.
    The whole article stinks of VI spin.

    No rise for the second half of the year, in other words.. a CRASH..

    Its going to be the same for the next two years, with the odd VI chasing the market down, but publishing some rose tinted reports.. Well I for one am glad its arrived. When the graph drops significantly below the average curve, thats when I will jump in.

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  • this is the beginning of an exponential down turn

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  • I agree with you george, this is an EA Mayday to chase the market down.

    No house sales = no commission = repossessed BMW and kids back to state school.

    What gives the article away is,

    “agents continue to urge sellers to be realistic in order to achieve a sale, forcing average prices down and leading to the decline in prices”
    and
    “agents are urging vendors to be realistic and drop prices in order to secure a sale now that conditions are much better suited to buyers rather than sellers”

    I do believe that C76 is right to chuckle though, the crash has well and truly started!

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  • And with every further month, the year-on-year figures will go down, and down, and down, and down and down. They WILL be negative by the time we hit April figures. Then with no growth, you won’t have anywhere to hide!

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