Friday, October 31, 2008

another take on the Nationwide figures

House prices fall by more than average annual pay

House prices have fallen in the past 12 months by more than the average Briton earns in a year, new figures show. The average home is now valued at £27,000 less than in October last year, while the national average salary is about £25,000. The 14.6% annual decline is the biggest since records began; the number of sales looks likely to also fall to record lows. The fall in prices has thrown nearly half a million homeowners into negative equity but there are fears that nearly two million more will suffer the same fate.

Posted by little professor @ 12:00 AM (985 views)
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15 thoughts on “another take on the Nationwide figures

  • Oh good, so they’re back to almost 6.5 times average salary then. Some way to go yet then.

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  • Trust you to post some delicious bear food LP!

    I found this bit interesting:

    ‘Economists warned homeowners against pinning their hopes on expected interest rate cuts to refuel the property market. Ed Stansfield, of the consultancy Capital Economics, said that there would be no recovery in prices even if rates fell to as low as 1 per cent. “With unemployment rising and expectations that house prices have much further to fall still widespread, lower interest rates will not stimulate housing demand.”’

    If the assertion that 1% interest rates will not ‘fix it’ (as in Bob the Builder) then why not concentrate on defending our currency and the cost of imports?

    Anyway, back to the headline: I might make a printout of this and keep it for the next property bore who upsets me.

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  • qg,

    Logical fallacy: 1% interest rates won’t “fix it”, but keeping rates at 5%+ could make things a lot worse. Different countries have different needs: Iceland this week hiked rates to 18% to “defend the currency”, whereas in the 1990s Japan dropped its rates to 0%. Cutting rates didn’t fix it for Japan, but I don’t know of any examples where keeping interest rates high has solved the problem.

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  • The priority is to help existing people with mortgages rather than kisck start home buying IMHO, so an interest cut would be welcomed. The fact the £ is going down is facts: other countries think the UK will be dearly affected by the crisis. The £ does not have the advantage of being a world currency reserve like the $. The advantage though is that hopefully it means the country can start saving again and get back on its feets. Imports will come sharply down cos people dont want to spend apart from food and essentials.

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  • drewster

    If the dropping them won’t fix the problem, why drop them ?

    As I see it all you do is import inflation.

    I think it’s clear to most that despite it’s recent gain in strength the dollar has alot of problems behind it due to the state of the US economy.

    Alot of people question the strength of the Euro given all the ‘recent entrant’ countries having to be supported by the strong few.

    There is a negligable interest rate return if Japanese Yen is bought.

    Therefore if the UK demonstrated it’s preserve of Sterling by maintaining higher interest rates wouldn’t that invite alot of buying of Sterling and maybe more long term investment.

    If interest rate cuts aren’t being passed on by the Banks I don’t see how it’s really making things worse.

    Perhaps we just plough on with the assumption that if we overborrow we’ll get bailed out.

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  • str 2007 – please can you explain your phrase ‘recent entrant’ countries. Do mean EU recent entrant countries rather than Euro? If so I would like to challenge this comment as the economy of Poland is stronger than Spain and France – and the population of Poland is the majority of the population in the ‘recent entrant’ countries. The Polish Zloty is far more stable than the Pound.

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  • WHAT NOBODY SAYS IS THAT IF AVERAGE HOUSE PRICES HAVE FALLEN £30,000 IN A YEAR – from £186K to £158K – THEN THOSE HOUSES WHICH WERE WORTH £372K A YEAR AGO – ARE NOW WORTH ONLY £312K !!!
    (ie) for every £186K of house value the price has dropped £30,000 .

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  • mountain goat says:

    Last month they spoke of a “reduction in the rate of falls”. I think it just accelerated again.

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  • stillthinking says:

    There is a return if you buy yen because the intrinsic value has gone up irrespective of return. As the Japanese government are desperately providing stimulus packages I guess that they are expecting a collapse in the export industry, so whether the yen maintains such a lofty value remains to be seen.
    Looks as though there is a global squeeze on savers though.

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  • I wonder what David Smith would say?

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  • Crashwatcher
    Fair comment, mine was just an observation of general opinion The EU has grown alot in recent years, I can’t help thinking Poland is the exception to the rule (and would it have such a strong economy if it wasn’t for the support it gained from the EU).
    Anyway I think you know what I was getting at.

    stillthinking
    Yes there would have been a return on the Yen due to it’s increase in value but has part of that increase been due to the anticipation of us dropping our interest rates.
    I guess what I’m talking about is – all things being equal – is it better in todays climate to have a strong currency or a weak one.
    Due to the instability throughout the entire system I suggest a strong currency is better.
    We don’t know how long this whole situation will last, we can always make the currency weaker quite easily, but IMO this is not the correct thing to be doing now.

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  • How to double your salary by not buying a house!

    (or how to work for absolutely nothing having done so?)

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  • I think we should look at gross pay, if you are earning £25,000, you will take home only £18,157.60 (including student loan repayments, £19,057.60 ex SLC).

    The goverment is going to have to increase taxes at somepoint soon because of more goverment borrowing, and reduced revenue from income tax (more unemployed), corporate tax (struggling companies, e.g. banks), stamp duty (stalled housing market), VAT (Consumers consuming less). This will be combined with public service cuts, it’s not going to be an either or situation.

    This will make it even harder to service debts. E.g if I took out a loan on the expectation of my income, and that income reduces due to paying more tax.

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  • Wappers – I agree that the Government will need to raise taxes probably sooner rather than later – if we take income tax then employees are the ones who will be hit hardest because there is little or no room for manoeuvre – self employed/business people have more scope with allowances etc… Lets hope we dont get a raft of new indirect taxes.

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  • Is there still some HPI included in the current YoY figures, i.e. have we had a full 12 months of falls yet?

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