Sunday, March 15, 2009

David Smith fights back

Could house prices really fall another 55%

It can be a good sign that you are approaching some sort of turning point when forecasts start to look bonkers. City firm Numis claimed this week that house prices could drop by another 55%. Hyperbole grabs headlines. I have to say I find it unconvincing. Even at current prices, interest in the market is increasing. RICS says numbers of new buyer inquiries rose in February for the fourth month in a row. At the same time, surveyors are reporting an upsurge in valuations as potential sellers look to put their homes on the market. Many decide not to proceed, though; as a result, many estate agents have a shortage of properties to sell. Buyers are keener, but face significant financial constraints. Sellers do not want to sell in a weak market. Spring is here, but it doesn’t yet feel like it.

Posted by little professor @ 01:13 PM (2761 views)
Please complete the required fields.



17 thoughts on “David Smith fights back

  • Smithy was always a crash denier. He hasn’t changed his tune.

    Funny how the Numis report is backed by statistical evidence, but his assertions that the housing market ‘might be picking up’ is based on anecdotal ‘skip index’ evidence.

    Reply
    Please complete the required fields.



  • “Prices will certainly fall more, but are we going to see an average house price in the UK, on the Nationwide measure, of £66,000 compared with just under £150,000 now? No.”

    That seems quite a reasonable argument to me. Much as I’d like to see £66K houses, I don’t believe that it will happen – if only because infation will take off.

    Reply
    Please complete the required fields.



  • quiet guy, inflation won’t make houses more expensive. In fact, think about how much harder it will be to pull together a deposit.

    The only way we’re going to get house prices rising again is real wage increases – and they will be hard to come by in a stagflatinary environment.

    Reply
    Please complete the required fields.



  • House prices in many areas are not coming down because there is a feeling that there are many cash buyers out there who are led by comments made by many, that as the return from their savings are so low means that they are better off buying property and then renting them out (assuming you can a tenant easily in this market). They are told by the so called “experts” that they will make a capital profit to compenstate them for their investment but fail to say how long before they realise this capital profit. Because of this in my neck of woods many cash buyers are showing interest to purchase of property and some are actually may be paying over the odds at present. However there are may properties on the market not sold becuase they are overpriced.These poor newcomers do not understand the fundamentals of renting property or understand the concept of opportunity lost. A 3% or 4% p.a return on capital invested is better than a capital depreciation of 20% over the next 3 years assuming that the rent covers the loss of interest (oppotunity lost).

    What would be interesting to know is that, how many purchasers with £150k to £250k out there who are at present looking for properties. If someone can provide these figures it would be useful. What happens once these peoples demands have been satisfied, what happens then when banks are going to lend reponsible multiples of income ie. say 3 or 4 times (Max.). 4 times is being very generous.

    Therefore as other writers have said before, average earnings(£25000) times 4 = £100000 + £25000 (Deposit) = £125000, therefore once the Nationwide House Price Index drops to £125000 as average house price then perhaps we may have reached the bottom but it always gets worse. Time will tell.

    Reply
    Please complete the required fields.



  • As evidence of an upturn in the housing market, Mr Smith mentions an upturn in new buyer enquiries and an increase in people having their houses valued. He makes no mention of the one indicator that really matters – actual sales being completed and houses changing hands! Just another delusional ‘green shoots’ article!

    Reply
    Please complete the required fields.



  • AND ON AND ON IT GOES AND ON AND ON I GO …..HOW CAN HOUSE PRICES RISE? WHERE WILL THE UK GET 750 BILLION A YEAR PLUS (borrowed 2007 from overseas to finance property market)? The failure to regulate mortgages and keep loan to income ratios led to property prices inflating 190% in less than 10 years, the kind of rise that should have taken 40 years in line with wages. The UK could not afford to support its inflating property bubble and in 2000 borrowed 6 billion from overseas but still the unregulated and irresponsible lending continued fueled by the BTL markets , investors etc and by 2007 the UK had to borrow over 750 Billion from overseas to help finance its mortgage market that was spiralling out of control.

    WHAT I AM SAYING IS OBVIOUSLY NOT BASED ON FACT TAKE A LOOK AROUND YOU AND ASK YOURSELF WHY THE BANKS ARE BANKRUPT AND THE UK BROKE?

    Of course there were other factors but the BOE and FSA have all pointed to the mortgage market (just as in the US and their property prices only inflated 75% now down 50% and still falling). The BOE and FSA have said lending will be regulated and loan to income ratios returned to sensible lending at around 3 x’s one income.

    THERE WAS AN ARTICLE IN THE GUARDIAN TODAY ABOUT THE FSA PRODUCING A HARD HITTING BANKING REVIEW THIS WEEK – the article spoke about irresponsible loan to income ratios yet only mentioned 4 x’s not 6 or 7 x’s . So if an article today can speak of irresponsible lending practices that MUST STOP and relate it to loan to income ratios of 4x’s income, HOW ARE PROPERTY PRICES GOING TO RISE? THINK ABOUT IT?

    Property prices HAVE TO now fall in line with incomes.
    The UK can’t blame the government for irrepsonsible lending and failing to regulate the lenders and then expect the lenders or the government to all a return to lending anything like what the UK has seen the past decade.
    RECOVERY means sensible lending from now on, bringing property prices in line with wages, loan to income set at about 3 or 3.5 one wage and dealing with the consequences of a decade of irrepsonsible overlending.

    HOW CAN ANYONE BELIEVE THAT WE CAN RETURN TO THE VERY LENDING LEVELS THAT BROKE THE BANKS WHEN IT IS GOING TO TAKE THE UK 30 YEARS TO PAY OFF THE DEBT INCURRED BY FAILING TO REGULATE THE MORTGAGE MARKET ?

    THE OVERLENDING MAY WELL HAVE LED THE UK INTO BANKRUPTCY…YET ALL PEOPLE WANT IT SEEMS IS FOR THE GOVERNMENT / REGULATORS / LENDERS TO CONTINUE DOING WHAT BROUGHT THE UK TO ITS KNEES!

    HAS THE WHOLE COUNTRY GONE MAD?

    Reply
    Please complete the required fields.



  • why would anyone listen to this guy, he has been so wrong on everything?

    Reply
    Please complete the required fields.



  • I emailed david smith about 5 years ago.. about the 3 times income limit, how crazy it was that best case scientists anbd engineers could not afford houses on this basis. no reply of course.

    Reply
    Please complete the required fields.



  • @sybil13, excellent..

    Reply
    Please complete the required fields.



  • paranoia blue says:

    Sybil13
    I luv you!!

    Reply
    Please complete the required fields.



  • watchingthewheels2 says:

    whoops…….wrong comment to wrong article….sorry.

    Reply
    Please complete the required fields.



  • £66,000 average price would mean quality first time buyer properties for £30,000 to £40,000 – it won’t happen, too many takers before that level is reached.

    Reply
    Please complete the required fields.



  • So who is more experienced David Smith or Numis? Look in the USA £ 66 000 is a fabulous amount of money to get for a house… we are talking about the most developed country of the planet.

    Reply
    Please complete the required fields.



  • dohousescrashinthewoods says:

    The only thing bonkers here is subjecting yourself to reading the article.
    I now even avoid reading his headlines.

    I find the clarity of my thinking is damaged as soon as I open that page in the Sunday Times and I have to carefully focus on reading the other articles without getting infected by Smith’s woolly “nonsense poems”.

    Reply
    Please complete the required fields.



  • LOL Smith does not realise that for house prices to rise again they would have to double in 5 years.

    Think about it Smithy. Will we all be earning 4 times what we are now. I will give you some time to do the math and some fundamental thinking.

    Reply
    Please complete the required fields.



  • Love the title “David Smith farts back.”

    Reply
    Please complete the required fields.



  • inflation is eating my savings says:

    @13……..I find the clarity of my thinking is damaged as soon as I open that page in the Sunday Times

    That is perhaps the purpose. “Don’t worry about all this economics stuff- it doesn’t make sense, unless you are really smart. Don’t worry about all that bad news, just leave it all up to us, we weren’t wrong before, it was just a technical thing”
    That Anatole chap is yet more stodgy.

    ‘ware the stodge.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>