Sunday, April 5, 2009

Merryn’s back with some common sense on the housing market

Merryn Somerset-Webb: Investing

She says a lot of commentators and contacts in the industry believe the market has hist the bottom. She explains why they are misguided.

Posted by othello @ 10:33 AM (1185 views)
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8 thoughts on “Merryn’s back with some common sense on the housing market

  • I must quietly point out that Merryn has a vested interest, being a long-term renter. Nevertheless her analysis of the market has been consistently perspicacious, and I look forward to reading more from her when she returns to MoneyWeek magazine.

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  • “The truth is that all real bear markets tend to offer the unwary investor one last opportunity to lose money.

    The summer of 2009 is probably that opportunity this time round. ”

    Absolutely spot on. Go for it you fools. Fill your boots.

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  • At the foot of the article there appears the statement; ” The views expressed are personal”. Probaly what should follow is; “the views of estate agents, banks and building societies, and property developers are Not personal”. I know which of the two I would trust.

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  • but…she is lovely!

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  • I read othello’s headline in disbelief. I thought the first word was “Mervyn’s”.

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  • MSW is a reliable voice is the vested interest media fog.

    Hoever she forgot to mention Nationwide and Halifax data don’t contain auction data, and I’m pretty
    sure neither does Land Registry ?

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  • doomwatch,

    That’s right – incredible though it may seem, the Land Registry house price index doesn’t include auction sales! The Guardian picked up on the story last November:

    Guardian:
    Government house price data ‘flawed’

    The Government’s official house price index, produced by the Land Registry, has been accused of misleading homebuyers and policymakers after it emerged that it excludes repossessions and auctions on the grounds that they do not reflect the ‘full market value’ of the sale.

    The latest Land Registry figures, published on Friday, showed a 10.1 per cent annual fall in prices across England and Wales, a considerably more benign figure than the indices from Halifax and Nationwide, which reveal prices falling by 15 per cent and 13.9 per cent respectively.

    In the past the gap between the figures has been attributed to time-lag differences. But concern is growing that the Land Registry figures, regarded as the ‘gold standard’ of house price data and used by the Bank of England in setting interest rates, may be fundamentally flawed, as repossessions are ignored.

    More than 45,000 repossessions are expected this year – around 6 per cent of all property sales – and several economists have forecast lenders taking the keys back on as many as 100,000 homes in 2009. The previous record was set in 1991 when the number of repossessions topped 75,000.

    A spokeswoman for the Land Registry said: ‘Repossessions are excluded as they are “commercial” sales and do not represent full market value.

    ‘Other surveys are based on sample sizes or mortgages or asking prices and so will reflect these differences in their results. The [Land Registry] House Price Index uses a sample size that is larger than all other statistical measures available.’

    But critics argue that Land Registry data is giving a false view of the property market in many of Britain’s urban centres, where savage price falls in recently built apartment blocks have been driven almost exclusively by repossessions. The price declines are also failing to appear on popular property websites used by buyers searching ‘sold prices’, as the data feed comes from the Land Registry.

    Housing expert Henry Pryor said: ‘It means the figures from the Land Registry are just inaccurate. Repossessions make up a significant part of total sales right now and will be making up an even greater number of transactions in the future. Excluding auctions is even harder to justify. Auctions are the closest you can get to the definition of open market value.’

    Land Registry data also provides the basis for ‘Automated Valuation Models’ widely used by major mortgage lenders. During the property boom, lenders began basing mortgage decisions not on traditional – and expensive – valuations by surveyors, but on automated ‘comparables’ generated using Land Registry data feeds instead. Pryor said that AVMs were becoming severely compromised by both the lack of recent comparables and the exclusion of repossessions.

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  • You can’t get a truer picture of market value than an auction. Looks like the Land Registry would rather trust a Poxtons “valuation”.

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