Monday, Sep 28, 2009

Dead cat flop

Land Registry: August -0.1%

The data for August shows a fairly flat market with a monthly house price change of -0.1 per cent. The average property in England and Wales is now worth £155,968.
The annual rate of decline is continuing to slow with an annual movement of -9.4 per cent. This is up from a low of approximately -16 per cent experienced in February this year.
Property transactions averaged 41,911 sales per month in the months March to June 2009. In the same period a year earlier,
the average was higher, at 60,997 sales per month.

Posted by phdinbubbles @ 11:37 AM (4706 views)
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32 Comments

1. little professor said...

This is the turn. Expect full crash speed to resume towards the end of this year.

Monday, September 28, 2009 11:54AM Report Comment
 

2. mark wadsworth said...

This is strange - for the past couple of years, HMLR figures have tracked Haliwide figures with a three month delay. So we'd expect HMLR's August figures to be much the same as Haliwide's June figures.

Monday, September 28, 2009 11:59AM Report Comment
 

3. mystie010 said...

That would be really good if it does - that would really cheer me up!

Monday, September 28, 2009 12:00PM Report Comment
 

4. Uncle Tom said...

There is something very odd here..

On page 4 it states that the annual fall in London prices is -6.2%

On page 11 it shows London price changes borough by borough

Only three boroughs are showing an annual price fall of less than -10%, and only one has seen prices fall by less than the supposed average of -6.2%

..very strange!

Monday, September 28, 2009 12:08PM Report Comment
 

5. uncle tom said...

Just posted a comment without entering my password..;(

Compare London annual average data (Page 4) with Borough by Borough annual data (page 11)

- Doesn't stack up..

Monday, September 28, 2009 12:10PM Report Comment
 

6. jack c said...

The overall volume is down by approximately one third for the corresponding period last year and as debated previously the volume in the market is having an impact on the figures.

I'm inclined to agree with LP @ 1 and expect to see the Nationwide/Halifax graph resume a downward path

Monday, September 28, 2009 12:19PM Report Comment
 

7. str 2007 said...

Devils advocate here
It's been said here before that it's impossible for the government to support house prices - this has been proved to be incorrect as they have actually managed it (at least as far as the various surveys would suggest).

I am still bearish longer term however, providing they keep printing, house prices are likely to remain stable.

For me the drop will onlu occur if
1/ They are forced to stop QE/printing

2/ Interested rates are forced up and banks maintain present margins (ie mortgages go up with base rates) afterall they could absordb some increase in base rates.

3/ There is a SIGNIFICANT & SUSTAINED rise in unemployment by that I mean seeing the monthly numbers markedly accelerating and the total hitting 3.5 - 4 million.

Without any of the above I suspect the market will go stagnant and move sideways with enough actual demand being catered for by enough actual supply. (IE perhaps the speculation taken from the market but sellers lookinng for near 2007 levels).

Monday, September 28, 2009 12:39PM Report Comment
 

8. tudorian said...

anecdotal stuff:-
Seeing more 'for auction' signs in front gardens recently. 3 new ones noticed on my way to work this morning.

A friend's offer for a house fell through last week (offered the asking price!) because the seller could not find find anywhere within his budget. Its the second potential purchase that he's lost through seller problems in a month.

The market seems to be locked now, only one way to go this winter...

Monday, September 28, 2009 12:48PM Report Comment
 

9. Andy H said...

Uncle Tom is right.

Also, of all the counties/unitary authorities and metropolitan districts (excluding London) only 15 show a rate of decline of less than 10%, yet the quoted decline in England and wales is -9.4%. Either these 15 areas have been selling an awful lot more houses than the rest of the country or the 9.4% figure is a bit wrong.

Monday, September 28, 2009 12:57PM Report Comment
 

10. tudorian said...

@ str 2007

I don't know if the dramatic rise in houseprices / sales in the last few months were caused by QE.
Forgive me if I'm wrong, but bank lending is still at woefully low levels, and nothing like enough enough to sustain a proper market in a country of 65million (ish). Infact, it seems to me that the reverse may be taking place .. more QE = less lending.

Mortgage interests rates are low. This should be 'freeing' up Joe Bloggs's money to be spent on TV's iPods etc. I don't know how retailers are doing, but in my local very new and modern shopping mall (Bristol's Cabot Circus / Merchants Quarter) there are noticeable empty retail units. Money saved through mortgage lending is being saved or paying off existing bills, credit cards.

I don't know why the DCB was so strong, it took me by surprise, thats for sure, but a stagnant market will not suit anybody and the Government can change policy, and effectively pull support for the housing market in an instant if macroeconomic factor demand it .

Monday, September 28, 2009 01:08PM Report Comment
 

11. Smugdog said...

No interest rate rises until the begining of 2011 at the earliest. Then they will be small as to not casue too much reaction. The markets will take a well deserved rest until then, but after, the human brain, having so easily forgot the past, will resume the fear and greed cycle at a pace. It's all happened before and will happen again.

Monday, September 28, 2009 01:09PM Report Comment
 

12. smugdog said...

No interest rate rises until the begining of 2011 at the earliest. Then they will be small as to not casue too much reaction. The markets will take a well deserved rest until then, but after, the human brain, having so easily forgot the past, will resume the fear and greed cycle at a pace. It's all happened before and will happen again.

Monday, September 28, 2009 01:10PM Report Comment
 

13. uncle tom said...

str 2007,

1) QE is currently devaluing Sterling at approximately 1% per month. If it continues for much longer, it is likely to provoke a currency crisis, as far too much of our debt is owed overseas.

2) But if they stop QE, interest rates will have to rise sharply to draw in the funds necessary to cover the budget deficit.

3) Unemployment has been rising steadily, and there is very little sign of job creation.

4) The number of empty properties coming on to the market is far in excess of the number of first time buyers.

5) The numbers seeking to upsize their living arrangments is far smaller than the number trying to downsize.

6) Too much property is valued too highly. When long term vendors see that the market recovery has stalled and turned, their patience will start to run out, and they will cut their expectations.

It is inevitable that interest rates will rise, and if that does not happen in an orderly fashion, we could see them forced up dramatically, much as happened in 1988. Coupled to falling house prices and continuing growth in unemployment, market confidence will plumb new lows.

This is the end of The Summer of Delusion

The next chapter is about to reveal itself...

Monday, September 28, 2009 01:11PM Report Comment
 

14. jack c said...

@ smugdog - "No interest rate rises until the begining of 2011 at the earliest" - please expand upon this statement and how you arrive at such a conclusion?

Monday, September 28, 2009 01:14PM Report Comment
 

15. smugdog said...

No rises till June 2010, Labour simply will just will not allow (at any cost). 6 months for the new Powers to settle in (without being seen as the wicked bad boys). Simples.

Monday, September 28, 2009 01:21PM Report Comment
 

16. jack c said...

BBC are covering the story but it's currently stuck in the business section under other top business stories

House prices see 'slight decline'

House prices in England and Wales fell very slightly in August, according to the Land Registry.

Prices dropped by just 0.1%, or £202, from July to take the average home price to £155,968.

That was 9.4% lower than in August 2008, a continued slowdown in the rate at which prices have fallen.

"The annual rate of decline is continuing to slow... from a low of approximately -16% experienced in February," the Land Registry said.

New trend?

The Registry's figures add weight to recent suggestions that this year's revival in both prices and sales may be running out of steam, at least over the summer.

Last week, HM Revenue & Customs reported that there had been a small drop in the number of property sales in August across the UK.

And the Council of Mortgage Lenders reported a drop in the amount of mortgage lending last month compared with July.

Meanwhile, the number of new mortgages approved but not yet lent by members of the British Bankers' Association also dipped in August.

One month's figures do not necessarily indicate a changed trend, and August's numbers may have been heavily influenced by the summer holidays.

One large estate agency group, Knight Frank, said that the price of "prime" country homes was now going up.

The average price of a farm house, manor house or cottages rose by 0.8% in the three months to September, compared to a fall of 0.9% in the previous quarter, it reported.

"A surge in demand and a shortage of quality property on the market is the principal reason prices are increasing," said Andrew Shirley of Knight Frank.

"The big question now is how much pent-up demand from frustrated potential buyers remains in the system to maintain the momentum," he added.

London

The Land Registry said prices in the capital rose by 0.8% in August, the fourth monthly increase in a row.

"This brings the average property price in the capital to £310,640," its report said.

Prices in London are now only 6% lower than they were a year ago, but in other parts of England the decline over the past year has been steeper.

In the north-west of England prices are nearly 13% lower than a year ago, while in the East Midlands they are down by 10%.

Prices have fallen fastest in Hartlepool, where they have gone down by 24% in the past 12 months.

David Smith of property firm Carter Jonas said overall the Land Registry's figures were encouraging.

"The property market is surprisingly buoyant at present and sellers are achieving some attractive prices," he said.

"Just how long this will last, though, is by no means certain."

Monday, September 28, 2009 01:21PM Report Comment
 

17. str 2007 said...

Tudorian
My concern is that the Government effectively own a couple of big lenders and are putting the pressure on to lend.

Uncle Tom
Everything you're saying makes sense and hopefully you're right.

However none of us expected interest rates to plunge to 0.5% or for them to start QE.

We've been dashed once, is there another unexpected trick we've missed ?

Don't forget the statement 'At Any Cost'.

Monday, September 28, 2009 01:24PM Report Comment
 

18. jack c said...

@smugdog - thanks for the prompt reply - but you seemed to have rapidly moved the goal posts !

Monday, September 28, 2009 01:24PM Report Comment
 

19. mark wadsworth said...

It all depends where you live. Round my way, there is a huge estate of bog-standard 1930s 3-bed semi's or terraced houses, the asking prices have drifted down over the past two years from £400k to £450k to around £280k - £350k (depending on condition), and the number up for sale (and on sale for well over a year in some cases) has increased enormously. £280k for a bog standard 1930s semi may seem outrageously expensive ... oh, it is!

So I shall continue to keep Mrs W's nesting instinct at bay until prices have drifted down to £200k or something. Then we'll snap up two and knock them together!

Monday, September 28, 2009 01:24PM Report Comment
 

20. smugdog said...

@Jack c. Please share with me on how I have moved MY posts?

Monday, September 28, 2009 01:30PM Report Comment
 

21. jack c said...

smugdog

"No interest rate rises until the begining of 2011 at the earliest" - Monday, September 28, 2009 01:10PM

"No rises till June 2010" - Monday, September 28, 2009 01:21PM

Monday, September 28, 2009 01:36PM Report Comment
 

22. letthemfall said...

I don't really think QE has influenced house prices that much. Even long-term rates, which one would expect to be most influenced (banks buying up bonds) have tended to move up, and SVRs are around 6% I believe. Banks are buying bonds rather than lend to buyers. As to whether house prices are recovering, that seems to rely mainly on VI anecdotes and statistics which will be full of small-sample noise. I think what is probably true is that a fair few people believe the crash is over and still believe that they will make money by putting all they've got into one basket of bricks. But that doesn't put money into their grubby paws.

We seem to be in a kind of "phoney war" at present. "Recovery" is the watchword, markets (all of them) are rising, bankers are banking their "profits" and all the usual suspects are trying to tell us that buy buy buy is the only way. Yet we have just had the worst financial disaster in history and all those horrible things we were worrying about (CDOs, CDSs, etc) are stilling sitting there. Conclusion: all is well and back to normal? Come off it!

Monday, September 28, 2009 01:42PM Report Comment
 

23. smugdog said...

Point taken Jack c. If, as most commentators expect, a new Tory government will commence next June. I suspect that they will not endeavour to undo Labour's crimes by immediately raising rates.

Monday, September 28, 2009 01:45PM Report Comment
 

24. little professor said...

Hackney up 7.4% in one month alone. Yikes!

Monday, September 28, 2009 01:55PM Report Comment
 

25. mark wadsworth said...

As I was saying, these figures are the same as Nationwide's June Figures, which were y-o-y down 9.3% and m-o-m (seasonally adjusted) up 0.9%.

Let's ignore the monthly changes as "noise" and concentrate on the y-o-y.

Monday, September 28, 2009 01:56PM Report Comment
 

26. timmy t said...

Smugdog - reckon the Tories will be quicker than that - if they do it quickly after coming to power they can blame Labour more easily.

Monday, September 28, 2009 02:10PM Report Comment
 

27. sold out said...

smugdog,

I am sure that the labour party will do everything within their power to keep interests low, however have you not perhaps considered that forces outside of their control may eventually push IR upwards?
My gut feeling is their hand will be forced sooner or later.

Where has all the QE money gone?
Not into housing as demonstrated by the weakness of the rally.
Most i suspect has gone to prop up the public sector and avoid any cuts at all costs before the general election.

Monday, September 28, 2009 02:13PM Report Comment
 

28. letthemfall said...

It's mostly gone to the banks and into bonds, which may have had the effect of stopping yields sky-rocketing.

Monday, September 28, 2009 02:23PM Report Comment
 

29. Mrandmrs Chris said...

I had a quick look and I would say that despite what I want to happen, the statistics are going to start to look even better for a while, (in the South East and London at least). This is because after Lehmans went down last September, the financial world had a breakdown and lending, (including mortgages), almost ground to a halt, so no one could proceed with their sale. The figures from last year were terrible, and when juxtaposed with the previous year, (when the country was still on a comparable high), looked even worse. But then the government borrowed heavily and devalued the currency. The economy, which had essentially seized like an old engine, started to turn again. (Albeit in a juddery kind of way).

However, this optimism can only last for so long, as it is built on a totally false sense of security. You only have to spend a few days in Europe to get a feeling for how weak the pound is.

The demand exceeding available houses to buy in the South East is certainly giving everyone a false sense of recovery, in the housing market. This is being fueled by Estate Agents, who are allowing people to put in offers that far exceed the real value of the property, (and sometimes even their own valuations).

From what I am seeing here in East Herts, the same property is becoming available on the market, “selling” and then coming back (sometimes even with the same agent), who is allowing the cycle to perpetuate itself. The agents are all scared stiff of a repeat of early 2008 when some of them couldn't get any offers accepted, sending their projected revenue into the floor at exactly the same time as the banks stopped lending to everyone, and bankrupting several of them in the process.

Now there are buyers back on the market, Estate Agents are letting sellers accept offers from a buyer, who doesn’t really know what they can actually afford until they go to the mortgage company with their offer, and fall foul of a series of problems, (valuation not as high as offer, joint income only just covers mortgage, credit history even slightly tainted, not even the minimum LTV, self-employed). But while that is going on the Estate Agent’s projections stay healthy, they look highly competent, and SOLD signs make the market look as though it is recovering. They can also use the amount a house has “sold” for to motivate someone bidding on similar house to put in a higher bid, padding out their projections.

In my opinion, the house market “recovery” is being fuelled by a several factors. People being very realistic, who can afford to take a hit, or bought a long time ago, selling to highly solvent people, or those with a lot of liquid assets. Single people or couples without children, who believe in the double dip, sitting on the dreaded one bed flat, and want it off their hands before the second dip comes, preferring to take advantage of the record amounts of rental properties. There are repossessions, and equity release schemes, (which I believe also count as sales).

Finally there is a very Machiavellian factor from a seller that can afford to take the biggest hit, namely the new build sector. If my trips round all the new builds are anything to go by, the sector is booming. Their real costs are much lower (land + cost of building), and they are developing their less profitable sites to fund them while they wait for the more profitable ones to be worth releasing onto a recovering market, (hence a lot of new builds cropping up in cruddy parts of your local area like “cleansed land” or overlooking roads and railways). They are offering incentives like part exchanging buyers’ homes for a deposit, on terms less than they would achieve on the open market, (two sales from one if I am not mistaken). They will also lend 15% of the value of the house (at 0 % interest and repayable after 10 years), thus bypassing the LTV problem, whilst artificially inflating the sale price reported to the Land Registry. Also, they offer you an incentive to use their own Financial Adviser who will, of course, find you a mortgage enabling you to buy, (if not really afford), the new home. Sometimes, these houses are marketed by local estate agents as well, who also therefore have an incentive to guide you to the sale.

The government economists realise that, as a nation we derive a huge amount of security from our homes, (both psychologically and, these days, financially). When the housing market is in freefall, we panic, stop spending, and tend to cast about desperately for a new government. For them, the most vital thing at present is to make sure we feel secure in the value of our homes. The indicator that helps to fuel this sense of security is a thriving housing market. This sense of security is essential for the political future of the ruling party. So they are lying to us, and capitalising on one of the most reliable human traits there is; greed.

Buyers want the house for less, because the statistical loss of value is irrefutable, and they don’t want to buy a home only for it to depreciate instantly. The quantities of money we are spending are too big for that to make any financial sense (5% loss of value on a £250,000 home is £12,500), and the past 10 years haven’t prepared us for that psychologically.

Sellers want to get the maximum amount from their home, and Estate Agents are pandering to this by not encouraging realism. So desperate, ill-informed, or very naïve people offer more than a house is worth and a cycle starts, where often the house doesn’t sell, the desperation of buyers increases, and the seller’s delusion continues. Meanwhile Estate Agents stay afloat on revenues from one or two that complete against the odds, more completions for much reduced prices, repossessions, new homes marketing and good projected sales. It’s a classic confidence trick.

That’s no consolation for those of us who are trying to buy (and really sell), but it does explain the gulf between our experiences, and the nonsense being spouted by the government and the industry.

There are no “green shoots of recovery”, which is plain from the interest rate in your savings account, the exchange rates, the oil prices, government debt and public sector borrowing, and how much everything is costing you now, quite simply. The way that you waver over buying a cheap new jumper at the supermarket, demonstrates the caution we all feel. Our gut instincts are telling us the truth that the powers that be are trying to distract us from. It may not be as obvious as a 1930s style depression, and the government economists may be working overtime to manipulate figures to make it look better than it is, but the truth is that we are still in a technical recession, actually heading for a real depression.

To continue the engine evaluation, we have borrowed enough new parts to lurch to the garage, where the economic engine is going to need to be completely rebuilt. This rebuild is going to be even more costly than buying a new engine outright, but because we have borrowed so heavily just to get it going again, that isn’t going to be an option. It’s going to take a long time and cost a lot to really get the economy back on the road. And no amount of telling people that the engine is fine is going to stop them wondering why it can’t even get out of the garage.

Monday, September 28, 2009 02:34PM Report Comment
 

30. uncle tom said...

LP,

It's hard to work out exactly how many properties sold in each Borough, as the primary postcode areas tend to cross the Borough lines, but in the E8 part of Hackney there were only ten sales in the month - far too few to draw conclusions.

As Mark says, m-o-m numbers are very noisy in such a thin market. 3 month rolling averages, y-o-y, will be more informative

Monday, September 28, 2009 02:40PM Report Comment
 

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