Monday, Dec 21, 2009

Xmas ramping

Times: Ghost of Christmas Yet to Come has cheer on houses

The consensus was for a 10% fall in 2009. Since then, against most economists’ expectations, almost every housing market indicator has turned up. House prices have risen 5% year-on-year.Why, in defiance of economists’ expectations, has the housing market recovered? Unlike the 1990s, it was a lack of mortgage financing, rather than surging unemployment and rising interest rates, which caused the dip. Demand did not disappear, but was constrained by lack of lending. The British have a longstanding love-affair with housing. As a vehicle for saving, it has served us well over a long period of time. In a small, crowded, island it is likely to continue to do so. Prices are likely to rise by 5-10% in 2010. So, like Dickens’s story of Scrooge, this one has a happy ending.

Posted by little professor @ 01:04 AM (4645 views)
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11 Comments

1. alan said...

"Just as the Commentariat failed to see the recovery in prices that has taken place over the past six to nine months, it remains in denial about the coming 12 months".

In denial? The lowest interest rates in history and new government laws on repossession have helped to secure a facade of normality ahead of the general election.

Scrooge changes his ways at the end of the Dickens story. Unless this government repents of its wastefulness, our currency will suffer a landmark drop in status (downgrade). We are only "doomsters" because we are anticipating a situation where the government lives within its means.

I forecast Geoffrey Dicks' property chain will suffer hardship come the reckoning in 2010.

Monday, December 21, 2009 01:37AM Report Comment
 

2. wdbeast said...

"Geoffrey Dicks is chief economist of Novus Capital Markets, a member of The Times MPC and a member of the International Dickens Fellowship "

It looks like he will be spending a lot more time with his literary chums soon if we are proved right.

Monday, December 21, 2009 08:04AM Report Comment
 

3. mark wadsworth said...

*Sigh*

The UK is neither small nor crowded. It appears to be 'crowded' because of The Hallowed Greenbelt, as a result of which 90% of us live on 5% of the surface area (or whatever the stats are). In fact most people quite like living in the suburbs, different topic. It's the houses themselves which are 'crowded' because all the old folk in three bedroom houses expect young couples to make do with a colossally overpriced rabbit hutch or flat, rather than allowing them to build new ones. I tell you, the Home-Owner-Ists must really hate their own children and grandchildren.

*/sigh*

Monday, December 21, 2009 10:09AM Report Comment
 

4. techieman said...

Can someone explain to me why people that get it wrong when they say there will be falls, have any credibility left when they say there will be rises???

the consensus was for a 10% fall in 2009. yes - and on here the consensus was probably for higher % falls. It was pretty likely that the selling on the stock markets was overdone, and a rebound in those was likely to be correlated to by a rebound in HPs - at least for the indexes.

That Stock market rise is definitely faltering but may have one thrust up to complete and dumbfound the bears in early 2010. That co-indices with the rebound high in the HP indices

Monday, December 21, 2009 10:09AM Report Comment
 

5. estrader said...

These articles are always based on the same contradictory nonsense - High interest rates and tight lending criteria are responsible for property prices on the way down but it's a case of pure demand and supply when property prices skyrocket...it just doesn't figure.

Monday, December 21, 2009 11:00AM Report Comment
 

6. luckyjim said...

Season's Greetings Techieman,

Like most people, I predicted HP falls for the year. I changed my mind by March in response to zero interest rates, the mortgage protection scheme and quantative easing. I don't think I lose credibility for revising my position in response to these changes. I think those who dismissed each of these actions as futile now look pretty silly.

It may be 20-20 hindsight but Geoffrey Dicks has realised that this crash, with relatively few forced sales and good reasons for owners to stay put, is very different to the 90s crash with 15% interest rates and owners desperate to sell at any price. That is why the "Lifecycle of a Bubble" graph is a false god.

Monday, December 21, 2009 11:21AM Report Comment
 

7. techieman said...

Hi LJ - well maybe you just got Lucky :-).

I laid down my "predictions" in about November of last year i think, so i thought it was a good idea to do an annual review. As for the moves not being futile I agree (although i never predicted exactly how the bounce would manifest i did say that it would, quite a few months before it did) BUT in any other time these moves would have resulted in appreciation above the prior high. Therefore since the prior high hasnt been breached - despite all the work done - I think we are just in a perfectly normal move back off the top. To be honest previous to this i thought that the move down may just have been a counter-trend bear move to a prevaling bull. I think what has happened since, and really what amounts to a pretty anemic rally, bodes well for the bears.

Of course that could all be wrong, and the bear market could have been over in Q1, but thats not what i think.

We could discuss why IRs are or arent important - personally i remember (when i was inititally bearish) having a conversation here with someone who said that they thought the market couldnt rally even if IRs were reduced to zero. I said at the time that that was just plain silly - who would not buy when the cost of debt service was nothing??

Now we have had "zero" rates but they have not manifested themselves throught the chain of supply. I actually dont buy into them going up for quite some time either, but i still believe we are relatively close to the end of the bounce.

As for the graph being a "false god" i would agree - its not gonna play out that way .... well not exactly that way.

Have a good Christmas LJ and as they say from where i come from "stay lucky". :-)

Monday, December 21, 2009 01:15PM Report Comment
 

8. mr g said...

Bah, humbug!!

Monday, December 21, 2009 01:47PM Report Comment
 

9. will said...

Has everybody given up on the affordability issues?

The average worker earns about £25K. Stuart Law stated in an article recently that the average first time buyer now earns £50K.
This implies that the UK property is unaffordable for the majority of people in the country with many traditional first timers left out of the market. Home owners may feel smug in this respect, but they must remember that the market has ceased to function (by removing the lower rungs of the housing ladder). Just who will the current owners and investors sell their properties to when the need arises? An efficient market always needs new money.

So now the UK stands out as the only western property market not to fallen significantly and remained there. I think this has more to do with currency exchange rates than anything else, but this won't last and neither will low interest rates which are dangerously low ( what other weapons do the B of E have in their armoury?) Over the next year or two when the banks are tired of supporting sub-prime defaulting home owners, they will let open the flood doors of this impending housing crash. They have merely delayed the inevitable.

Monday, December 21, 2009 04:28PM Report Comment
 

10. tenyearstogetmymoneyback said...

Will

Unfortunately the answer at the moment seems to be someone who earns £50K a year.

Perhaps everyone is being far to impatient. As my user name implies during the 1990s things
panned out over a ten year timescale. As someone who spent ten years wanting to move but
not being prepared to sell at a loss I can tell you about the Zombie households of the 1990s,
estate agents puting random houses (including mine) in their windows to fill them up, and how I
could have bought a really nice house had I been prepared to take a 30% drop on mine

Duncan

Bought 1989 £65500 Sold 1999 £70500

Monday, December 21, 2009 08:19PM Report Comment
 

11. Estate Agent said...

Everyone is running out of houses!
Houses are selling yet they are not being replaced with new stock at the same rate! Agents are falling over themselves to get more stock and because of this pressure they are over valuing property again. As an agent myself, I am frustrated of not getting stock on because other agents are valuing higher than me. I have had to start over-valuing again just to win stock to sell, which I know won't sell at first and the vendors will probably have to drop the price later to get them shifted. At least we have them on our books to sell though!

The upshot of all this is this. Stuff that wasn't keenly priced, with vendors who have not cared about when they sell and cared only for clearing their existing mortgage have started getting interest and are now selling because there are no better deals out there and new stock is looking over-priced! Some of these properties have been on the market for the whole of 2009 and now they are selling!

Property prices are sticky up and vendors that don't need to sell will wait it out to get back what they paid.

For the record, I just had an offer accepted today on a property I want to buy for my family. This will be my 6th property taking the value of my portfolio up to 1 million pounds! Don't worry, I will still have 44.6% of equity across the whole lot, so I'm not about to plummet into the financial abys! Oh and we are not selling our current home right now either. It's only worth about £240k and I know it was worth £270k in 2007, so we'll rent it out for peanuts just to cover the costs and keep it occupied until the market is stronger. Then we'll let it go, so the trade up costs are minimal.

Our new purchase today has fallen from a 2007 asking price of £430k (Clearly over-priced back then!) to a sale price today of £308k! (About £20k less than it is probably worth) I consider the market to have bottomed out and now really is the time to buy! It certainly isn't going to fall much further, so the risks are much lower than they were! :)

Tuesday, December 22, 2009 01:23AM Report Comment
 

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