Thursday, June 3, 2010
Rejoice etc.
House prices still rising, says Nationwide
"Prices went up by another 0.5% in May, pushing the price of the average UK home up to £169,162 which was £15,000 more than a year ago. Annual house price inflation fell slightly last month though, from 10.5% to 9.8%. But the Nationwide said prices might keep on rising modestly as few properties were being put up for sale...."
Posted by mark wadsworth @ 07:44 AM (4431 views)
39 thoughts on “Rejoice etc.”
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little professor says:
Full pdf report
Headlines:
-House prices increased by 1.0% month-on-month in April
-Annual rate of price inflation moves into double digits for first time since June 2007
-House prices are 10.0% below the October 2007 peak
little professor says:
Ignore above post – that’s April, not May
paul says:
Annual house price inflation fell slightly last month
Eh? They kept that
very
quiet.
hewing standards
hpwatcher says:
There will be an end, at some point, to the absolute stupidity which is rising house prices. Though not just yet, I fear.
BOE have made it obvious that they value the perceived wealth of house prices far more than the currency.
It’s still early days, but I can’t see life getting easier for the people in the UK.
ReCAPTCHA: House falling – you couldn’t make it up, you really couldn’t.
mrflibble says:
With this sort of return it would seem to me that all I need do is sink my entire pile into a house and keep MEW’ing the profit each year. I could quite easily live on a 10% return and when the boom years return it could reach 20%. If we can manage 10% during a recession then the sky is surely the limit once the recovery is fully locked in.
That’s the problem though, this is non productive wealth creation, which must be matched elsewhere by people who actually generate the equivalent through real productive work. This is then ‘gifted’ to the people who simply own a pile of bricks. Not directly of course, as that would awake people to the scam, it’s all done by stealth via QE, ZIRP and Devaluation.
uncle tom says:
This is the ‘dash from cash’ false dawn..
..prices are not being propelled by rampant lending, they are being propelled by people who have cash savings…
..can’t last..!
flashman says:
We have to look at this dispassionately.
Most of the house price inflation is centred in the South East. Unemployment in the South East is running at about 3%, which in economic terms is ‘effectively zero’. The South East has a population that rivals many first world countries and an economy that would probably rank in the worlds top ten. Figures are hard to extrapolate but the GDP of this region must be very close to the GDP before the recession began. People in the South East have very much continued their love affair with property and their rock solid faith is amply supported by interest rates that are at record lows. In these circumstances, it should not surprise anyone that prices continue to rise or at least remain the same.
Only increased unemployment supported by higher interest rates will cause house prices to fall. There is no point in hoping for a stroke of luck every month. If unemployment gets to levels seen in previous recessions, then prices will fall. If interest rates rise significantly, at the same time, then there will be a serious fall in house prices.
Exiges says:
It’s bizarre, since in another HPC post there’s the article from the Times saying that lending is falling..
If lending is falling but prices are going up, then Uncle Tom is right, it’s either cash buyers from the UK getting no interest on their savings, or foreign money.. it’s certainly not “your man in the street”
Fraggle says:
What about the volumes? Are they still rock bottom?
will says:
Asking prices maybe rising but I am convinced many vendors are still struggling to sell their homes. The lenders produced fanciful house price statistics in the early 1990’s correction to contradict falling prices.
I sold to rent four years ago and have watched the local Exeter market almost daily since then. Many properties remain unsold throughout that period or have been withdrawn and re-listed. The most expensive homes on the Rightmove site simply are not selling. One home in my village originally listed at £1.8 million in 2008 finally sold for £1.1 million – a 38% drop. We are all now able to watch the property price manipulation in this country on our computers, of course far fewer had them in the early 1990’s.
Why is it that other countries like the US, Ireland, Spain etc have had significant house price corrections but we have not? I believe that Mervyn cannot allow such a correction here yet, but when things appear a little rosier in our economy he may unleash the tether.
mark says:
quite a few houses around cheshire have suddenly shot up in price, some by as much as 12% but they have been on the market for well over a year, so it is simply greed and stupidity taking over, “i know if i had 20k to my house someone will panic buy” wonder if they actually sit and ask themselves why it has not sold for a year or are they too stupid to realise it is overpriced?
uncle tom says:
Actually Flashman, the whole country qualifies as ‘First world’ – although we’re beginning to slip toward the bottom half of that category.
The south east’s GDP is not separately calculated, so one can only estimate; but the banking crisis took a huge toll, which I don’t think has been restored.
The area did have the advantage of having large numbers of eastern european workers who were readily dispensable without raising the jobless count – this has kept the unemployment stats steady.
There are still a lot of professionals in the south-east without jobs, who often elect not to register as unemployed..
Lucky Landlord says:
MWWWAAAAAAAAHAHAHAHA
Every month you all pull the same HPI excuses out of the bag.
Listen lads, stop bleating and accept it. You missed the boat, now deal with it!
mark wadsworth says:
mrflibble: “That’s the problem though, this is non productive wealth creation, which must be matched elsewhere by people who actually generate the equivalent through real productive work. This is then ‘gifted’ to the people who simply own a pile of bricks. Not directly of course, as that would awake people to the scam, it’s all done by stealth via QE, ZIRP and Devaluation.”
Yup. That’s Home-Owner-Ism in a nutshell, except it’s not even ‘non-productive wealth creation’ – selling each other the same old houses for ever higher prices is actually wealth destruction, and all it means is a higher debt burden on the next generation and so on ad infinitum.
Which highlights yet more DoubleThink. The Home-Owner-Ist mantra is that they want “wealth to cascade down the generations” but actually what they are doing is exactly the opposite.
And they also wail about the government’s public sector deficit being a burden on future generations, so that makes it TrebleThink.
uncle tom says:
The bottom line is that over 70% of UK families own their own home, and despite the various utopian ideals that get aired here and elsewhere, that isn’t going to change much.
Renting does not provide a long term solution to unaffordability, unless it is subsidised; and the country’s taxpayers cannot afford any more subsidy.
So houses have to be affordable, not only to the 70% of households, but also to the extra 10% or so who rent without subsidy.
As this graph shows, the top 20% can afford to buy, the next 20% can struggle to buy something, but there’s a huge army for whom housing is both unsubsidised and unaffordable..
http://www.statistics.gov.uk/cci/nugget.asp?id=334
Cool_hand says:
I would love to buy a house for the average price of £169,162. What is this based on? If it’s an average then there must be properties selling for less than this figure. Is this a joke?
mark wadsworth says:
Uncle Tom; you’ve highlighted yet another bit of Home-Owner-Ist DoubleThink.
They say “homeownership is A Good Thing” and I think most people (including me) would agree with that. Then they go off at a tangent and say that it follows that housing must be lightly taxed, heavily subsidised and new supply restricted as far as possible. As a result of this, housing becomes ever more expensive and concentrated in ever fewer hands. The % of owner-occupying households has gone down a per cent or two over the last ten years.
Just because I oppose Home-Owner-ism does NOT mean that I think everybody should rent, where did I ever say that? And where does this talk of subsidies come from? I oppose subsidies for anything especially land ownership – in fact, quite the reverse, I think we should be taxing incomes and production a lot less and taxing land values a lot more.
estrader says:
I have followed the prices of houses and flats in the South East for the last 6 months and the number for sale has increased and the asking prices have decreased. My unqualified opinion is that anything up to at least June is still the lag of the Labour Government policies. If house prices are going to soar forever then it makes no difference when you buy, so I personally would be waiting for another 6 months of data. But in any case, I pay little attention to the media, you will go broke it you do.
ReCaptcha: makes abstaining
letthemfall says:
The point about unemployment and interest rates with respect to the SE contains a depressing truth. Such is the obsession with property ownership that only changes in these are likely to have an impact on prices. Rather an obvious truth perhaps, but what we did not anticipate was the suppression of interest rates. In time these will rise again, but in the past there were very long periods of low rates, and current conditions may persist for many years. There may be reasons why this will not happen, or even other reasons why house prices will fall (I hope so), but my big fear is that we have entered a period in which the majority of wealth (including assets) in this country is becoming more and more polarised. A bleak house indeed.
flashman says:
uncle tom: “Actually Flashman, the whole country qualifies as ‘First world’ – although we’re beginning to slip toward the bottom half of that category”
I said: “The South East has a population that rivals many first world countries”. I was clearly only talking about the population density of the South East. I said we “have to be dispassionate†for a reason
“The south east’s GDP is not separately calculated, so one can only estimate; but the banking crisis took a huge toll, which I don’t think has been restored”
Unemployment in the South East is, in economic terms, “effectively zero”, so what you say is obviously not correct. Hardly anyone works in banking. If any country had an unemployment rate as low as that enjoyed by the South East, they would consider themselves to be in ‘boom times’. No amount of supposition about undeclared professionals and Polish workers can detract from the incredibly low unemployment numbers.
Facts have to be faced, dispassionately. Things will change if and when unemployment picks up
uncle tom says:
Mark,
If you keep using Orwellian language, you’ll start sounding like Dave Spart..:)
In principle, I regard homes as consumer durables that should normally be worth their most when new (and on average, not vastly in excess of build cost) and then allowed to gradually depreciate until they are cleared away for redevelopment.
In general, I think it would be better for all save detached houses to be sold leasehold, to facilitate eventual re-development. It would also provide a supply of short lease ‘end of term’ property that would be eminently suitable for future students.
Having been bought with tax paid cash, I do not think it fair or appropriate to further tax homes, other than to pay for essential local services. Whilst I am against wealth taxation in principle, I favour the punitive taxation of empty property as an exception to that rule.
I believe the supply of land for residential development needs to be significantly increased, while maintaining effective migration control to stabilise the population. The afore mentioned tax on empty homes should be used to ensure that speculative over development, as seen in Spain and Ireland, is not repeated here.
To avoid the game of ‘half completion’ widely played in some countries, developers should be required to declare their intention to start building a property before the first sod is turned, and then be liable for an empty home tax, if the property is not completed 12 months thereafter.
I would volunteer a rate of 0.5% of market value per calendar month, as an appropriate tax on empty property. I would allow homes left empty for renovation to be allowed a six month respite from taxation, provided they had five consecutive years of occupation previously.
Some transitional measures would be needed in the first instance.
– How does that fit with the UKIP vision??
timmy t says:
Flash – your point is right, but doesn’t highlight where I think we are now, and it is what letthemfall talks about @15. Things already have changed in terms of unemplyment, but mainly at the “bottom end” of the market, retail etc. This has followed through into price falls at the bottom end of the housing market, the new build blocks in city centres etc. The fact is though that at the top end of the employment market, far fewer people have been affected, some obviously, but less, and this has meant that houses in the middle and at the top have been affected far less. Those that have been made redundant are having their lives made less difficult by the current interest rates, but again, those at the bottom end will be affected more because of their lower equity, so once again, the “haves” win.
Cat Ansell says:
In response to the comments by Mark re. Cheshire house prices, it was alleged I think during the episode of Location filmed in Hale and Altrincham that property prices here had dropped by 18%. We bought our house 2 and half years ago at the property peak, we have just accepted an offer within 10 days of it being on the market and exchanged within 4 weeks making an 8% increase on the initial investment, so all in all it does seem to concur with the price rise stats. I do agree though that people do need to stop being so greedy and pitch it at the right price in the first place.
The Baldman says:
Unemployment is only low becasue of the high number of government jobs. This is unsustainbale.
mander says:
It is more like Nationwide proudly anouncing that we here in the UK are still bubbling. Just to remind them that Warren Buffet said that the housing market experienced ‘the grandaddy of all bubbles’ in America and the CEOs of the financial institutions are responsible. Here is the video http://www.guardian.co.uk/business/video/2010/jun/03/financial-crisis-economics
We need to recongnise the fact that houses are double in the UK compared to America’s bubble and global forces will not let us escape the correction unless we are willing to distroy the pound and have our houses bought by foreign investors where they could rent back to us or so…
mark wadsworth says:
Uncle Tom, that’s all heading in the right direction, but the easiest way to get land to behave like any other consumer durable (or any other commodity come to that) is LVT. No tax on the buildings value, but a tax that is set in each area so that resale cost = approx what its depreciated rebuild cost would be. There’s no science to setting the rates, you just hike them gradually in each area and stop in each area when houses in that area are selling for approx. rebuild cost/value.
If LVT were a straight swap for income tax, then homes would not be bought with “tax paid cash” of course, they would be bought out of gross income. The overall tax burden would not go up (and when I am in charge, it will come down quite a bit, obviously).
mark says:
MW LVT is not going to happen unless you become PM or similar, lets all just look forward to the big party when the crash really starts..
uncle tom says:
MW – I agree with Mark – LVT is electorally unsellable, so move on..
mark wadsworth says:
“LVT is electorally unsellable”
I am perfectly aware of that 🙂
Goldbug9999 says:
Prices can not in the foreseeable future rise above peak 2008 levels because there will never be that much credit available to finance purchases for some considerable time to come (if ever hopefully).
Even sustaining the current level of 10% below that peak requires all of the current “favorable” factors to remain lined up.
Those include:
Historically low transaction rates.
Historically low interest rates.
Widespread belief in the plausibility ever increasing prices.
Extremely favorable tax regime for property “investors” (including the current CGT rate).
Ludicrously generous housing benefit policy to prop up rents, and subsidise mortgage payment.
Low(ish) unemployment levels.
A general belief that “the worst is over” economically.
Continued economic growth (arguably already covered by previous point).
Continued heavy government borrowing.
No catastrophic economic event in the eurozone – bank collapse, sovereign default etc.
There comes point where scarcity of supply cant push up prices any further because the cash/credit to the fund the rises simply doesn’t exist.
dbc reed says:
@will
Good question: why have n’t we had a HP crash like in Spain, Ireland and US?Probably because they built too many houses over there: over here they always built a small enough number not to dilute the average price. Competitive Markets are supposed to respond to demand by lowering prices but the land element in house prices is anti-competitive. It can be hoarded ad infinitum without a land value Tax.
bellwether says:
It is difficult to know which facts to face, and a sense that the facts being presented do not square with reality as experienced.
As a small example, something like 9% of office space in central london is let to lawyers. Lawyers are not in banking but they are absolutely affected by a banking/credit crisis because so much of their business is driven by credit. It is also fair to say that almost all corporate/commercial deals that happen will pass through their hands to some extent.
Everywhere however there are reports of deal flow having dropped off, and there is in addition a stack of accounting evidence of fee income shriking in a manner never seen before within the profession.
What would be interesting would be information on total tax receipts from 2005 until now, this would seem to tell a better story about the health of the ecomomy than say GDP
This does not s
here is a great deal of focus on GDP but it would more interesting to look at tax reciepts, as this seems more black and white.
Because it is never that clear if we are getting facts, or the facts we are getting are influenced by other factors
s not the banking crisis that took a huge toll9% of all office space in central London is let to Lawyers. Lawyers are
hpwatcher says:
In response to the comments by Mark re. Cheshire house prices, it was alleged I think during the episode of Location filmed in Hale and Altrincham that property prices here had dropped by 18%. We bought our house 2 and half years ago at the property peak, we have just accepted an offer within 10 days of it being on the market and exchanged within 4 weeks making an 8% increase on the initial investment, so all in all it does seem to concur with the price rise stats. I do agree though that people do need to stop being so greedy and pitch it at the right price in the first place.
This simply should not be happening. In a normal recession, prices should reset and then start to rise – but the government is doing exactly the same thing it did in 2004 – all to put off the inevitable.
They will keep on trying the same trick – I’m not so sure it is going to work this time.
flashman says:
bellwether: I won’t argue about the importance of GDP because it is something that is not understood by the public or the press. Suffice it to say that it’s an important number. I had a look at the tax receipt figures for you. They are currently running at 2006 levels but this is for the whole UK and it is noticeable that VAT took a chunk out of the receipts (now back at 17.5%). The South East has suffered very little extra unemployment as a result of the recent recession, so it is logical to suggest that any loss of tax receipts has probably come from areas that have suffered from more unemployment. I am loath to say it, but the London based banks have had a bumper two years courtesy of QE so there is no real loss of tax receipts from that industry. If unemployment ticks up in the densely populated South East, it will lose its ability to skew the national figures. In fact, the opposite will happen and the national figures will be skewed downwards.
To demonstrate my point here are some figures for the South East region including London:
GDP: just under £ 700 Billion
Unemployment rate: about 3%
Population: 17 million
The GDP per capita for this region is therefore one of the highest in the world (and by far the highest in the country), so it is hardly surprising that house prices, in this densely populated/wealthy area, have been rising in the face of record low interest rates and very low unemployment numbers.
I hear stories that offices in London are empty etc but I’m here every day, and I don’t see any more of them, that there used to be. All the good stuff gets snapped up. I personally don’t know anyone who is unemployed and I don’t know anyone who is particularly worried by the economy. My nieces and nephews have all walked into decent jobs and so have the majority of their graduate friends. I appreciate that things are different in the other parts of the country. In a laboured way, all I am saying is that the South East still has the economic ability and house buying zeal to skew the national figures and it will not lose this ability until unemployment and interest rates tick up.
hpwatcher says:
I hear stories that offices in London are empty etc but I’m here every day, and I don’t see any more of them
I am seeing lots and lots of empty shops – even in central London. Loads of them.
The Baldman says:
Flashman
What is the real unemployment rate when taking away the non-jobs created in Gordans miracle economy that will have to disappear in the next year. I know several graduates unable to find jobs.
flashman says:
hpwatcher: To some extent, we see what we want to see. Even in boom times, there are always empty shops and offices because people relocate or the owner wishes to sell/refurbish etc. Businesses also come and go, even in boom times
I prefer to look at hard numbers because it is easy to fool ourselves with ‘evidence’ that fits out desired outcome. London’s commercial property market is actually doing very well. In May, there was £15.5 billion of equity chasing only £7 billion worth of assets for sale. That is one of the best ratios I have seen in many years
Here’s a link to a very recent report:
http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201006021006dowjonesdjonline000483&title=londons-commercial-property-market-remains-vibrant#ixzz0pnzJcbaP
Here’s n articlehttp://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201006021006dowjonesdjonline000483&title=londons-commercial-property-market-remains-vibrant
clockslinger says:
Flashman, the arguments about unemployment and interest rates are obviously correct. Question is, what is the prognosis for the two? Will the public sector be sufficiently reduced by staff leaving at a gradual and managable rate? Can further sterling falls be anticipated in the absence of rate increases, and if so does the government care enough about that to up rates anyway? How much imported inflation does there have to be to trigger a rate rise of any significant size? You’re analysis is pretty clear so I’d like to hear your opinion on the above.
bellwether says:
Flash useful as always. Puts me in the mood to look properly at some data when I get sometime.