Monday, Jan 19, 2015

Could 2015 beat 2014 for house prices?

City AM: UK house prices rise unexpectedly: Stamp duty to the rescue?

After a muted end to 2014, London house prices grew 0.9 per cent in January, compared to just 0.2 per cent in the first month of 2014. Possibly the bull market has only just taken off, with Switzerland demonstrating a desire for capital to flee the Eurozone. Many ploughed in last year to grab fixed rates that now look expensive, and so this year we may see the less prudent bunch snapping up properties on uber cheap variable rates that just keep getting cheaper, with buying now often far cheaper than renting due to incredible rate cuts.

Posted by libertas @ 10:58 PM (16982 views)
Add Comment
Report Article

10 Comments

1. reticent said...

0.9% on the RM index barely even registers as noise, since its degree of inaccuracy is around 3%.

But even if it were accurate, it would still mean nothing. That sellers are trying to capture the sdlt windfall is not surprising. Theory says they will succeed, but in practice, in a falling market? Wake me up when something based on accepted offers gets published.

Tuesday, January 20, 2015 07:29AM Report Comment
 

2. libertas said...

Reticent. Looking at the falls from November to December, with seasonal adjustments they seem quite normal, and now January has strong readings, particularly with seasonal adjustment.

I have been warning folks here, to fingers in ears, that market conditions are now highly favourable to house price increases in 2015. In 2014, there were about 3 options for 10yr fixed rates, the cheapest being 3.99%. You can now borrow for 10yrs at significantly below 3%. Flex rates were around 2.2%, and they are now almost 1%

The costs of buying a house have plummeted well below the cost of renting and all you chumps sitting on the sidelines are literally handing your homes to BTL investors on a platter, because they are taking advantage of this shift.

My other point is that low rates are structural at this stage. It is not just oil prices that are falling, and we have new technology really driving this as it did in Japan, amplified by low population growth in Europe. Britain on the other hand has these trends plus a soaring population. We are not Japan.

I have also pointed out that those thinking of riding the shark this year in London should think about buying along the West Anglia railway route that becomes London Overground at the end of May. It suddenly goes onto the tube map with the progressive improvement TFL always provide with a concession, starting with an immediate doubling of Sunday services as stage one. People mock me for pushing Enfield, but it will soar in value along with northern parts of Waltham Forest up to Chingford. If Crossrail 2 finally gets approved and the Lea Valley gets rail, you will see the prospect of 2 trains per hour morphing into at least 12 trains per hour metro services along that route and an area that has hardly changed since the 1930's will suddenly leap into the 21st century along with values. Too early to bet on that, but the West Anglia route gives opportunity to speculate on the area in comfort at least until May this year.

Then we have Switzerland, demonstrating the keen-ness for capital to flee the Eurozone, and pressure now on Scandinavian bonds demonstrates that this is a trend, not a flash in the pan.

Others mock me for stating that economics is relative, but folk focus on nominal values. With rates down 30%, £300k is the new £200k. Values will adjust. That adjustment accelerates when we get deflation in a couple of months and BOE are forced to cut first to 0.25%. Bear in mind that most mortgage rates have priced in a rate hike, and so the fall in mortgage rates will be amplified by Carney's forked tongue.

Tuesday, January 20, 2015 08:10AM Report Comment
 

3. icarus said...

Regarding that Lea Valley rail it's worth remembering that the recent London First report recommended that Boris should have more cash and powers for infrastructure improvements and extra house building and that significant amounts of that cash should come from taxes on increased property values that are due to transport improvements.

Tuesday, January 20, 2015 09:43AM Report Comment
 

4. hpwatcher said...

The costs of buying a house have plummeted well below the cost of renting

Maybe, in La-la land, certainly not in the real world.

Low wages, will continue to be a drag on both the housing market and wider economy.

Moves like that from SNB will constrain bank capital further due to the pretty massive losses that are being made.

Tuesday, January 20, 2015 10:24AM Report Comment
 

5. reticent said...

1. For the umpteenth time, I bought a house around the same time you did and completed a few months before you.
2. No one cares about the specifics in the area you bought. Everything you've said on that just smacks of the sort of rent-seeking, speculative, money-for-nothing nonsense most people here abhor. Whilst I can't speak for everyone, I think most of us come here because we think housing is too expensive and want to time our home purchases so as we don't get short-changed, i.e. we want more for our money in the areas we want to live, not to make a ton of money out of buying somewhere we don't.
3. "Rates are structural at this point" - no idea what you mean by this, even though what you have to say about interest rates is not exactly unpredictable. Do you mean that the actual interest rate is the same as the structural one because we're halfway through a cycle? The recovery really only just got started, but the economy looks to be going downhill so it's hard to fathom what you mean here, although we can obviously all guess at the conclusion.
4. As for all your other predictions, the other thread on the DM petrol article contains 8 posts currently. Every one but yours (and HPW's fitting barb) is a reasonable assertion about what will happen next and where you've gone wrong. Particular highlights included "no such thing as virtuous deflation" and "extrapolated to zero and beyond". You seem to draw your conclusions first (NIRP will pay my mortgage, reduce taxes and send house prices to the moon) and then come up with the reasoning later.
5. The rough analogue to your nonsense about relativity in actual economic terms is that finance is all about opportunity cost, i.e. relative prices. The issues around opportunity cost that negative interest rates throw up are countless. I cannot be bothered to suggest some again, since you never appear to respond to any attempt of mine or anyone else's to call your attention to them (or indeed read most of the other posts here, despite contributing about 50% of the copy and presumably expecting us to pore over the uninformed stream-of-consciousness rants you post 5 times-in-a-row).

Tuesday, January 20, 2015 10:26AM Report Comment
 

6. hpwatcher said...

I have been warning folks here, to fingers in ears, that market conditions are now highly favourable to house price increases in 2015

That statement could only have come from a VI, who without big increases in house prices, is likely to be underwater with their mortgage.

Tuesday, January 20, 2015 10:26AM Report Comment
 

7. hpwatcher said...

I cannot be bothered to suggest some again, since you never appear to respond to any attempt of mine or anyone else's to call your attention to them (or indeed read most of the other posts here, despite contributing about 50% of the copy and presumably expecting us to pore over the uninformed stream-of-consciousness rants you post 5 times-in-a-row).

He's got confirmation bias, simply sees what he wants' to see - nothing else exists.

Tuesday, January 20, 2015 10:28AM Report Comment
 

8. reticent said...

@7

I'll say. I can't even recall what he used to post before he bought because it was such a pronounced volte-face and he's been banging the same drum ever since. I seem to remember lots of posts about inflation and too-high taxation making housing unaffordable so I guess there's some consistency to the analysis.

So, in La-la land, inflation of 3% means house prices are about to fall and falling inflation of 0.5% means house prices are about to rise.

Libby, look at this graph:

http://www.bbc.co.uk/news/10612209

Look at CPI inflation and you'll notice 2 things:

i) When house prices were rising fastest, in the mid noughties, it was roughly steady, ranging from 0.5-3%.
ii) When house prices were falling fastest, in 08-09, inflation was falling.

This is what most sensible people would conclude: steady and moderate inflation are associated with optimism and rising house prices, whereas unstable, high inflation and deflation are associated with economic uncertainty and stagnant or falling real house prices, which, in the case of deflation, means falling nominal house prices.

Tuesday, January 20, 2015 10:44AM Report Comment
 

9. hpwatcher said...

seem to remember lots of posts about inflation.

I remember when Libby was seeing interest rate rises in almost every single economics based news article.

I guess he switched sides because he was sick of being wrong all the time.

Tuesday, January 20, 2015 11:05AM Report Comment
 

10. hpwatcher said...

This is what most sensible people would conclude: steady and moderate inflation are associated with optimism and rising house prices, whereas unstable, high inflation and deflation are associated with economic uncertainty and stagnant or falling real house prices, which, in the case of deflation, means falling nominal house prices.

BUT, the real question here is the effect of massive FLS government intervention on the usual cycle - and in what way is that likely to effect future demand. Usually, when future demand is pulled into the present, any future decline is amplified...will the same happen here?

Tuesday, January 20, 2015 11:07AM Report Comment
 

Add comment

  • If you do not have an admin password leave the password field blank.
  • If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
  • 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
Username  
Admin Password
Email Address
Comments

Main Blog | Archive | Add Article | Blog Policies