The property market and reality

carolt · 2 November 2009 at 11:39AM

I suspect it also varies a lot from property type to property type, too.

Houses higher up the ladder are selling well, as lower rates for those with existing equity make those relatively affordable. Whereas the sorts of properties I'm interested in - the cheaper end of houses, FTB-type, are not seeing the same rises, or are in fact still stuck in 2004, as FTB's don't have the equity to get the cheap loans, generally, or the secure incomes to borrow 5X multiples any more, even if they were available.

And BTL landlords can't afford to buy them up, either, as their interest rates are not as favourable as they were, and even at lower prices, the return on the investment is too poor to make it an attractive proposition. Plus the income from rents now needs to be much higher relative to the mortgage - I can't think you'd cover 125% unless you put in an enormous deposit first. Which, with falling prices, less landlords have.

So I suspect even within single areas, there is a 2 tier market - high and quite possibly rising prices at the top end, but falling prices at the bottom end.

ruggedtoast · 2 November 2009 at 11:44AM

Pete111 wrote: »

There are in pretty much all decent parts of London and a lot of the the SE. And given the money/ % population within that area, it drives a lot of sentiment.

Example: friends of mine in Surrey putting their house on the market in teh new year having seen recent sales in their neck of the woods go for only 5-10% off peak (was 20%+ down at the start of 09). They hope to be able to get close to peak - we shall see I guess!

That's an interesting point and I think worthy of further investigation. Firstly because I dont believe that places in prime locations ever really dropped that much. There were a few bargains in West London for example over the last few years for example, but few and far between.

Secondly, the bubble mentality in 2007 meant that even bad neighbourhoods were matching good ones in property prices. And this was purely about mortgage availability.

The fact is there is more affordable property around now then there was in 2008.

julieq · 2 November 2009 at 11:49AM

carolt wrote: »

I suspect it also varies a lot from property type to property type, too.

Houses higher up the ladder are selling well, as lower rates for those with existing equity make those relatively affordable. Whereas the sorts of properties I'm interested in - the cheaper end of houses, FTB-type, are not seeing the same rises, or are in fact still stuck in 2004, as FTB's don't have the equity to get the cheap loans, generally, or the secure incomes to borrow 5X multiples any more, even if they were available.

And BTL landlords can't afford to buy them up, either, as their interest rates are not as favourable as they were, and even at lower prices, the return on the investment is too poor to make it an attractive proposition. Plus the income from rents now needs to be much higher relative to the mortgage - I can't think you'd cover 125% unless you put in an enormous deposit first. Which, with falling prices, less landlords have.

So I suspect even within single areas, there is a 2 tier market - high and quite possibly rising prices at the top end, but falling prices at the bottom end.

I think that's spot on actually. Good quality places are selling very fast with competition (supply and demand issues feeding into the desire to snap things up before further rises), I think you'll see BTL fed rises at the low end where there are potentially good yields from rental due to local issues (universities, workplaces, proximity to rail links to London), but probably not elsewhere as there's no reason to buy poor quality in the sticks just at present.

carolt · 2 November 2009 at 12:02PM

ruggedtoast wrote: »

That's an interesting point and I think worthy of further investigation. Firstly because I dont believe that places in prime locations ever really dropped that much. There were a few bargains in West London for example over the last few years for example, but few and far between.

Secondly, the bubble mentality in 2007 meant that even bad neighbourhoods were matching good ones in property prices. And this was purely about mortgage availability.

The fact is there is more affordable property around now then there was in 2008.

As I used to live in West London, I had a look at a road I used to live in. When we left in spring 2003, you could buy a flat here (it's a good comparison, as basically all the flats are identical 2 bed maisonettes, and it's a long road, so there's lots to compare), for £200-250K ish.

You can now buy a flat for...the same price. Most recent sold prices are 230K, 250K and 195K - all sold in Aug 2009. Compare that to spring 2003, when 3 sold for 220K (Jan), 280K (Feb), and 195K (Feb). There's one under offer currently on Righmove for 250K.

Whereas at peak, in 2007, one flat sold for 330K.

So - from this lone but quite large sample - it seems clear that prices in West London are not rising, but have fallen back 6 years...just like that.

Here's the link:

http://www.nethouseprices.com/index.php?con=sold_prices_street_detail&locality=LONDON&town=LONDON&street=CAVENDISH+AVENUE&year=All&house_style=All&house_age=All&house_type=All&search_radius=&northingToSearch=&eastingToSearch=&cCode=EW&outcode=W13&incode=0JG&order=&start_limit=0&curPage=1

carolt · 2 November 2009 at 12:04PM

julieq wrote: »

I think that's spot on actually. Good quality places are selling very fast with competition (supply and demand issues feeding into the desire to snap things up before further rises), I think you'll see BTL fed rises at the low end where there are potentially good yields from rental due to local issues (universities, workplaces, proximity to rail links to London), but probably not elsewhere as there's no reason to buy poor quality in the sticks just at present.

I'm more than happy to live in the sticks, so that suits me just fine. I think you make the mistake of confusing quality with price. I'm not looking at shoddy new builds, which are poor quality, but surprisingly expensive - I'm looking at solid family homes that aren't mansions.

Rochdale_Pioneers · 2 November 2009 at 1:16PM

I don't know why people post house price moves in place X and think they apply to all property everywhere. Property like all markets relies on supply and demand to drive values.

For example, if you bought a one-bed flat in a new block in say Sheffield, you'd have paid a lot at the time as demand from BTL was high and mortgages were plentiful. Now demand has fallen through the floor, many of them are empty, and values have crached. Why? Oversupply of city-centre one bed flats. There were few real buyers, only investors. Take the investors away and you see the true demand for such properties.

Then look at family houses in the suburbs. Prices are recovering strongly from the crash in many places. Why? Because demand outstrips supply as it has done for a decade. Housebuilders have spent their time chasing the BTL £ in city centre apartments instead of building family housing. Prices go up, mortgages adjust to allow for this and the price inflation continues rising.

The ONLY way prices will come down by 70% or whatever other stupid figure people want to apply would be for mortgages to dry up completely, or for the supply to be increased to somewhere approaching demand. We didn't see mortgages go completely after the crash - what makes you think it will happen now?

the_ash_and_the_oak · 2 November 2009 at 1:21PM

Rochdale_Pioneers wrote: »

I don't know why people post house price moves in place X and think they apply to all property everywhere. Property like all markets relies on supply and demand to drive values.

For example, if you bought a one-bed flat in a new block in say Sheffield, you'd have paid a lot at the time as demand from BTL was high and mortgages were plentiful. Now demand has fallen through the floor, many of them are empty, and values have crached. Why? Oversupply of city-centre one bed flats. There were few real buyers, only investors. Take the investors away and you see the true demand for such properties.

Then look at family houses in the suburbs. Prices are recovering strongly from the crash in many places. Why? Because demand outstrips supply as it has done for a decade. Housebuilders have spent their time chasing the BTL £ in city centre apartments instead of building family housing. Prices go up, mortgages adjust to allow for this and the price inflation continues rising.

The ONLY way prices will come down by 70% or whatever other stupid figure people want to apply would be for mortgages to dry up completely, or for the supply to be increased to somewhere approaching demand. We didn't see mortgages go completely after the crash - what makes you think it will happen now?

thing here is...it really depends who was buying those apartments in cities...are they ftb properties...or are family homes in suburbs? If suburban houses are ftb properties then it doesn't matter about flats and the problem of selling them (because mainly BTL)..if flats have become FTB properties then there is the problem of selling them in order to trade up...in which case demand for suburban houses will be affected over the next few years imo

Pobby · 2 November 2009 at 1:26PM

chucky wrote: »

i've never seen anyone post about 15% HPI predictions each year on here.
can you tell me who makes this posts?

Bruno?

chucky · 2 November 2009 at 1:29PM

Pobby wrote: »

Bruno?

maybe. he was one of your old friends wasn't he

i don't see anyone here telling us that prices will increase 15%

Pobby · 2 November 2009 at 1:31PM

I`ll have you know that Bruno is in fact a master of predictions and uses well thought out debate. Not at all extreme.

Debate House Prices

The property market and reality

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