Get ready for Capitulation....Fear is here, people will start to accept lower prices

lostinrates

moggylover wrote: »

But I think it will have to come Chucky! Many of the houses/smallholdings around here have been on the market since 2005/2006 and were overpriced compared to those that were actually selling at that time. Our market was a bit slow throughout all of 2006 tbh because the smallholding owners had priced themselves out of the market:rolleyes: and people who wanted to move to the area to try out the "good life" scenario could not buy cash, as had been happening in the past, and have a lump sum left over to live on. The wages are so dreadful around here (even if you can find any work) that they weren't going to earn enough working locally to make the whole adventure worth their while, so the market had slowed. As an example of how stupidly the prices jumped in 2006, the prices for a reasonable house 3 bedroomed or more, with around 4 acres of land and some stone outbuildings for conversion to holiday lets (just what I was looking for) in 2005 was around £270 - £300K and they were selling, not fast but they were selling. By the spring of the following year (they always took them off the market in the winter as most of the ground is heavy clay around here and the fields look dreadful in the wet Welsh winters:D so they came off around September and went back on in about March/April:rolleyes: to catch idiot incomers who knew nothing about surveying land:D ) they had gone up to around £370 to £450K, and this time without the convertable outbuildings which would have been the only way of making an income from such a holding. A few sold, but not very many and the market was already rather quiet during 2006 and 2007 at those prices. It has been totally dead since 2007, with Estate Agents admitting that the websites are being looked at, but no phone calls were coming in, and no viewings were happening.

I know Wales (especially as isolated an area as Ceredigion is) will take the hit harder than more central areas, but some kind of "capitulation" or "waking-up" is going to have to come or those people are still going to be trying to sell in 2011, and I know some of them actually "need" to sell for various family reasons.

Did I enjoy taking so much lower an offer for my mums? Of course not. But I had to be realistic that it was costing me rates, water rates, insurance and a percentage drop in value each month and also needed to be checked up on and bits of gardening and so forth done - so realistically it was more sense to do so. I shall try to take the same attitude with my own, but that might be more difficult for me as I bought it derelict (in 1990:eek: ) having sold in Slough in 1989 (yes I DO suffer from very poor timing:D ) and it was only bare walls standing by the time the demolitions were done and the renovations started so I have it imprinted on my heart big time. However, it is too small for current needs, and have needed to move for some time (should NEVER have had kids:D ) so need to use my head not my heart and get the best deal I can on it, and the best deal I can on the next one.

Whether we call it "capitulation" or just "wising up" a large part of the market are going to have to take their head out of the sand eventually, just as they did in the last recession. Somehow it always seems to be those further up the ladder that have the hardest time accepting it for a while though:D

wow, yes. Just done a search on your area (new to property bee!) and the lack of price drops is astounding. For comparison of PRICE bracket New Forest area towns (which I count as London longrer distance commute for those craving rural idyll) shows lots of reductions in the 'top end' which for sake of argument I chose to make a round 1 million in my search terms. I'm not trying to draw any comparison in area, just that the market at that rice level elsewhere is moving, and I see your point about local stickiness.

chucky

moggylover wrote: »

But I think it will have to come Chucky!

i agree it will have to come or is already happening in some areas.

i see it as two layers of people selling their houses.

those that need to sell quickly due to circumstances and those that want or would like to sell. those in the 2nd category will not drop their price unless the property they're buying is a very good deal.

the size of the first category is dependant on the obvious things like unemployment etc... how big the number of people this is will be driven by the job situation in the region and area that you live in - it won't be everywhere in the UK.

i've simplyfied it a little bit but i think that is the main driver for people to 'capitulate' and drop their prices further.

moggylover

lostinrates wrote: »

wow, yes. Just done a search on your area (new to property bee!) and the lack of price drops is astounding. For comparison of PRICE bracket New Forest area towns (which I count as London longrer distance commute for those craving rural idyll) shows lots of reductions in the 'top end' which for sake of argument I chose to make a round 1 million in my search terms. I'm not trying to draw any comparison in area, just that the market at that rice level elsewhere is moving, and I see your point about local stickiness.

I think a number of people around here think that because property prices here are lower than in areas like New Forest, they will not be as badly affected but they forget that at those prices they are TOTALLY dependant upon people wanting to move to an extremely rural area from outside (and many do come here and go back very quickly as it really can be quite issolated as well as very wet:D ) as there is absolutely no hope of anyone living and earning here affording to move up the ladder to those houses. The vast majority of the work around here is minimum wage (or less if the employers can get illegals or dole claimants to do the work:rolleyes: ) and that does not add up to the kind of mortgagability necessary around here nowadays.

In 1990 when I moved down here, my parents house and mine together would have bought us a small farm (an 80 acre one behind them went for just under £100K - which is what they both added up to then) now the same two houses will struggle to provide a reasonable house with an acre or two:rolleyes: .

bubblesmoney

chucky wrote: »

if you do find one - what it will probably be missing is the regional breakdown which is obviously important.
as mentioned above - what is the impact to Hastings house prices if there are 50,000 empty properties in Wigan?

otherwise the headline of 1 million empty properties is just doom mongering if it is linked to house prices in general

i have already posted the regional breakdown for the uk property affordabilty ratios a few months ago on another thread. see my post number 78 on that thread. when i posted it a few months ago the 4th annual report of 2008 was available, now the 2009 version of the 5th annual report is available and it is almost the same.

it is clear from the research on the link given in that message that all regions in the uk are expensive compared to historical average earnings to average price median multiples. the median multiple has been used in most countries for mortgage affordability as it is historically proven to be accurate (compared to most other measures), the crashes have always occured when the median multiples were much in excess of the median multiple.

extracts from ....

5th Annual Demographia International Housing Affordability Survey: 2009

Ratings for Major Urban Markets le 1

Dographia Housing Affordability Ratings
Rating Median Multiple

Severely Unaffordable 5.1 & Over

Seriously Unaffordable 4.1 to 5.0

Moderately Unaffordable 3.1 to 4.0

Affordable 3.0 or Less

see table 3 on page 8 of the link for severely unaffordable areas as per median household income in uk

in the affordable housing (table4) list i cant find even 1 uk city!!! that should be a good indicator of whether the market will crash or not for most people

Quote:

United Kingdom: The United Kingdom has no “affordable” markets and no “moderately
unaffordable” markets. Twenty-five (25) of the 28 markets in the United Kingdom are “severely unaffordable” and three markets are “seriously unaffordable.” The best ratings are “seriously unaffordable,” in Falkirk (Scotland), Dundee and Middlesborough & Durham.
The most unaffordable markets are Bournemouth & Dorset (8.9), Belfast (8.8) and Exeter & Devon (8.2). Among the larger markets, London (7.7) and the London Exurbs (7.4) are the least affordable. The national Median Multiple is 5.5, which is approaching double the Median Multiple ceiling of 3.0.

how ever it should be noted that just having a low median multiple doesnt mean that the price wont crash, as has happened in the usa now where area having less than 3 have crashed now as well. even areas less than 2.5 have crashed! the explanation for that in other papers (i cant remember which one but i read it recently) is that job losses on a massive scale have created a fear in the market and hence people not buying even when affordable and are clearing other debts and saving in preparation for bad times and taking a more cautious approach.

i dont think one will find more detailed data on affordability that this report. i have looked a lot but havent found a more detailed one yet.

chucky

the regional breakdown for empty properties not affordability

dervish

bubblesmoney wrote: »

i have already posted the regional breakdown for the uk property affordabilty ratios a few months ago on another thread. see my post number 78 on that thread. when i posted it a few months ago the 4th annual report of 2008 was available, now the 2009 version of the 5th annual report is available and it is almost the same.

it is clear from the research on the link given in that message that all regions in the uk are expensive compared to historical average earnings to average price median multiples. the median multiple has been used in most countries for mortgage affordability as it is historically proven to be accurate (compared to most other measures), the crashes have always occured when the median multiples were much in excess of the median multiple.

extracts from ....

5th Annual Demographia International Housing Affordability Survey: 2009

Ratings for Major Urban Markets le 1

Dographia Housing Affordability Ratings
Rating Median Multiple

Severely Unaffordable 5.1 & Over

Seriously Unaffordable 4.1 to 5.0

Moderately Unaffordable 3.1 to 4.0

Affordable 3.0 or Less

see table 3 on page 8 of the link for severely unaffordable areas as per median household income in uk

in the affordable housing (table4) list i cant find even 1 uk city!!! that should be a good indicator of whether the market will crash or not for most people

Quote:

United Kingdom: The United Kingdom has no “affordable” markets and no “moderately
unaffordable” markets. Twenty-five (25) of the 28 markets in the United Kingdom are “severely unaffordable” and three markets are “seriously unaffordable.” The best ratings are “seriously unaffordable,” in Falkirk (Scotland), Dundee and Middlesborough & Durham.
The most unaffordable markets are Bournemouth & Dorset (8.9), Belfast (8.8) and Exeter & Devon (8.2). Among the larger markets, London (7.7) and the London Exurbs (7.4) are the least affordable. The national Median Multiple is 5.5, which is approaching double the Median Multiple ceiling of 3.0.

how ever it should be noted that just having a low median multiple doesnt mean that the price wont crash, as has happened in the usa now where area having less than 3 have crashed now as well. even areas less than 2.5 have crashed! the explanation for that in other papers (i cant remember which one but i read it recently) is that job losses on a massive scale have created a fear in the market and hence people not buying even when affordable and are clearing other debts and saving in preparation for bad times and taking a more cautious approach.

i dont think one will find more detailed data on affordability that this report. i have looked a lot but havent found a more detailed one yet.

a superb post. Thankyou.

baileysbattlebus

bubblesmoney wrote: »

i have already posted the regional breakdown for the uk property affordabilty ratios a few months ago on another thread. see my post number 78 on that thread. when i posted it a few months ago the 4th annual report of 2008 was available, now the 2009 version of the 5th annual report is available and it is almost the same.

it is clear from the research on the link given in that message that all regions in the uk are expensive compared to historical average earnings to average price median multiples. the median multiple has been used in most countries for mortgage affordability as it is historically proven to be accurate (compared to most other measures), the crashes have always occured when the median multiples were much in excess of the median multiple.

extracts from ....

5th Annual Demographia International Housing Affordability Survey: 2009

Ratings for Major Urban Markets le 1

Dographia Housing Affordability Ratings
Rating Median Multiple

Severely Unaffordable 5.1 & Over

Seriously Unaffordable 4.1 to 5.0

Moderately Unaffordable 3.1 to 4.0

Affordable 3.0 or Less

see table 3 on page 8 of the link for severely unaffordable areas as per median household income in uk

in the affordable housing (table4) list i cant find even 1 uk city!!! that should be a good indicator of whether the market will crash or not for most people

Quote:

United Kingdom: The United Kingdom has no “affordable” markets and no “moderately
unaffordable” markets. Twenty-five (25) of the 28 markets in the United Kingdom are “severely unaffordable” and three markets are “seriously unaffordable.” The best ratings are “seriously unaffordable,” in Falkirk (Scotland), Dundee and Middlesborough & Durham.
The most unaffordable markets are Bournemouth & Dorset (8.9), Belfast (8.8) and Exeter & Devon (8.2). Among the larger markets, London (7.7) and the London Exurbs (7.4) are the least affordable. The national Median Multiple is 5.5, which is approaching double the Median Multiple ceiling of 3.0.

how ever it should be noted that just having a low median multiple doesnt mean that the price wont crash, as has happened in the usa now where area having less than 3 have crashed now as well. even areas less than 2.5 have crashed! the explanation for that in other papers (i cant remember which one but i read it recently) is that job losses on a massive scale have created a fear in the market and hence people not buying even when affordable and are clearing other debts and saving in preparation for bad times and taking a more cautious approach.

i dont think one will find more detailed data on affordability that this report. i have looked a lot but havent found a more detailed one yet.

Here is a report for the UK from HBOS/Halifax issued on 31 Dec 08

http://www.hbosplc.com/economy/includes/31_12_08FTBAffordability.doc

The Affordability Calculation:

A local authority (LA) is classified as affordable if the average house price for a First-time Buyer (FTB) in the LA is lower than someone paid the average earnings in the area can borrow. Gross average annual earnings for the LA are multiplied by 4.0 to calculate the amount that someone on average earnings could 'afford' to pay. For example, if average earnings in the LA are £30,000, someone on average earnings in the area could pay up to £120,000. The LA is deemed to be affordable if the average price paid by a FTB in the LA is less than £120,000 and unaffordable if it is higher.

The multiple of 4.0 is in line with the average house price to income ratio for a FTB over the last 20 years (1989-2008). (Source: Halifax). This is approximately equivalent to an average loan to income multiple of 3.25 plus a 19% deposit, or a 3.5 times multiple and a 12.5% deposit.

The report uses one salary, not two

Conrad

3 bed houses in Harlow have fallen to an unbelievable £94995 - repos. Rent for £750 per month

bubblesmoney

baileysbattlebus wrote: »

Here is a report for the UK from HBOS/Halifax issued on 31 Dec 08

http://www.hbosplc.com/economy/includes/31_12_08FTBAffordability.doc



The report uses one salary, not two

the HBOS/Halifax report says 4.0 median multiple is conservative and affordable! when almost all other authorities including the world bank and united nations agree on the median multiple of 3 being affordable.

also recently in the news i remember something being mentioned about making it compulsory for banks to use these earnings criteria more strictly in future. but dont know what multiple they will agree as the max.

even today if you try out the halifax mortgage calculator for FTBs for a person earning 30,000 with no dependents it shows one can borrow 150,000 !

probably it was lending like this of high multiples that made HBOS go bust and they still dont seem to have learnt their lesson going by their mortgage calculator online.

if you see the cities mentioned in the report i talked about in my earlier post and check out how the severely unaffordable places are doing like belfast, you can see that thats where the highest falls have happened. although i dont know if other places mentioned as severely unaffordable are doing now.

ps: the report i mentioned has used data from HBOS / halifax / nationwide / land registry and govt statistics so it is more comprehensive than just halifax data

bubblesmoney

chucky wrote: »

the regional breakdown for empty properties not affordability

i am not sure but probably councils might keep such data as the empty houses will have tax rebate! probably some one might have complied that info
edit: got the data for 2008. it is from a charity so might be under reporting the problem if they have missed some data. (no chance of over reporting i guess) see empty homes statistics for 2008 but they have some 700,000 homes as empty. i dont know where the other reprot got the million figure from though. dont know if that was more recent govt data. the report is by this charity, the update on their website says 783830 homes empty now