We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
British Houses Headed for long term decline - Moneyweek.
Spartacus_Mills
Posts: 5,545 Forumite
From Moneyweek email
Dear Subscriber,
Surely it’s time to sound the all clear for Britain’s housing market?
In November, house prices rose for the seventh month in a row, according to the Nationwide. Values are now up 2.7% year-on-year. Home loan approvals rose again in October. And one housebuilder, Bellway, has even said that current sales are 10% ahead of last year.
So why are we still bearish? Because this isn’t the whole story. In 2010 and beyond, prices could head right back down again. Here’s why...
4 reasons why house prices are headed for long-term decline
Last week’s upbeat housing news was seized upon by property bulls as a further sign that the market has bottomed. It comes on top of the most recent unemployment figures, which showed that in the three months to September, the country’s dole queues shortened slightly.
Employment data is one of the most important indicators of what’s likely to happen to property prices. So if British job losses really are levelling out, that could really bolster the market. But the opposite would be very bad news.
1. Unemployment is going to rise for a while yet
And that's the problem - that September job statistic looks like a false dawn. Even Alistair Darling confessed recently that, “unfortunately, unemployment will continue to rise for a while”.
With a general election looming next year, he wouldn’t have been keen to admit this. But it looks like he’s right. Last week a string of companies said they’re shedding labour. Steelmaker Corus is slashing 1,700 jobs in Teesside. Defence giant BAE is cutting back its workforce by another 640 as its order book suffers. City law firms could cut as many as another 5,000 employees as demand for business services shrinks. Even the Greater Manchester police force is sacking 300 officers after overspending its budget.
In short, there’s plenty more job loss pain to go round. The fewer people in work, the less cash around to buy houses and repay loans.
2. Home loan approvals are still low
The second reason is home loan availability – or rather the lack of it. Housebuilder Bellway said last week that it expects half-year sales to be up 10% on last year. But the firm is still worried that potential home buyers can’t get their hands on loan finance.
Last week’s Bank of England figures showed that home loan growth is running at an annualised rate of less than 1%. OK, October saw a modest uptick in home loan approvals. But approvals are still 40% lower than their long-term, pre-credit crunch average. What’s more, says Seema Shah at Capital Economics, they’re 30% lower than the monthly level which history suggests is required for sustained house price rises.
3. Low interest rates won't last
A third reason to be wary is interest rates. Today’s record low levels are helping millions of homeowners with their loan repayments – for now. But that’s unlikely to last for too long.
As we discussed in the magazine last month, (Will the government bond market blow up?), rates are currently being kept down artificially. (If you're not already a subscriber, claim your first three issues free here.) Central banks are printing money and buying government bonds with it. That has pushed down yields on long-term bonds. This can’t continue forever. When it stops, rates will rise again.
Add this to the double whammy of rising job losses and lending curbs, and UK house prices could suffer a lot more damage. Why’s that? Because when house prices were rising sharply, many homebuyers seriously overextended themselves. Their borrowings were much too high as a multiple of their incomes.
The only thing that’s keeping them in their homes right now is the temporary reprieve granted by those record low rates. But as Jean-Pierre Husband at credit ratings agency Fitch notes, over two-thirds of UK borrowers are now on floating rate home loans (ones that change as underlying rates change, unlike fixed rates). That compares with under half in August 2008. “Their ability to service existing debt would be adversely affected by any hike in interest rates”, he says.
In other words, higher loan costs would mean a big rise in borrowers falling behind with their repayments. That in turn would cause a surge in repossessions. And an extra dose of cut-price properties would then hit the market – and values, too. So far prices have only fallen by about 13% from their 2007 peak. But Fitch sees that drop extending by at least another 20%.
4. The supply of homes is set to surge
And finally, we come to the last big argument put up by housing bulls – that there’s a ‘lack of supply’ which is keeping prices climbing. Clearly, even if there aren’t many buyers around, if almost no one’s selling, prices must rise.
But that too could be about to change in a big way. And not just because of rising repossessions – though that won’t help. There’s something on the horizon even more worrying for property bulls.
“There are big changes in the offing which could have a significant effect on the property market”, says Lorna Bourke on Citywire. “The ‘baby boomers’ of the 1940s and 1950s are now reaching age 65 and coming up to retirement. Many intend to use their homes to subsidise this by selling up and downsizing”.
Over 1.3m over-50s plan to cash in on their properties for retirement purposes, says new research from insurer LV=. This implies more than a million properties coming onto the market over the next few years. Many of these will be in upper price brackets where, supposedly, there’s currently a shortage. So even if many of the ‘downsizers’ buy back into the market at cheaper price points, the amount of money about to be extracted from UK housing will be huge.
In a nutshell, this completely blows the ‘lack of supply’ case right out of the water.
Add this all up, and it’s very hard to see how UK house prices can avoid falling into a long, and painful, decline.
Dear Subscriber,
Surely it’s time to sound the all clear for Britain’s housing market?
In November, house prices rose for the seventh month in a row, according to the Nationwide. Values are now up 2.7% year-on-year. Home loan approvals rose again in October. And one housebuilder, Bellway, has even said that current sales are 10% ahead of last year.
So why are we still bearish? Because this isn’t the whole story. In 2010 and beyond, prices could head right back down again. Here’s why...
4 reasons why house prices are headed for long-term decline
Last week’s upbeat housing news was seized upon by property bulls as a further sign that the market has bottomed. It comes on top of the most recent unemployment figures, which showed that in the three months to September, the country’s dole queues shortened slightly.
Employment data is one of the most important indicators of what’s likely to happen to property prices. So if British job losses really are levelling out, that could really bolster the market. But the opposite would be very bad news.
1. Unemployment is going to rise for a while yet
And that's the problem - that September job statistic looks like a false dawn. Even Alistair Darling confessed recently that, “unfortunately, unemployment will continue to rise for a while”.
With a general election looming next year, he wouldn’t have been keen to admit this. But it looks like he’s right. Last week a string of companies said they’re shedding labour. Steelmaker Corus is slashing 1,700 jobs in Teesside. Defence giant BAE is cutting back its workforce by another 640 as its order book suffers. City law firms could cut as many as another 5,000 employees as demand for business services shrinks. Even the Greater Manchester police force is sacking 300 officers after overspending its budget.
In short, there’s plenty more job loss pain to go round. The fewer people in work, the less cash around to buy houses and repay loans.
2. Home loan approvals are still low
The second reason is home loan availability – or rather the lack of it. Housebuilder Bellway said last week that it expects half-year sales to be up 10% on last year. But the firm is still worried that potential home buyers can’t get their hands on loan finance.
Last week’s Bank of England figures showed that home loan growth is running at an annualised rate of less than 1%. OK, October saw a modest uptick in home loan approvals. But approvals are still 40% lower than their long-term, pre-credit crunch average. What’s more, says Seema Shah at Capital Economics, they’re 30% lower than the monthly level which history suggests is required for sustained house price rises.
3. Low interest rates won't last
A third reason to be wary is interest rates. Today’s record low levels are helping millions of homeowners with their loan repayments – for now. But that’s unlikely to last for too long.
As we discussed in the magazine last month, (Will the government bond market blow up?), rates are currently being kept down artificially. (If you're not already a subscriber, claim your first three issues free here.) Central banks are printing money and buying government bonds with it. That has pushed down yields on long-term bonds. This can’t continue forever. When it stops, rates will rise again.
Add this to the double whammy of rising job losses and lending curbs, and UK house prices could suffer a lot more damage. Why’s that? Because when house prices were rising sharply, many homebuyers seriously overextended themselves. Their borrowings were much too high as a multiple of their incomes.
The only thing that’s keeping them in their homes right now is the temporary reprieve granted by those record low rates. But as Jean-Pierre Husband at credit ratings agency Fitch notes, over two-thirds of UK borrowers are now on floating rate home loans (ones that change as underlying rates change, unlike fixed rates). That compares with under half in August 2008. “Their ability to service existing debt would be adversely affected by any hike in interest rates”, he says.
In other words, higher loan costs would mean a big rise in borrowers falling behind with their repayments. That in turn would cause a surge in repossessions. And an extra dose of cut-price properties would then hit the market – and values, too. So far prices have only fallen by about 13% from their 2007 peak. But Fitch sees that drop extending by at least another 20%.
4. The supply of homes is set to surge
And finally, we come to the last big argument put up by housing bulls – that there’s a ‘lack of supply’ which is keeping prices climbing. Clearly, even if there aren’t many buyers around, if almost no one’s selling, prices must rise.
But that too could be about to change in a big way. And not just because of rising repossessions – though that won’t help. There’s something on the horizon even more worrying for property bulls.
“There are big changes in the offing which could have a significant effect on the property market”, says Lorna Bourke on Citywire. “The ‘baby boomers’ of the 1940s and 1950s are now reaching age 65 and coming up to retirement. Many intend to use their homes to subsidise this by selling up and downsizing”.
Over 1.3m over-50s plan to cash in on their properties for retirement purposes, says new research from insurer LV=. This implies more than a million properties coming onto the market over the next few years. Many of these will be in upper price brackets where, supposedly, there’s currently a shortage. So even if many of the ‘downsizers’ buy back into the market at cheaper price points, the amount of money about to be extracted from UK housing will be huge.
In a nutshell, this completely blows the ‘lack of supply’ case right out of the water.
Add this all up, and it’s very hard to see how UK house prices can avoid falling into a long, and painful, decline.
"There's no such thing as Macra. Macra do not exist."
"I could play all day in my Green Cathedral".
"The Centuries that divide me shall be undone."
"A dream? Really, Doctor. You'll be consulting the entrails of a sheep next. "
"I could play all day in my Green Cathedral".
"The Centuries that divide me shall be undone."
"A dream? Really, Doctor. You'll be consulting the entrails of a sheep next. "
0
Comments
-
They should just call themselves HPCweek and be done with it.0
-
I'm sure they had 7 reasons a few months ago.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
-
The thing is, it's not so much that I disagree with some of the individual 4 points that they raise - more that the outcome of those 4 points = house price crash number two.
There's a lot of 'this will happen and that means this will happen' vagueness.
And that point about the supply of homes is ridiculous. 1.3m over-50's to cash in on their properties = 1m properties on the market. Who did the maths on that then? Where are all those over-50's going to live? Are they just simply going to disappear? Or will they emigrate en-masse?
Ridiculous.0 -
"How to Fail at STRweek" would be more appropriate :T
"Odious crash ramping troll week" would be about right.
It's amazing that they still keep trying, they've gambled, they've lost, and now they rely on the hpc clown brigade endlessly reposting the doom monger emails to boost subscription sales.
:rotfl:
Priceless.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Spartacus_Mills wrote: »What’s more, says Seema Shah at Capital Economics,
I almost stopped reading there.
Because when capital economics say prices will fall, it is almost 100% guaranteed they will do the opposite.
Capital Economics have the WORST house price prediction record in the history of house price predictions.
But then I read more, just for fun.....Over 1.3m over-50s plan to cash in on their properties for retirement purposes, says new research from insurer LV=. This implies more than a million properties coming onto the market over the next few years. Many of these will be in upper price brackets where, supposedly, there’s currently a shortage. So even if many of the ‘downsizers’ buy back into the market at cheaper price points, the amount of money about to be extracted from UK housing will be huge.
They "may" buy back in??? !!!!!! else are they going to do, live in tents?
So lets get this clear, Moneyweek take a giant leap of faith to assume that a survey from an internet insurer regarding general intentions "implies" that a million boomers will sell their houses in the next 4 years, but only "may" buy back in.:eek:
No mention of how many elderly people would sell in a 4 year period anyway, no mention of the increase, no mention of the demand for houses, other than a statement half heartedly acknowledging an "alleged" shortgage of these very properties.
No mention of the peer reviewed published research compiled by Demographia and others identifying massive shortages, the UN population growth estimates, the ONS household growth estimates, or an attempt to analyse what will happen to the price of FTB properties if a million boomers suddenly buy them all.:rolleyes:
WOW. Staggering levels of journalistic incompetence. I can see why the hpc-ers love it.
In a nutshell, this completely blows the ‘lack of supply’ case right out of the water.
Add this all up, and it’s very hard to see how UK house prices can avoid falling into a long, and painful, decline.
In a nutshell, this doesn't even come close to anything resembling competent journalism,, let alone blow the amassed body of evidence to the contrary out of the water.:rolleyes:“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »"Odious crash ramping troll week" would be about right.
It's amazing that they still keep trying, they've gambled, they've lost, and now they rely on the hpc clown brigade endlessly reposting the doom monger emails to boost subscription sales.
:rotfl:
Priceless.
Whereas you cut n paste every PR puff coming from the property sector that gets placed in the press and media.
:T:T
More in desperation than expectation I guess.
:rotfl::rotfl::rotfl::rotfl::rotfl:
At least these guys have put forward some logical reasons as to why they are so bearish. I have a house myself, the mortgage is nearly paid, I have no plans to move but I am a bear on the market. Not because I want to see people lose money (I can make an exception in your case
) and not because I want to buy a cheap house but because I believe we are still in the middle of an almighty mess and the actions the government have taken are mere tinkering around the edges.
Talking of HPC, are you still banned.
"There's no such thing as Macra. Macra do not exist."
"I could play all day in my Green Cathedral".
"The Centuries that divide me shall be undone."
"A dream? Really, Doctor. You'll be consulting the entrails of a sheep next. "0 -
Nice one sparticus.
Keep the optimists entertained falling over themselves laughing while the rest get on with other threads
0 -
Spartacus_Mills wrote: »At least these guys have put forward some logical reasons as to why they are so bearish.
No they haven't. See post number 7.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
In 20 years time we will have a new crop of property rich landlords that DID BUY NOW. That's the bottom line.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.2K Work, Benefits & Business
- 600.9K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards