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Debate House Prices
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Is a new house price crash looming?
doire_2
Posts: 2,280 Forumite
http://www.thisismoney.co.uk/mortgages-and-homes/house-prices/article.html?in_article_id=499343&in_page_id=57&ct=5
Gazumping, excessive asking prices and stranded first-time buyers: greed is back in the housing market.
The average property has increased in value by £15,300 in just seven months, according to Halifax. It's a remarkable turnaround from the 14% annual falls reported last April.
But Money Mail's experts warn hopes of a rapid housing recovery may be unfounded and that these statistics are misleading sellers into asking too much for their homes.
Many of our panel of experts warn house prices could fall significantly by the end of the year.
Peter Hargreaves, of Hargreaves Lansdown, compares our situation with the U.S. where some homes have fallen in value by 60%. He and investment expert Justin Urquhart Stewart suggest property prices will plunge 10% here.
Mr Hargeaves argues the UK market is artificial and unrealistic. He says: 'Without Government intervention there would have been more job losses, more repossessions and lower house prices.'
Estate agents say sellers are already putting their homes on the market at overinflated prices.
Money Mail has seen examples where, in the past week, buyers have been gazumped by £30,000 on a £600,000 property, and an incredible £50,000 on one worth £250,000. However, there is a pile of evidence suggesting the recent recovery may be unsustainable:
• Lenders have warned they may be forced to introduce mortgage rationing for the first time since the Eighties.
• House prices are increasing so rapidly in some areas that first-time buyers cannot save fast enough to build a deposit.
Last month, prices increased by £1,000, yet someone on the national average wage of £25,000 would take home just £500 more than this every month.
• New research suggests the figures are being skewed by price rises in just 7% of postcodes - largely confined to southern England.
• In 93% of postcodes, prices have mainly stayed the same or, in fewer cases, fallen.
• Borrowers with small deposits are being asked to pay up to £300 a month more for an average £150,000 loan than those with larger deposits.
A significant majority of chartered surveyors in London, the South-East, South-West and East Anglia are reporting price rises. But in the North and West Midlands, there are large falls.
Meanwhile, property firm Hometrack says that in those 7% of postcodes where prices are rising, homes are worth almost a third more than those in the rest of the country. Many of these price rises have been boosted by City bankers, who are still getting huge bonuses and are able to pay extra for homes.
The property hotspots can even be incredibly localised. For instance, in Grimsby, Lincs, one postcode area, DN33, has seen price increases of 3%, while a neighbouring one has seen falls of minus 2.3%. This table shows the towns that are the biggest risers and fallers.
'I was gazumped - twice!'
Unlucky Andrew Whitmore was gazumped twice looking for his new home.
The 25-year-old financial adviser from Trowbridge, Wiltshire, first put an offer in at the asking price of £100,000 for a two-bedroom house in the town last September. He then upped the offer to £105,000 and it was accepted. But, two weeks later, he was told that another offer of £115,000 had been accepted. He pulled out.
In October, Andrew, who is a former estate agent himself, made an offer of £125,000 on a two-bedroom bungalow. It was accepted, and the house was taken off the market. But, four weeks later, he was told another offer of £130,000 had been accepted.
Andrew says: 'I was absolutely furious. I told them I wasn't going to play their game, they could take my offer or I'd walk. 'So it was with great satisfaction when the agent rang me three weeks later to say they were willing to accept my original offer, as the other one had fallen through. 'There are so many buyers and so few homes for sale that sellers have again got the upper hand.'
But any wider recovery could be undermined by mortgage rationing. The collapse of the wholesale borrowing markets - which were behind the boom in the last decade - has left a £300billion hole in lenders' pockets.
This is the gap between what banks and building societies need to lend to keep customers on good deals, and what they can actually give out from available funds.
At present, most money for mortgages comes from deposits made by savers - but this will only go a little way to plugging this gap. A spokesman for the Council of Mortgage Lenders says: 'Customers are going to find that mortgages will be rationed. It will be the only way that lenders can strike that balance between the supply and demand for mortgage funds.
'It could last for many years to come unless this choke-chain is released and lenders can return to the money markets to fund borrowing.'
Despite recent improvements, mortgages are still scarce for those with small deposits. Someone with a 10% deposit faces repayments on an average £150,000 loan that are a whopping £272 a month more than someone who has 25% to put down. It is homeowners with huge deposits and cash-buyers who are driving the market forward, leaving those who want to step on to the property ladder stranded.
However, there is evidence that the recent price rises are starting to slow. For the first time in more than a year, the time it took to sell a house rose - to 8.6 weeks in January. And estate agents reported that the number of properties on their books almost halved as sellers wait for further improvements.
A report in The Economist found that UK house prices were overvalued by 29%. A fall this big would wipe £51,000 off the average house price of £169,777, according to figures from Halifax.
Richard Donnell, director of research for Hometrack, says: 'There is a danger the skew in transactions towards higher-value property in better-off areas has led to the general health of the housing market being overstated, especially when set against the backdrop of an economy emerging from a recession.'
Dan Cowl and his girlfriend Krista Beamish have moved in with his parents to help them save to buy their first home.
They are putting aside about £700 a month and have built up savings of £5,500.
Dan, 27, a group engineering manager for a manufacturing company in Tewkesbury, Glos, says moving in with his parents Ian and Bernie in Gloucester was the best way to cut his and Krista's outgoings.
He says: 'I've tried to repay my debts as fast as possible - I had a £3,000 student loan and £2,000 on a credit card. After that we've just been cutting back more and more to save as much as possible. It's such a concern that house prices are rising quicker than we can save. Every month it just gets further away. And at the end we'll need such a big mortgage that we may not even be able to afford it.'
One and two-bed flats around Gloucester currently cost upwards of £120,000. To have any chance of buying, Dan and Krista will need a 15% deposit, which they hope to have by 2011.
Gazumping, excessive asking prices and stranded first-time buyers: greed is back in the housing market.
The average property has increased in value by £15,300 in just seven months, according to Halifax. It's a remarkable turnaround from the 14% annual falls reported last April.
But Money Mail's experts warn hopes of a rapid housing recovery may be unfounded and that these statistics are misleading sellers into asking too much for their homes.
Many of our panel of experts warn house prices could fall significantly by the end of the year.
Peter Hargreaves, of Hargreaves Lansdown, compares our situation with the U.S. where some homes have fallen in value by 60%. He and investment expert Justin Urquhart Stewart suggest property prices will plunge 10% here.
Mr Hargeaves argues the UK market is artificial and unrealistic. He says: 'Without Government intervention there would have been more job losses, more repossessions and lower house prices.'
Estate agents say sellers are already putting their homes on the market at overinflated prices.
Money Mail has seen examples where, in the past week, buyers have been gazumped by £30,000 on a £600,000 property, and an incredible £50,000 on one worth £250,000. However, there is a pile of evidence suggesting the recent recovery may be unsustainable:
• Lenders have warned they may be forced to introduce mortgage rationing for the first time since the Eighties.
• House prices are increasing so rapidly in some areas that first-time buyers cannot save fast enough to build a deposit.
Last month, prices increased by £1,000, yet someone on the national average wage of £25,000 would take home just £500 more than this every month.
• New research suggests the figures are being skewed by price rises in just 7% of postcodes - largely confined to southern England.
• In 93% of postcodes, prices have mainly stayed the same or, in fewer cases, fallen.
• Borrowers with small deposits are being asked to pay up to £300 a month more for an average £150,000 loan than those with larger deposits.
A significant majority of chartered surveyors in London, the South-East, South-West and East Anglia are reporting price rises. But in the North and West Midlands, there are large falls.
Meanwhile, property firm Hometrack says that in those 7% of postcodes where prices are rising, homes are worth almost a third more than those in the rest of the country. Many of these price rises have been boosted by City bankers, who are still getting huge bonuses and are able to pay extra for homes.
The property hotspots can even be incredibly localised. For instance, in Grimsby, Lincs, one postcode area, DN33, has seen price increases of 3%, while a neighbouring one has seen falls of minus 2.3%. This table shows the towns that are the biggest risers and fallers.
'I was gazumped - twice!'
Unlucky Andrew Whitmore was gazumped twice looking for his new home.
The 25-year-old financial adviser from Trowbridge, Wiltshire, first put an offer in at the asking price of £100,000 for a two-bedroom house in the town last September. He then upped the offer to £105,000 and it was accepted. But, two weeks later, he was told that another offer of £115,000 had been accepted. He pulled out.
In October, Andrew, who is a former estate agent himself, made an offer of £125,000 on a two-bedroom bungalow. It was accepted, and the house was taken off the market. But, four weeks later, he was told another offer of £130,000 had been accepted.
Andrew says: 'I was absolutely furious. I told them I wasn't going to play their game, they could take my offer or I'd walk. 'So it was with great satisfaction when the agent rang me three weeks later to say they were willing to accept my original offer, as the other one had fallen through. 'There are so many buyers and so few homes for sale that sellers have again got the upper hand.'
But any wider recovery could be undermined by mortgage rationing. The collapse of the wholesale borrowing markets - which were behind the boom in the last decade - has left a £300billion hole in lenders' pockets.
This is the gap between what banks and building societies need to lend to keep customers on good deals, and what they can actually give out from available funds.
At present, most money for mortgages comes from deposits made by savers - but this will only go a little way to plugging this gap. A spokesman for the Council of Mortgage Lenders says: 'Customers are going to find that mortgages will be rationed. It will be the only way that lenders can strike that balance between the supply and demand for mortgage funds.
'It could last for many years to come unless this choke-chain is released and lenders can return to the money markets to fund borrowing.'
Despite recent improvements, mortgages are still scarce for those with small deposits. Someone with a 10% deposit faces repayments on an average £150,000 loan that are a whopping £272 a month more than someone who has 25% to put down. It is homeowners with huge deposits and cash-buyers who are driving the market forward, leaving those who want to step on to the property ladder stranded.
However, there is evidence that the recent price rises are starting to slow. For the first time in more than a year, the time it took to sell a house rose - to 8.6 weeks in January. And estate agents reported that the number of properties on their books almost halved as sellers wait for further improvements.
A report in The Economist found that UK house prices were overvalued by 29%. A fall this big would wipe £51,000 off the average house price of £169,777, according to figures from Halifax.
Richard Donnell, director of research for Hometrack, says: 'There is a danger the skew in transactions towards higher-value property in better-off areas has led to the general health of the housing market being overstated, especially when set against the backdrop of an economy emerging from a recession.'
Dan Cowl and his girlfriend Krista Beamish have moved in with his parents to help them save to buy their first home.
They are putting aside about £700 a month and have built up savings of £5,500.
Dan, 27, a group engineering manager for a manufacturing company in Tewkesbury, Glos, says moving in with his parents Ian and Bernie in Gloucester was the best way to cut his and Krista's outgoings.
He says: 'I've tried to repay my debts as fast as possible - I had a £3,000 student loan and £2,000 on a credit card. After that we've just been cutting back more and more to save as much as possible. It's such a concern that house prices are rising quicker than we can save. Every month it just gets further away. And at the end we'll need such a big mortgage that we may not even be able to afford it.'
One and two-bed flats around Gloucester currently cost upwards of £120,000. To have any chance of buying, Dan and Krista will need a 15% deposit, which they hope to have by 2011.
0
Comments
-
I think so, we have yet to feel the worst of the depression/recession.
Stock Market to plummet also.
N.Never be afraid to take a profit.
Keep breathing. :eek:
Just because I am surrounded by FOOLS does not make me wise. :j0 -
I think so, we have yet to feel the worst of the depression/recession.
Stock Market to plummet also.
N.
What value do you think the FTSE100 will plumet too? When do you think this will happen?"I can hear you whisperin', children, so I know you're down there. I can feel myself gettin' awful mad. I'm out of patience, children. I'm coming to find you now." - Harry Powell, Night of the Hunter, 1955.0 -
Harry_Powell wrote: »What value do you think the FTSE100 will plumet too? When do you think this will happen?
3,236 at 15.48 on the 22nd November!0 -
Not Again0
-
Is a new house price crash looming?
To be honest if we look at the article I posted yesterday, it seems apart from a very small portion of the country, the last crash is still going strong with no sign of it waning, in fact it's likely to gather pace as the government's unsustainable policies fall by the wayside.0 -
mystic_trev wrote: »3,236 at 15.48 on the 22nd November!
Well, the chap stated with such certainty that we would see a crash that I felt sure he had some inside information he could share with the forum. I'm not above a little insider dealing amongst MSE friends
"I can hear you whisperin', children, so I know you're down there. I can feel myself gettin' awful mad. I'm out of patience, children. I'm coming to find you now." - Harry Powell, Night of the Hunter, 1955.0
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