London Has Peaked

Bubble_and_Squeak

Crashy_Time wrote: »

No, it hasn`t been explained, and your patronising tone doesn`t hide the fact that you just can`t engage with the debate. Posting paragraph after paragraph of waffle, that could be written in three lines, just shows that you are out of your depth, and past your bed time.

speaking of bedtimes
the bubble (me, not the property market) needs a RELAX
lets see what property-bee reductions tomorrow brings

wotsthat

Crashy_Time wrote: »

The thing is though, you don`t , that is part of your problem. The other is that you have totally overestimated the Ponzi`s ability to become a "New Paradigm"

You've shown from the links you've posted you don't have the first clue about the Edinburgh market. Do you still think prices didn't rise between 1998 and 2004?

Until you came here you were still thinking there was a chance that a big crash would make you a winner. Maybe it's you that overestimated the Ponzi's ability to become a new paradigm.

In_For_A_Penny_2

Jason74 wrote: »

I know the question wasn't directed at me, but I'll throw my own answer in anyway. Supplky in my area is dramatically up in recent Months.

As for why this has happened, I think it's a simple case of the market having overshot. Prices are up about 40% from last spring, which is clearly unsustainable. That led to a complete frenzy earlier in the year, with multiple offers over asking price being the norm for a while. That frenzy has now burned out, while at the same time the possibility of higher prices has brought a lot of new supply into the market.

With that frenzy burned out, buyers are thinking twice, while some sellers are looking to cash in at favourable prices.

All of that means that the balance in my local market has shifted from sellers to buyers. That certainly doesn't mean that a crash is imminentent. As you say, the drivers for demand are still very much there. But it does mean that we have entered a new stage in the market, where buyers have the upper hand over sellers (albeit at much higher prices than 12 Months ago). If I was a betting man, I'd wager that my area will see prices flat, or maybe down a small amount (5% or so) over the next 6-12 months, but that the long term trend probably still remains upwards.

Value your input Jason!

I too am looking a few specific areas in the UK with a view to buying my first home. I've been following these closely over the past 24 months while I see out a work contract elsewhere. Anecdotally at least, there has been a large increase in properties for sale in these areas over the past 3-6 months.

Perhaps this is just normal variation or my biased interpretation of things but I'm just trying to understand who & why people might think its now a good time to sell. . .

I'm looking at larger family homes - so not typically the BTL type so I don't think BTL investors "cashing in" explains it. I still don't see why home owners feel now is a good time to sell even though the market is (probably/possibly) at a high. Unless they are downsizing (a small proportion) or selling to rent (a tiny proportion), they are unlikely to benefit from increased prices.

Perhaps then it is second home owners who are looking to cash in? You used the word "frenzy" to allude to the fact that there may have been a degree of speculative buying from some quarters and agree this certainly seems to have happened to a degree. . . for true supply to increase in the current climate this is the only group I can see who might look to sell now in sizeable numbers. This is also the only way I can see falls in house prices as it may prompt a "herd mentality" with others in this position looking to cash in.

I have no figures to back up my pondering so I don't know what proportion of the market this represents - I would be interested if anyone else does? Having said all that, I can't see any of the above resulting in more than a minor correction to prices as the groups mentioned probably constitute only a small proportion of the market.

Jason74

In_For_A_Penny wrote: »

Value your input Jason!

I too am looking a few specific areas in the UK with a view to buying my first home. I've been following these closely over the past 24 months while I see out a work contract elsewhere. Anecdotally at least, there has been a large increase in properties for sale in these areas over the past 3-6 months.

Perhaps this is just normal variation or my biased interpretation of things but I'm just trying to understand who & why people might think its now a good time to sell. . .

I'm looking at larger family homes - so not typically the BTL type so I don't think BTL investors "cashing in" explains it. I still don't see why home owners feel now is a good time to sell even though the market is (probably/possibly) at a high. Unless they are downsizing (a small proportion) or selling to rent (a tiny proportion), they are unlikely to benefit from increased prices.

Perhaps then it is second home owners who are looking to cash in? You used the word "frenzy" to allude to the fact that there may have been a degree of speculative buying from some quarters and agree this certainly seems to have happened to a degree. . . for true supply to increase in the current climate this is the only group I can see who might look to sell now in sizeable numbers. This is also the only way I can see falls in house prices as it may prompt a "herd mentality" with others in this position looking to cash in.

I have no figures to back up my pondering so I don't know what proportion of the market this represents - I would be interested if anyone else does? Having said all that, I can't see any of the above resulting in more than a minor correction to prices as the groups mentioned probably constitute only a small proportion of the market.

I think there's a few issues to consider to be honest. Firstly, I think BTLs cashing in might be more of an issue than you think, even for family homes (although this will vary a lot based on area). I'm considering making what would probably be my last move at the moment to a 3/4 bed family house, and a surprising number of properties coming on are BTL cashing out. And if you're an investor, that makes sense. If the back end of a 40% rise in prices isn't a good time to cash out, when is ?. After all, even in the unlikely (imho) event that prices continue to power ahead, nobody ever went broke taking a profit.

I also think a lot of homeowners will be looking to make a move on the back of price rises. Im a few cases, this will make sense, as the rise in prices provides an equity cushion that makes the move , even though the overall cost of the move is likely to be more as a result of price rises (after all, if everything goes up by 20%, 20% of a larger number is more than 20% of a smaller one). If people didn't need the additional equity to move, they're actually being pretty irrational to move as a result of price rises, as the cost of their move has just gone uip. But people odften are irrational in a market, and the lack of many people's basic financial literacy when it comes to things like the cost of a move is remarkable imho.

The third thing you mention, is the simple impact of the herd mentality, and this shouldn't be underestimated. All the time that prices are powering ahead, people are panicking to buy, believing that they have to buy now or miss out forever. At the same time, sellers see prices rising, so decide to sit back and wait a bit as they'll get more if they do. That creates increaed demand and reduced supply, so the rises become a self fufilling prophecy and you get the frenzy I referred to.

Eventually, that frenzy exhausts itself, with prices a lot higher than they were at the beginning. Once that happens, you get more sellers coming on, thinking that it's a good time to sell. At the same time, buyers become more cautious, realising that prices are no longer steaming ahead, and they're no longer competing with 40 people at an open day for a modest house in a very ordinary London suburb. Suddenly, the market dynamic has changed, and it's a buyers market, albeit at a much higher level.

That's exactly what has happened near me in the last 18 Months or so. A red hot market becoming a frenzy, c40% rises in 18 Months or so, and at about june / July, burnout.What happens next is anybody's guess. The only thing I would (almost) rule out, is a return to mega increases in the next 6-12 Months. Some will go to the other exsee this as the start of a crash, as that frenzy swings 180 degrees and becomes a panic. I personally don't see that as likely in the absense of a major economic shock, but herd behaviour (not to mention that there are several things out there that coulc cause a major economic shock) means that it's a risk any buyer should be aware of.

For me, a period of stagnation is the most likely outcome, possibly with some small falls (or at least the possibility of a few individual "bargains" in relative terms). Imho, the factors that cvaused the frenzy haven't gone away, albeit much of the pent up demand has been satisfied. And those facors will combine with a relative lack of forced sellers to put a floor under prices if they fall away by a significant amount.

But the above is just my personal view, and only really relevant to a relatively small area of suburban south London. Other areas will be at different stafges (indeed, "listening" to some on here, it sounds like there are parts of SE England where a frenzy is just kicking off!). And in any event, I'd be wary of anyone who says that they know what is going to happen.

Sorry for the longer post than planned, but hope it's of some help.

In_For_A_Penny_2

Good post! Echoes most of my thoughts. . . Agree I can't see anything drastic happening by way of falls unless something fundamental changes in the economy and that could be 5, 10, 15 years away. Who knows.

Jason74 wrote: »

But the above is just my personal view, and only really relevant to a relatively small area of suburban south London. Other areas will be at different stafges (indeed, "listening" to some on here, it sounds like there are parts of SE England where a frenzy is just kicking off!). And in any event, I'd be wary of anyone who says that they know what is going to happen.

Sorry for the longer post than planned, but hope it's of some help.

I think the effect London has on the wider market shouldn't be underestimated albeit with a certain expected time lag. Market sentiment is such a huge factor.

Sadly I live in the SE, love the area but am destined to go live somewhere else - too unaffordable for me!

Bubble_and_Squeak

an excellent post jason74.
certainly agree with the herd mentality factor.
i find that in london we have many people from other countries who don't know that we have property bubbles over here. they think prices can only ever go up and will only ever go up. i remember very vividly an indian colleague of mine reading an article in the standard and sighing "house prices will be double in five years" with a sad look on his face. i tried to explain that we have property bubbles regularly over here but he didn't want to believe it. the power of the heard was just too strong to defy.

Neil21

I have been watching the South London market closely for over a year now as a flat in Streatham I had an offer accepted on fell through last October. I have definitely noticed a massive change in sentiment. From open houses to lots more supply to choose from.


I am trying to work out who is still buying? Post MMR and loan to income caps first time buyers has been reduced due to less affordability.
With the large rises in prices we have seen the net yield on BTLs are now wafer thin if any at all and now even if the market only flat lines then BTL for capital appreciation doesn't make sense.
Overseas investors have been reduced to the rising pound, Russian sanctions, the Chinese property bubble starting to implode, the Euro is expected to tank as Mario starts their own version of quantative easing and the capital gains tax for non residents being introduced in April.
This is all without mentioning interest rate increases and FLS being reduced.

Supply of property in Streatham South London has increase from 500 properties on the market last December to 1108 in August 2014. As well as every available piece of space in London seems to be being built on for flats I don't see how these prices can be sustained for much longer.

padington

I've got a friend buying around brockley, they say it's an apsolute nightmare with loads of competition. Looks like they are going to accept an offer on their house without buying another one as an interim solution because sellers arnt interested unless you have cash up front.

Bubble_and_Squeak

Neil21 wrote: »

I have been watching the South London market closely for over a year now as a flat in Streatham I had an offer accepted on fell through last October. I have definitely noticed a massive change in sentiment. From open houses to lots more supply to choose from.


I am trying to work out who is still buying? Post MMR and loan to income caps first time buyers has been reduced due to less affordability.
With the large rises in prices we have seen the net yield on BTLs are now wafer thin if any at all and now even if the market only flat lines then BTL for capital appreciation doesn't make sense.
Overseas investors have been reduced to the rising pound, Russian sanctions, the Chinese property bubble starting to implode, the Euro is expected to tank as Mario starts their own version of quantative easing and the capital gains tax for non residents being introduced in April.
This is all without mentioning interest rate increases and FLS being reduced.

Supply of property in Streatham South London has increase from 500 properties on the market last December to 1108 in August 2014. As well as every available piece of space in London seems to be being built on for flats I don't see how these prices can be sustained for much longer.

this is exactly what i'm seeing in the post codes i'm looking at.
only tottenham and leyton are defending their bubble gains.
i expect tottenham to buckle once the glut of new build rat cages hit the market.

Bubble_and_Squeak

padington wrote: »

I've got a friend buying around brockley, they say it's an apsolute nightmare with loads of competition. Looks like they are going to accept an offer on their house without buying another one as an interim solution because sellers arnt interested unless you have cash up front.

why don't they buy in walthamstow?
they'll be giving them away soon