Latest House Price Inflation News (Slowdown)

phlash

Going to collate a few articles:

Nationwide's latest House Price Index shows MoM 0.1% and YoY 9.9%. Meaning in July the growth was lower than it was this time two years ago when the market had severe signs of sticking just before that infamous August Interest rate cut, which almost immediately sent house price growth rocketing. The last time this MoM figure was lower for this month was July 2000 at MoM -0.2%, when the dotcom crash was going on, before that it was July 1993 when it was MoM -1.3% (When house prices were falling). It means this is a severely weak figure, but by itself is rather difficult to conclude anything. Although from June 2007 to July 2007, the figure has gone from +1.1% down to +0.1%, that is a sharp slowdown. (Nationwide's figures are based on mortgage approvals)

The figures: http://www.nationwide.co.uk/hpi/historical/Jul_2007.pdf

The sharp decrease in July Natiowide's figures coincides with mortgage approvals for June down -11% from a year earlier, see http://uk.biz.yahoo.com/26072007/325/mortgage-approvals-fall-sharply.html

I believe this will mean a definate HOLD by the MPC in the August Interest Rate decision, unless there is some very shocking news in their quarterly August Inflation report due out on the 8th August.

Northern Rock's half year results shows a doubling of REPOSSESIONS, and a 67% increase in provisions for unsecured loans. See here: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/26/cnrock126.xml
Mix this news with the fact that many people in the next couple of months are coming off fixed rate deals and having to fix at Interest rates that could be as much as 40% higher to when they last fixed means stormy times ahead. See this times article about a mortgage timebomb: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2115098.ece

With news like the one below hitting national press far more often, and over many of the tabloids and broadsheets, it means that there is a change of sentiment on the cards, from one of complete confidence in House Price rises to one of caution. The article below was hitting the likes of the Evening Standard: http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=422711&in_page_id=57

I now eagerly await the news tomorrow at 11am from the Land Registry Quarterly report. To see what was happening in the market 6 months ago, as this index is delayed and based on actual sold prices, making it the most accurate index of all of them. The last report showed falls in 4 out of the 11 areas, and that London and NI masked a slowdown elsewhere. (These were figures from Q4 2006 effectively, and since then we have had 3 interest rate rises).

This is why in summary, I am of a bearish attitude towards housing, coupled with simple facts like average house price growth has been 204% and average earnings 92% in the last decade. When put in simple terms like those, it means something has to give, and thats either house prices stop rising and come into alignment with wages, or we get massive wage inflation. The latter being very unlikely as Businesses will not want >10% wage inflation. Is all I can do is watch the figures and make some judgement from them, and it will be very interesting to see what happens over the next 18 months.

:beer: phlash.

EDIT: "House prices plummet by up to €10,000 every month" http://www.independent.ie/national-news/house-prices-plummet-by-up-to-euro10000-every-month-1044153.html

rebeccaj

phlash wrote: »

When put in simple terms like those, it means something has to give, and thats either house prices stop rising and come into alignment with wages, or we get massive wage inflation. The former being very unlikely as Businesses will not want >10% wage inflation.

don't you mean the latter?

cells

if the next 11months grow at this rate, the yearly house price increase will be 1.3%

:beer::beer:

Gorgeous_George

cells wrote: »

if the next 11months grow at this rate, the yearly house price increase will be 1.3%

:beer::beer:

Price falls cannot be far away. Once we get past the popular house buying season, prices generally slow down. I guess this winter, prices could start to fall faster than many 'experts' expect.

At 1.3%, HPI would only cover 55% of the interest on my mortgage. After all these years of hideous HPI, I guess the feel-good factor may be about to fade.



GG

Generali

IMVHO, the only things that'll cause a big fall in nominal house prices are mass unemployment or a credit crunch.

It's very possbile that a credit crunch is on it's way. Cadbury's are the new lot having problems. They're trying to sell their US drinks subsidiary.

ravenfield

could it be because of the flooding? everyone is busy scoping water out of their house so no viewings allowed

Gorgeous_George

ravenfield wrote: »

could it be because of the flooding? everyone is busy scoping water out of their house so no viewings allowed

I know the pictures are really bad on TV but it isn't everyone that is suffering from the flooding.



GG

Generali

ravenfield wrote: »

could it be because of the flooding? everyone is busy scoping water out of their house so no viewings allowed

Possibly. I had a squizz but I couldn't see the dates it covers on the website.

wolvoman

The recent flooding in west England will only have a limited effect as it is so recent I don't even know if these figures were calculated during that period. But the previous flooding in Yorkshire will be included time-wise.

There may be some impact, after all nobody would be househunting who was in an affected area, but this would only have a small impact.

wolvoman

Also worth bearing im mind that the Nationwide figures for last month were out of kilter from most opinion and other surveys, so these figures may not be all that dramatic.

I'd be interested to know the regional variation in these figures, does Nationwide do that? After all, consensus would suggest prices have been dropping (albeit slowly) in many northern areas for some time. I suspect London and NI are still showing strong rises.

phlash

The flooding would not account for that many houses, in order to skew the statistics.

It may be a part of it, and actually could have even more a play on sentiment. As people seriously take into account flood risks on property, which could have a downward pressure on prices.

But we've always suffered from floods, we're a wet Country! If I'm looking at housing, especially newer houses, checking the lie of the land is one of my first considerations, but it hasn't been in recent times for many. Its been about getting on the market at whatever cost, irrespective of risk.