only anecdotal but USEFUL

happinessfactory

We had dinner with a much older family friend last week. He is very, very senior at a very, very well-known merchant bank and has his fingers in all sorts of financial and political pies.

He was quizzing us about our house-buying situation (flat sold back in April, haven't been able to find anywhere to buy, aged 34, desperate to get married, biological clock a ticking time-bomb). OH was/is v depressed about the situation.

Big City Chap: "What great timing. You're set up to take advantage of the market."

OH: "Not really, no-one's reducing their asking price and we're totally priced out of the area (London zone 2)."

Big City Chap:"They will. Come April, today's vendors are going to be toast."

Basically, he thinks all the BTLs are going to take profits / bail out of the market whilst they still can, mortgages are going to get more expensive, redundancies are just round the corner, and then house-prices will be all set for a 'perfect storm'.

Of course, everyone and his dog has an opinion on the London housing market, and in the past we've let things go in through one ear and out of the other because we are looking for a home rather than an investment, but given how well-connected this guy is, and the extent of insider information to which he's privy, it does give pause for thought...

dolce_vita

"You don't need a weatherman to know which way the wind blows"


Bob Dylan 1965

happinessfactory

dolce_vita wrote: »

"You don't need a weatherman to know which way the wind blows"


Bob Dylan 1965

You'd have thought so, wouldn't you?

Nope.

We offered on a house last week at 15% under the asking price (125k more than previous ceiling price on the street). It's been on the market since May and they haven't had a single offer. The Agent told us (apologetically), "they're taking it off the market and putting it on again in the Spring."

And in our neck of the woods, only one house seems to have reduced its asking price - after 10 months on the market, they've dropped the price from £925k to £850k (still laughable considering it's hideous, backs onto a rough estate, needs loads of work, and is a good mile and a half from the tube - try £650k and you might get some interest...)

I was beginning to think I was the odd one out for being so pessimistic, but now it finally looks like I'm in good company:T

lynzpower

Ive been talking about this for ages.

Anecdotally property has been sticking a bit around our patch. Flats have been vacant & on the market for months on my road- 10 mins from tube overlooking epping forest. Peroid 2 beds flats ( SOF) for 239 getting reduced, then getting relet. All 4 of them were multi agent. Larger houses backing onto us,large family semis & detached have been sticking about for a while, too, despite being not badly price for zone 3. http://www.rightmove.co.uk/viewdetails-16191518.rsp?pa_n=12&tr_t=buy

I was an estate agent for oooh about 5 minutes earlier in the madness of Feb march this year. I was working for a aggressive EA, and most were completley focused on selling- even they were starting to wrorry about the trade - depsite business apparently booming! Sealed bids on one bed council flats going well over 275 in terrible estates. Then buyers started pulling out with jitters. So I left.

Worked for a major property websifte for a few months, and was working with HIPS. I was speaking to Eas every day. they were pessimistic, not only about hips, but interest rates were bothering them.

Now, people who "dont show an interestin property" that I know have started saying "you did well, selling at the right time" I sold in October last year!! I think its certainly filtering down to the "masses" that the market in london is not looking so good. ( I sold to rent, being of ill health and worried about the market- thanks to MSE!)

A freind, has a 3 bed period house on the market. Has had one viewing in 7 weeks.

Ive seen a few 3 bed maisionettes in East london for 169- 175 bracket recently. When I was looking earlier in the year I couoldnt find ANYTHING for under 235 in the areas I would have been prepared to live in.

Generali

IMO, there's a housing market at the moment that isn't 'clearing'. Put simply, that means that sellers are putting a higher value on what they're selling than buyers are on average.

This can't continue indefinitely - either buyers have to pay more (demand rises) or sellers accept less (supply falls). My feeling is that demand can't rise due to the credit crunch restricting the funds available for mortgages to buy so ultimately supply must fall so the market can clear. This will take a long time unless economic woes cause an increase in forced sellers.

My belief is that this is exactly what will happen but we'll see. I've been calling this since 2005 at least (including the credit crunch bit). The credit crunch is the only bit I've been right about so far....

carolt

To see where we might be heading, have a look at:

http://news.bbc.co.uk/1/hi/business/7073131.stm

Frightening stuff - particularly the map of Cleveland and it's truly awful repossession statistics.

The voices of those who were convinced that what the USA has suffered could never happen here have become strangely muted of late - maybe one of them will be along in a minute to tell me I'm wrong and the UK is different and property prices here (unlike the US) can only ever go up, but I'm not sure many have the confidence to declare that any more...

Any takers?

lynzpower

thank you Carol T.

That link is fantastic. The information on Cleveland is staggering. :eek:

real1314

Ok, people think prices might be too high, therefore prices *will* fall, but unless interest rates are a problem most people do not *need* to sell.

The Exchecker/BoE will therefore protect the interest rate to ensure this is not a problem, but will keepit high enough to maintain the threat, hence, nil HPI (or thereabouts) for 2-3 years.

imho

Generali

real1314 wrote: »

Ok, people think prices might be too high, therefore prices *will* fall, but unless interest rates are a problem most people do not *need* to sell.

The Exchecker/BoE will therefore protect the interest rate to ensure this is not a problem, but will keepit high enough to maintain the threat, hence, nil HPI (or thereabouts) for 2-3 years.

imho

It's a good argument and might even be right. However there are a couple of flaws as far as I can see:

- As we have a large current account deficit* there is a constraint on monetary policy (interest rates) as if the MPC tries to maintain a policy where the UK has negative real interest rates, the value of the pound will fall, increasing the price of imported goods and thus causing inflation (A Bad Thing) and reducing peoples' spending power.

- The longer the current market impasse goes on, the more people will be forced sellers (eg need to move for some reason or want to sell an investment place to retire) and so the more downward pressure is put on prices.




* That is to say we import a lot more than we export. This is often called the balance of payments by journalists but that is not correct. The balance of payments must always = 0 by definition (ie be in balance as implied by the term). At present the UK is a net seller of £s to make up the difference between the value of what is imported and what is exported. The BoE needs to maintain a certain interest rate to encourage foreigners to keep buying £s. Either that or the UK cuts consumption of imported goods by approximately £2000 per household per year.

carolt

Absolutely agree that the first thing to go will be transaction volumes, as sellers who can't achieve their desired price just pull out rather than reduce - that is clearly happening already with the 35% ish drop in mortgage approvals since last October, announced yesterday.

But whilst initially there are not that many forced sellers, there are some eg those facing repossession, going through divorce, inheritances etc - and in a very quiet market these will be the ones marking the new price levels. Also, all the BTL/'developers' wanting to get out quick before they lose all their profits/end up in negative equity then put their stuff on the market, particularly after April.... leading to vastly increased supply with no increase in demand. The credit crunch hitting city bonuses and jobs and reducing demand further, especially in the key London region. Worried banks further reducing the amount they will lend to cover their own profits, further reducing demand....

I think anticipating a period of zero growth/falls is wishful thinking. Whatever the Bank do to interest rates is largely immaterial anyway, as currently the market is setting it's own rates, somewhat higher than the banks, and general thinking now appears to be that banks will probably not pass on the full value of any rate cuts to the consumer anyway.

Again, anyone care to disagree?

Jonbvn

If the US goes into recession, which looks highly likely, then I think the UK will follow suit. In such circumstances, the last post supporting any HPI will be removed, and we could be looking at a proverbial bloodbath.

Time to batten the hatches?