December Rightmove Figures - London 6.8%, Nationally 3.2%

Turnbull2000

Good to see London going strong as certain forum members predicted.





(Those figures are DOWN by the way, not UP. And let's annualise those figures like EAs and vested interests loved to do when prices we getting out of hand and tearing apart the country...

London -81.6%

Nationally -38.4%

Oh, they'd also have you know that HIPS is to blame. Not the credit crisis and an asset price bubble. No Sir. Those are minor indiscretions compared to a £400 survey)


Oh aye... London house price fall of 6.8% in past month stokes ecomomy fears

Doozergirl

Are we not good enough to be provided with a link?

beingjdc

It doesn't seem to be up on the website yet, but it's on the Times and Metro news pages. I'd say there's some HIP distortion, but not this much. Paradoxically of course that will help those who deny that prices are falling, as next month will show them going up, as the distortion element falls out of the prices, and it'll be "market recovers as interest rate cut takes hold"...

jamesd

London house price fall of 6.8% in past month stokes economy fears: "In Kensington and Chelsea, the average asking price in December was £1,572,814, compared with £1,653,696 a month ago. In Hackney, prices fell from £473,377 to £425,007. However, house prices in the West London borough had risen by 41 per cent in the past year ... However, the impact of the downturn has been magnified by sellers putting their homes on the market before compulsory and costly Home Information Packs (HIPs) were introduced for smaller properties last week ... 'Many sellers who have listed this month have priced below the market to try to sell. It is wrong, however, to speculate that prices will continue to fall based on one month’s statistics from a quiet December'".

Just what the numbers report is important here: it's average asking price, not average asking price for properties with the same number of bedrooms.

The introduction of HIPs previously caused an increase in Rightmove average property asking price as high value properties were put on the market just before they became subject to them. Easy to understand: total property value divided by number of properties increases if the proportion of high value properties increases, even if there's no change at all in property values. That effect may be getting washed out of the numbers now and causing a drop back to normal and beyond as lower value properties get the HIP effect and reduce the average in the same way the high valued ones increased it.

Better to rely on mortgage lenders and Land Registry numbers at the moment, or any figures that are for the same property type. Those that aren't for properties with the same number of bedrooms are going to be distorted and unreliable for a while.

Turnbull2000, you got your annualised numbers wrong. 6.8% a month with compounding is an annual drop of 57%, to 43% of the starting value. Easy to calculate in Windows calculator: 1 - 0.068 [= button] [x^y button in scientific mode] 12 [= button] [- button] 1 [= button] answer: -0.5704, a 57% drop. The national 3.2% monthly drop corresponds to a 32% annual drop. But these are misleading because of the HIP short term effect distorting the property mix.

Your calculation failed because multiplying by 12 fails to take account of the 6.8% in the second month being 6.8% of a lower starting value, instead your calculation takes 6.8% of the initial value as a number in Pounds (say 6,800 on a 100k property) then reduces the property price by that same 6,800 each month. It's the complement of the same mistake with positive interest compounding: 6.8% positive interest is an increase of 120% in a year, not only 81.6%. You're gaining the interest on the interest in the increase case and don't lose the loss on the previous loss in the decrease case.

merlinthehappypig

I've put this as a link on the HPC thread, but that thread seems to have got swamped by one poster at present so I've been avoiding it.

Full text here from todays FT for those who don't subscribe (and well written and interesting it is too):

This has been the year when many deeply held beliefs have been challenged. One such belief was that central banks have the toolkit to sort out any conceivable economic or financial crisis.
Last week’s co-ordinated liquidity action by five central banks taught us that this is not the case. The idea was that a co-ordinated response would reassure the markets, but it had the opposite effect. It turned out that market participants are not infinitely stupid. They know by now that this is not a liquidity crisis at its core. If it had been, it would be over by now.

It is a fully fledged solvency crisis that has arisen because two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors on the brink of bankruptcy, some hanging on by their fingertips. Yet there is nothing the central banks are offering at this stage to alleviate a solvency crisis.

So the message from last week is that central banks have no game plan. Expect continued stress in financial markets for most of next year and possibly beyond. Expect also further declines in property prices in the US and the UK and spill-overs to the real economy.

As the European Central Bank correctly noted in last week’s financial stability report, the crisis is not going to be over until and unless there is a turnround in the property sector. But we are not going to see this for quite some time, not even in the US where the property market downturn began in 2006. In the UK, property prices have only recently started to fall.

I looked at the Nationwide house price index for the UK, which goes back to the early 1950s. After adjusting for inflation, the result is a line with two interesting characteristics. The first is that there is a surprisingly stable linear trend, with only a moderate upward shift. Real prices go up over time but not by much, and any deviations from the line are followed by a return to trend. The second is that past bubbles were relatively symmetric – both in extent and in time.

In the UK the latest upward movement has lasted 10 years and on my calculation prices started to rise above the trend line somewhere between 2000 and 2002. That would suggest that the downturn phase is going to last as long – possibly longer since downward moves often undershoot the trend line. Unless there has been some structural shift, there is going to be one of the most serious housing downturns ever.

Homeowners and mortgage lenders are always clinging to the hope that there may have been a structural shift. But even then, it is not at all clear whether such a shift would necessarily raise the position or the slope of the trend line. For example, an increase in housing supply or some regulatory restriction on credit may well lower it.

In an environment in which central banks target a low rate of inflation, the lion’s share of the adjustment will have to come from falling nominal house prices. That was different in the 1970s, when high inflation took care of the real price adjustment. But an inflation-targeting central bank cannot allow that to happen.

This raises the question of whether central banks, or governments, should consider raising their inflation targets. That would be a huge mistake, in my view, but I expect such a debate to hit us next year. Higher inflation would make it easier for indebted mortgage holders to cope with a multi-annual fall in real house prices.

Here is the basic arithmetic. Let us assume that the housing downturn is going to last eight years. A 2 per cent annual inflation rate – the target of many central banks today – adds up to 17 per cent inflation for the entire period; and a 4 per cent annual rate adds up to 37 per cent. So if UK house prices have to fall 40 per cent in real terms – which is not exaggerated given the extent of the bubble – an annual inflation rate of about 4 per cent would take care of the problem. Nominal houses prices would then not have to fall.
This is an experiment I would dearly love to watch, though preferably from outer space. A hypothetical increase in inflation targets would, I think, turn the current episode of turmoil into an uncontrolled financial crisis. Bonds would become the next asset class to crash and we could also expect violent adjustments in global exchange rates.

I suspect that central banks would dearly love to choose the semi-soft option – to allow a temporary overshoot in inflation targets and pray that people do not raise their inflation expectations. But that option has already been over-stretched, given that inflation expectations are already rising everywhere.

The bottom line is that inflation-targeting central banks will end up doing little more than swamp the financial markets with liquidity, and defend themselves against accusations that they had anything to do with this mess.

$$$_12

Saved well over 2/3s of my annual salary by not buying in London before the beginning of last month. £28K down!

Just shows how out of sync asking prices are with actual prices as HIPs is probably getting rid of the kiteflyers.

Still 8% up on the previous Dec though so not too much to celebrate yet (even if you thought Rightmove was actually a credible index).

jamesd

chriseast, that's an opinion piece Hold tight, the central banks have no plan by Wolfgang Münchau of Eurointelligence rather than news.

While personally I'd gain from a 50% drop in house prices in one year I think he's too pessimistic in writing as if the central bankers of the Western world are clueless. Being clueless isn't how you get to be a central banker.

The liquidity problem has been widely speculated to be worse at the moment because banks are hoarding cash for their end of business year. Hence the one month money being lent today by the Federal reserve Bank in the US. If this is a big part of the reason for liquidity trouble we might see some improvement from say the middle of January.

In the UK we've already had a big injection of medium term money: the Bank of England has funded Northern Rock while savers moved their money to other places, notably the building societies, who have been using it for mortgage lending while the banks have been more reluctant. Big shot in the arm for the building societies, at the expense of Northern Rock shareholders.

Add in the three month money from the Bank of England later this week and give time for the end of year issue to pass and we get again to mid January as the next time when I'll be looking on with interest to see if things start to improve or not. If they don't, the central bankers get to try something else. Maybe six month or one year or two year lending. Lots of options still around for them to use if they see the need.

It's looking as though 2008 is going to be an interesting time for people who have lots of deposit money accumulated and who are looking for a good deal.

beingjfc, the trouble in January will be telling the difference between the HIP effect reducing and the passing of the end of financial year effect. Add the central bank liquidity moves. Three different things, all of which should have a positive effect... if we don't see some improvement by the end of January I'll be significantly more pessimistic about the markets (but optimistic about me and housing - a quick 50% crash is lovely for me).

jonewer

Of course its churlish to dismiss HIPs outright and it makes sense to state that more smaller properties have come on the market recentley, which may distort figures.

However, it should be remembered that Rightmove blamed HIPS when they were introduced for 4 beds and the index fell -2.7%, yet surely the glut of larger properties should have pushed the market UP not DOWN.

IMO, HIPS are a very minor variable.

ds1980

Turnbull2000 wrote: »

Good to see London going strong as certain forum members predicted.





(Those figures are DOWN by the way, not UP. And let's annualise those figures like EAs and vested interests loved to do when prices we getting out of hand and tearing apart the country...

London -81.6%

Nationally -38.4%

Oh, they'd also have you know that HIPS is to blame. Not the credit crisis and an asset price bubble. No Sir. Those are minor indiscretions compared to a £400 survey)


Oh aye... London house price fall of 6.8% in past month stokes ecomomy fears

chelsea and kensington is not london its a borough of and the most expensive. 1 bed flats sell for more tahn you'd earn in a lifetime hardly a statement to say the whole property market is fallign aprt. The stitches are coming oput thats for sure but now 6.8%.

2 houses on my st went under offer within 2 days in the last week. No drop of 6.8% there and at a time of continuing doom and gloom.

Let's see what happen's in the new year and all have a lovely xmas!

BettiePage

I really don't see how Hips are to blame as £2-400 in the grand scheme of a £200k+ property is a minuscule amount.

ruggedtoast

ds1980 wrote: »

chelsea and kensington is not london its a borough of and the most expensive. 1 bed flats sell for more tahn you'd earn in a lifetime hardly a statement to say the whole property market is fallign aprt. The stitches are coming oput thats for sure but now 6.8%.

2 houses on my st went under offer within 2 days in the last week. No drop of 6.8% there and at a time of continuing doom and gloom.

Let's see what happen's in the new year and all have a lovely xmas!

Surely you mean that 2 houses in your street had offers in the last week? Dont be surprised if you see those For Sale boards back up in January.