Panic selling by landlords could turn slump into rout

dopester

Thrugelmir wrote: »

House prices are outside of Government control. They may be influenced by changes in tax etc, ultimately market forces will determine what they are.

Why are the banks going to go insolvent due to house prices? First quarter results from LloydsHBOS showed flat lending at far higher margins. The mortgage banks its fair to say are now steadily repairing their balance sheets at borrowers expense. With improved lending criteria the situation looks increasingly sound. The black cloud on the horizon for the banks is exposure to Greek debt and Greek Government bonds.

The progressive tightening of credit availability is the external force that will stabilise house prices for an extended period into the future.

Increasingly sound? Brace yourself for a bit of a shock; house prices are going to crash hard from these levels - UK wide - imo.

a) The Government can influence prices on the way up (I won't let house prices get out of control = FSA light touch regulation, allowing finance to come from new financial instruments sold within the market with AAA ratings = boom.), And temporarily delay correcting market forces... political pressure against repossessions, political leaning on banks to lend more and write mortgages for people above the banks' own risk assessment in the post-boom climate, mortgage rescue schemes, backing QE, Treasury influence over BoE.

b) What? Don't read too much in to one or two providers accepting 10% deposit. The banks are going to tighten up further. There's a £300 billion funding gap in the mortgage market + other variables such as credit revulsion + lenders are set to begin repaying emergency funding (2008) in 2011.

BBC News 4 May 2010

Despite the recent revival in profitability of the UK banking system, lenders are still demanding deposits from borrowers averaging 25% of the value of the homes being purchased.

And mortgage lenders have continued to warn that from 2011 onwards banks will have to repay the government the £300bn it provided in emergency loans during 2008.

This suggests that mortgage rationing will continue for several years, though the availability of funds has been thawing slightly in recent months, according to the financial information service Moneyfacts.

c) Make your mind up.

chucky

dopester wrote: »

Increasingly sound? Brace yourself for a bit of a shock; house prices are going to crash hard from these levels - UK wide - imo.

they may or they may not drop...

how many times have you said this Dopester? it's been a number of times that you've made this call and still nothing. i'm not saying that you're wrong in your call because none of us can predict the future.

what i am questioning (in a nice way), how many times will you say that they're going to fall before you say you could have been wrong.
it's got to stop at some point.

StevieJ

Oil_Shock wrote: »

That's one reason, the other reason would be the forced increase of IR's. We only have to look at Greece. I remember saying to StevieJ sometime ago that there is just as much chance of needing a deposit to get a house in 10-15 years time as there is a shotgun and shells. I believe he gave me short shrift.

However we only have to look at the riots and civil unrest in Greece, that is set to get much worse as austerity measures bite to see that this could easily happen and happen quickly.

There you go again and you wonder why

dopester

chucky wrote: »

what i am questioning (in a nice way), how many times will you say that they're going to fall before you say you could have been wrong.
it's got to stop at some point.

You are correct Chucky. I'll have to stop - either when the market changes significantly enough to begin proving my position correct - or should conditions go against me to such an extent that I'm forced to accept I've been proven wrong and admit others, perhaps yourself, were correct.

In my opinion, many unintended and damaging consequences are slowly but decisively playing out. Trying to support high house prices and high rent levels against a background of a very changed funding/market situation, is a serious drag on other economic activity.

I'm expecting a sudden event to force rebalance. To force a stop to mortgage rescue schemes, to political pressuring of lenders to lend, in favour of having to accept reality over wishful thinking (imo).

Gen indicated a scenario where it could be a 25% fall in value over 25 years, which might not be so bad for many an existing landlord and home owner.

My own view is we've got significant cyclical forces in play, on top of the credit crunch itself - and unintended consequences trying to get back to this so called "normality" market as in this BBC article - which was proven to be wholly unsustainable.

"But lending figures show that there is only a slight improvement in the market; we still have a way to go before the market returns to any sort of normality," he added.

(Increasing numbers of baby-boomers seeking to cash in on high end properties which have HPI'd beyond belief to downsize with a nice sum towards good pension. Fewer people wanting to take on £100K+ to upsize from a house where they have less debt. Fewer jumbo mortgages and ever tighter qualification requirement to do it even if they wanted to. Rise in stamp duty on £1m+ homes designed towards supporting the FTB stamp duty free scheme - another drag. Public sector cuts (!), garden-size taxes - you could go on and on with negatives on the horizon weighing on the market.)

We're going to begin to see all the main house price indexes register some significant falls during the rest of this year imo, but I don't know just how long until the markets might force a sudden and heavy deflationary response. Any time from tomorrow to within the next 3 years - just my own assessment. There are enough downsides in play to keep my belief the situation is still very volatile for house prices. Sorry - that is just my honest belief.

chucky

dopester wrote: »

We're going to begin to see all the main house price indexes register some significant falls during the rest of this year imo, but I don't know just how long until the markets might force a sudden and heavy deflationary response. Any time from tomorrow to within the next 3 years - just my own assessment. There are enough downsides in play to keep my belief the situation is still very volatile for house prices. Sorry - that is just my honest belief.

this is why i like you Dopester - your posts have logic and do provide an argument.

i'd only agree with you if we were in a situation where we would have forced sellers (no Government will allow that) or there was a lack of credit again (the current amount of credit maintains house prices now so this has to be maintained and it seems to be increasing).

unless there is a change in these (which i doubt) i'm not in your team