UK Property Market Stagnating

[Benjamin]

I don't know if this is the correct section for this but if you're dependent on selling in the UK before you buy here don't hold your breath.

Nearly two thirds of chartered surveyors, close to a historic high set in

1990, saw house prices fall last month, a new survey has shown.

The number of surveyors who reported house price falls increased to 64.1% in

February from 54.7% in January, almost reaching the 64.5% mark from June 1990,

the Institution of Chartered Surveys reported.

Surveyors said enquiries from new buyers continued to fall, with many

borrowers struggling to raise finance to buy. Of the around 400 Charted

Surveyors polled 37% reported a fall in enquiries, down from 35% in January.

‘Confidence in the market is clearly having an effect on prices. A

combination of a lack of available finance and weakening demand is causing a

slow drop in capital values,’ said Ian Perry, RICS spokesman.  

Stocks of unsold property is building up on surveyors’ books, another sign of

weak demand. 

Unsold stock leapt by more than 8%, with each surveyor having an average of

92 properties on the books in February up from 84.7 homes in January. 

‘While there is very little new supply coming onto the market, it is unlikely

that there will be significant price drops in the short term but the build up of

unsold stocks will encourage buyers to negotiate lower asking prices,’ Perry

said.

The Scottish housing market defied the gloom, with the number of surveyors

reporting a rise in housing prices surging to 25% in February from 7% in

January.

Unless you live in Scotland that is.  [:)]

[Pads]

You little ray of sun shine you ................[:)]

[dexter]

Benjamin, see my reply to `selling in england,buying in france` from yesterday for the harsh reality of property priced between £250,000 and £300,000 in the North of England.

[Gastines]

Perhaps Darling Darling will feel a little compassion tomorrow and raise the capital amount before the 3% stamp duty kicks in but don't hold your breath.

Regards.

[PeterG]

Nearly two thirds of chartered surveyors, close to a historic high set in 1990, saw house prices fall last month, a new survey has shown.

The number of surveyors who reported house price falls increased to 64.1% in February from 54.7% in January, almost reaching the 64.5% mark from June 1990, the Institution of Chartered Surveys reported.

 

No,......... it's the house price increase which is falling.

see http://news.bbc.co.uk/1/hi/business/7289134.stm last section.

We are not in a negative equity situation yet but most media publication would like to think so, as well as trying to talk us into a recession.

[Benjamin]

PeterG

If the following is the quote you are referring to, I know which sources I'd rather trust i e Rics as opposed to DCLG. Sorry but I much prefer to listen to a professional body than a Government department that has a vested interest in telling the Public that everything in the garden is rosy. Gordon's ducks are coming home to roost.

Slowing prices

Meanwhile the government's own house price survey shows that house price inflation continues to slow down.

The survey for January, by the Department for Communities and Local

Government (DCLG), shows house prices were rising at an annual rate of

8% that month, down from a revised rate of 8.4% in December.

[PeterG]

Try these then. Halifax and Nationwide property index.

http://www.hbosplc.com/economy/includes/06_03_08HousePriceIndexFeb2008.doc

http://www.nationwide.co.uk/hpi/  Both show it is the rate of increase that has fallen.

Royal Institution of Chartered Surveyors (RICS)

Put simply, this survey reflects confidence in the property market rather than what is actually happening to house prices.

Three hundred surveyors and estate agents in England & Wales are asked if they feel prices are falling or rising.

Respondents are also quizzed on a host of other related issues, such as whether the number of buyers and sellers are rising or falling.

Generally speaking, the RICS survey is the first to show any sea change in the market.

[Benjamin]

Thanks for the detailed links. Your final sentence says it all for me.

If prices are lower this month than last, then prices  are falling. If this were to be a one or two month blip then annual percentage figures remain a good guide to an overall trend but I believe, and I think that is what the Rics survey is also saying, at best the UK house market is stagnating and at worst it will show a significant decline.

[Gluestick]

I would as much trust any mortgage lender's numbers on house price values as I would an estate agent!

Or a car trader's integrity when he tells me that "This model is very rare and very hard to get hold of!"

They all tend to suffer from "Buy now whilst they're cheap!" syndrome.

All lenders and the CML, for the past five months or so have stated that their new mortgage lending is much down: they have also agreed that mortgages are hard to obtain and they are being picky, particularly with re-mortgages.

New money from the interbank market for mortgage lenders is now non-existant.

Thus from these disparate bits of data we can pretty confidently conclude that it's only really good credit risk profile borrowers who are obtaining new mortgages, on much lower LTVs than before.

In both the early 70s and late 80s house price fiascos, estate agents had "A lot on: and nothing much happening!"

The true value of any asset is what you can obtain for it in a real concluded sale: not on a billboard offer.

As before, people have an inflated concept of what their house is worth; it's conditioning caused by a few years of insanity.

With tighter lending parameters  -  lower LTVs, lower Income Multiples and shorter tenors  -  there will be less real buyers willing and able to conclude purchases.

No mortgage lender is really going to encourage the view, post the idiocy of Sub Prime and etc, of their book lending to asset value ratios growing rapidly, now are they! Their shares would tank: overnight!

And as for surveyors, carrying out off the cuff valuations for lenders, they also are hardly going to admit that with valuation, they are not market makers, but market reactive agents, pure and simple!

Each and every day, we learn about the latest round of price rises and cost inflation: today it's grains having tripled which again feeds through into the food market.

If incomes had honestly kept pace with the last year's rises in utilities, food, energy, road fuel, interest charges and shortly council tax, then inflation would be hitting double figures!

And that's the hidden and core problem for the Bank of England's MPC and Government, shortly: as inflation starts to build, then they only have one clumsy way to try and control it: interest rate rises: which destroys the residential property market, as more and more obligors default: many are already technically in default!

The killer, later on this year, will be when circa 2.5 million low start and fixed interest deals end: with no other lenders to turn to, most of these borrowers will be in trouble, since all they have been doing as the market rose insanely, was to flip into yet another cheap start deal.

Exciting times..........................

 

 

 

[Higgy]

We have just sold our 2 Bed Bungalow to move to a larger place in rural Northumberland and we got slightly

under the asking price but we had catered for this in the original  price, it was only on the market for 7 days though.

I think the Estate Agents would say It's a buyers market '.

 

[tj]

Since the market downturn in UK is only just beginning, and the forecast is for at least a 30% fall in house prices over the next 5 years.

And given that the French market is relatively stable at present, I would suggest now is the best time for those contemplating the move over to France to sell in the UK.

And as sterling is also expected to lose groung to the euro, I dont see a better time to make the move. 

[WJT]

Not that I am disagreeing with you because I don't have a clue, but would be interested to know where you got that information on the 30% fall for UK property in five years.

[tj]

A news report BBC I think, about a month ago.

I was in the business during the last recession late 80's early 90's and these things tend to take a longtime to pan out, and given the absolute reckless lending practices over the last 10 years this time can only be worse.

We can already see it is impossible for a single person to legitimately acquire sufficient funding for even the most modest purchase, a big reason why prices must come down, no first time buyers no market simple as that.

 But in large part the problem will stem from the number of repossesions which is set to be much higher than the last time as a result of negligent lending and sharp practice of buy to let property developers etc.

If I were in the UK I would be selling now, investing and renting for a while, and when the time is right grab a bargain many people ended up in bigger houses better locations and for a lot less in the early 90's.

 When the repossesion frenzy kicks off, agents will be swamped with bargain property and normal stock will go to the wall until its over, you cant sell a house for 200,000 when the repo next door or down the street is up for 170,000 or less after 4 or 6 weeks. Once an eviction order is in place the lender doesnt really care, its a damage limitation exercise and they just want a quick sale, and they will sell for whatever they can get.

[Alan Zoff]

Regardless of what I read from estate agents or lenders, solicitor contacts tell me two things: conveyancing business is quiet; and desperate sellers are having to accept much less than they originally expected.

But that will settle down, as will the mortgage market - provided the UK does not go into a serious recession. Ultimately, the housing market depends on people having jobs and being confident that those jobs are secure. If employment levels hold up, the natural desire of the British to own property will maintain the housing market. If we see widespread unemployment, house prices will tumble.

Now, do I trust Brown and Darling with the UK economy? More importantly, after recent fiascos, does the rest of the world trust them?

And how much will it take before financial institutions decide that they could transact business equally well, perhaps more cheaply - and for the benefit of another host economy rather than the UK's - in somewhere other than London? If you saw the programme a little while back by Peter and Dan Snow, you might have been surprised to discover just how dependent the UK economy is on the success of London's money markets, insurance business, etc. A large part of the nation's wealth filters out and down from that one source. If that golden goose disappeared, in the absence of a manufacturing base, what would the UK have left? Would the pyramid collapse? This is not a new risk, and up to now inertia seems to have been the order of the day. But the world is becoming ever more competitive in all areas. New technology and the people who drive it can make established ways of doing things - and thinking on how to do things - redundant very quickly.

Interesting times ahead....

 

 

 

 

 

[Gluestick]

Alan:

I agree with much you state, excepting:

[quote]Ultimately, the housing market depends on people having jobs and being confident that those jobs are secure. If employment levels hold up, the natural desire of the British to own property will maintain the housing market. If we see widespread unemployment, house prices will tumble.[/quote]

The insane price escalation of property from 1997 was driven by one main causal factor and one factor only, with subsidiary causal reaction: that as he admitted last May to the House Select Committe on Finance examining the success or other of Bank of England Independence, Eddie George and the MPC synthetically depressing base rates to their lowest historic level for 50 years+ to try and avoid the UK economy sliding into recession just after Blair became PM.

Added to this (reaction cause) was frenetic competition amongst mortgage lenders to garner ever large shares of the residential mortgage market.

Low base rates allowed borrowers to secure ever-larger obligations predicated on the same income stream.

As a direct result of lending competition, income multiples were increased, time after time and tenor (length to maturity of the debt obligation) extended.

Finally, LTVs (Loan To Value) ratios were increased and increased until Northern Rock (e.g.), amongst others were offering up to 130%!

Furthermore, as bank lenders surpassed traditional Building Societies and eventually dominated them, the funding strategy shifted from lending deposits from members, to aggressive funds search through the Interbank Market, where all banks have, since the early 70s sourced most of their lending funds.

In wholly realistic analysis, if wages and salaries had have kept pace with house price increase, then most people would be now earning three times their 1997 incomes: clearly this is not so.

Most emotive markets rely on a sort of gullibility and essential naivity of participants: perhaps they can best be described as being like a water skiier who is not only staying afloat but making forward progress but with no tow boat! When they lose their inate confidence, then they sink like a stone!

During all of this insanity, Government did not intervene, as they ought, in their role of stewards of the economy: this was simply because the UK "Economic Miracle" was based upon residential house market price explosion; a raft of subsidiary activities participated as a trickle down, including double glazing, fitted kitchens, conservatories, carpet and floor covering, furniture, DIY, gardens, etc. a majority of the commodities imported. No wonder the Balance of Trade Deficit is so high and that the South is infested with white vans replete with ladder racks!

Interesting that again, yesterday, both the Fed and the B of E have injected liquidity into the market, in the van attempt of kick starting their respective economies: which is fine, if that cash gravitates down into the consumer loans and SME business sector: it didn't last time!

Indeed, on the news, the UK and US equities markets zoomed: thus much of that new liquidity has already been mopped up in increased share prices!

Today's budget will be interesting, to say the least!

Darling Darling now has to balance Government's greed for revenue, against the ability of the average family to afford to pay!

Most families are already struggling to meet everyday bills: with across the board increases in the real cost of living, the economy and house prices can only move one way, I fear!

 

[dragonrouge]

Remember when the banks wanted to get into the estate agent business for it was an opportunity for them to cross sell and look where that got them.  There was a leading South Wales agent who sold at the top and then bought back his estate agent chain at the bottom.

There is one thing in all of this and which is one of the major drivers.  That ladies and gentlemen is (or should I say was) shareholder value now its about repairing the balance sheets and perhaps in five or ten years time we will see a repeat exercise for shareholders will not go away and unless they see good dividend cover then they will sell.

We own properties in both the UK and here in France and when we sold our wonderful Georgian home in Chepstow we took the proceeds and just bought another house outright and let is on a buy to let basis but no one owns it save for ourselves.  Its there for when we return and fortunately too we were able to commute our pensions to buy our French house outright.

Again we move money across on a monthly basis to pay prelevements and last week we achieve 1.27 euros to the pound.

I just now wonder where is the better place to live here in France or the UK and that of course is totally another and differing question.

[Quillan]

The other issue is the rest of Europe and the effect it will have on the UK market. Spain, Portugal, Italy are all going in to recession with the French and German banks refusing them any further credit. Ireland is even worse off now with unemployment rising and the government may have to bail out some of their banks. It is said the situation will be worse than Black Rock. All this has a knock on effect. Stormy times a head I think. There is some information here.:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/11/cnirish111.xml

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/10/cceuro110.xml

Still if you are thinking of going back to the UK then give it a month or two and you could make a few bob just on the exchange rate. In fact why not pop round to your French bank, borrow a few grand and shove it in a high interest account in the UK for a year. [;-)]

[Alan Zoff]

So Quillan, you feel sterling is a good bet at present, while tj reckons it's still on the slide.

We're back to "You pays your money and takes your choice" on that one. As ever, forecasting exchange rate movements is only reliable with hindsight!

But as has been said before, it's always relative. A currency is only weak while others are stronger. However bad the outlook might be for the UK, if european economies are expected to suffer still worse deterioration, then the £ should indeed "improve" against the euro (other factors being equal, which should never be assumed). It will no doubt happen some time, but as to when - who wants to borrow my 5 year calendar and pin....?

    

[Quillan]

Well it's good if you want to move a shed load of money back to the UK for any reason. Put it in a high interest account then move it back in a couple of years.

A chap from Bank Populaire phoned my wife up last week and offered us a large loan for our business/house at a special rate of 2.8%. I thought this was rather good, in fact I thought it was very, very good because the advert for some UK bank account that offered 11% flashed through my mind and I thought, hang on that's 7% interest and the pound will probably get stronger next year. It could be a win, win, situation in fact it could be a nice little earner I thought. Sadly not however, it seems I have to get whatever work done on my house that I need then send the bank the bill and they pay it, I would never had got to see the cash. Never mind it was a good idea while it lasted.

To be honest the money market is rather like betting on the old gee gees and I was never any good at that either (the bookie still has my shirt from the 1973 Grand National) so I think you can keep your calender and pin, but thanks for the offer. The money men are so much like the racing tipsters, be all right in the third quarter translates to something like should take the lead in the final furlong. [;-)]

[Alan Zoff]

Yep. That's exactly how  see it. (And I lost at Cheltenham yesterday.)

[WJT]

We have a UK property that we will sell at some stage in the future but I feel it would be a mistake at the moment. With all of the doom and gloom reported it will no doubt have an affect on the housing market but I still think that UK property in the long to medium term is a good investment. For those of you that are selling up or recommend to do so, I would be interested to know what you will be putting your money into nowadays that you feel will give you a better return.

Off the subject a  bit but did anyone see the BBC program last night "The Poles are Coming!"? It was very enlightening and just one small example of the very rapid population growth taking place in the UK at the moment.

[Gastines]

To WJT. Ref the Poles are coming. The point worth noting was when the reporter spoke to the locals outside the Job Centre. Out of work,don't want to work,better off not working. Untill the UK put the block on all the scroungers and the mindset that goes with it,things won't get a lot better.

Regards.

[WJT]

I agree Gastines, some of the comments were disgusting and I wish the government would do something about it. I found the program very interesting and an eyeopener but I was not complaining about the influx at all. My comments were made in this thread because I feel that this influx will be another reason the property market in the UK will not go down as much as forecasted. There is just so much land available in the UK and many new people entering will just encourage more demand.

I believe, particularly with the Polish, in time they will become more successful as shown in the program and will be buying property more and more as they settle instead of renting. I say good luck to them. [:)]

[suzy]

We will be selling our house next year to move to our chosen area of France.  If we have to take a lower asking price than we had hoped, so be it, we will have to rethink what we buy on the other side, but it won't stop us from moving, we will be downsizing anyway. 

With regard to property prices falling, in our area there has been a significant fall in the price of apartments which is due to far too many being built in the first place and buy to let owners getting out while the going is good, but good sized family houses with gardens near to good schools are still commanding premium prices.

Sue

[Gluestick]

[quote user="WJT"]

I agree Gastines, some of the comments were disgusting and I wish the government would do something about it. I found the program very interesting and an eyeopener but I was not complaining about the influx at all. My comments were made in this thread because I feel that this influx will be another reason the property market in the UK will not go down as much as forecasted. There is just so much land available in the UK and many new people entering will just encourage more demand.

I believe, particularly with the Polish, in time they will become more successful as shown in the program and will be buying property more and more as they settle instead of renting. I say good luck to them. [:)]

[/quote]

So, what about Government and the CBI's oft repeated statements about wages then?

Apparently, many of the Eastern European migrants work for less: which has been the justification for allowing such high numbers to come into the UK.

If this is so, then how will they afford even higher mortgages?