UK Property Market Stagnating

[NormanH]

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3716586.ece

[Alan Zoff]

Talking to a surveyor friend today. (A proper, trained surveyor who also does some estate agency work, rather than an 18-year-old estate agent with wide tie, spiky hair-cut and Porsche ownership aspirations.)

He does a lot of valuation work for lenders and now finds himself with something of a dilemma. Unlike the local estate agents, he has been saying for ages that property prices have been overstated. However, he has had to join the herd to an extent with his valuations as it has been an inescapable fact that prices achieved have - until now - continued to rise relentlessly. If he had valued houses for what he considered them to be worth, he would have been accused of grossly undervaluing and lenders would have ceased instructing him. While the market continued with its barmy rise, none of this really mattered.

However, how should he value property today? At what it has recently been fetching, or what he thinks it will fetch next year or in five years time? The traditional approach has been to draw comparisons with similar properties that have been sold recently, allowing for condition. But how much use is that to a lender if the market value of the security is about to drop by 25 -30% in value? He is not expected to have a crystal ball but he still wonders if he faces being sued for negligence if lenders are left with large shortfalls when they repossess.

I imagine that as well as being rather careful when wording his reports, he will be looking closely at the terms of his professional indemnity policy.

[Russethouse]

Doesn't it depend very much on where your friend practices his craft ? And what sort of property ?

Some flats, studio's etc are probably going to lose value because they are in many cases buy to let investments and some people are looking to off load them.

Remember in London, prices still went up last month...

[dragonrouge]

Alan as a lawyer I can tell you that there are both Court of Appeal and House of Lords decisions on the question of negligence of lets us say FRICS.

That is why you see restrictions as to liability contained within their reports.

Phrases such as 'we did not have access to the loft...........................we were unable to verify..............it was not apparent on first inspection............we were unable to formulate an opinion.

The only question the law will now pose is 'Would a FRICS possessed of the same knowledge as xyz valued the property in a like manner'  In other words the reasonable man test.

I too would be looking to update my insurance limits.

regards

[NormanH]

Latest news on this:

http://www.guardian.co.uk/money/2008/apr/15/houseprices.housingmarket

[AnOther]

The downturn in the market combined with the collapse of consumer confidence has put a very serious dent in government revenue from stamp duty and VAT so I'd be watching for where darling Darling might be looking to claw that back from.

There would not seem to be too many too many un-levredged avenues open to him so I'd watch out for some creative thinking highly likely to be dressed up as giveaways [:-))]

 

[Russethouse]

Yesterdays comment was that Gordon Browns sole thought was the economy - in which case what is Alistair Darling actiually for ?

[Ian]

Those of you old enough to remember the last UK property slump (and a Tory govt.) may recall Spitting Image's take on house prices [:)]

http://www.youtube.com/watch?v=2t8YTvdYXws

[Ian]

Another little clip (I know its doing the rounds by email, but thought I'd post it for those not seen it yet) - great music by "The Primitives" too

http://www.parkerchris.pwp.blueyonder.co.uk/vocationvocationvocation.html

[mint]

Enjoyed both clips, thanks Ian.

By the way, caught the end of a prog on TV last night that featured some people who bought buy-to-let flats (I think near Manchester) for £135K (SIGHT UNSEEN!!!) about a year to 18 months ago and now same flats going under the hammer at auction with no takers at £75K.

Scary................Also compulsively watchable!  Rabbits and headlights come to mind.

 

[NormanH]

This site is interesting: apologies if its been posted before

http://www.propertysnake.co.uk/

[AnOther]

I saw the programme and found it hard to work up much sympathy as the people featured had, on the whole, been greedy, unbelievably stupid, and thus were the authors of their own misfortunes.

Sorry if that sounds harsh [:'(]

[Ian]

Well, I guess we are all largely the authors of our fortunes and misfortunes.  Every small business or investor has to struggle to manage the two emotions of greed and fear - and sometimes striving to do your best for your family's future can mean you make (in hindsight) dumb decisions - so much for "as safe as houses"!

[AnOther]

The thing is Ian the individuals portrayed were neither small businesses nor real investors but just ordinary people who saw a "get rich quick can't lose" bandwaggon that everyone else seemed to be jumping on and decided to join the party.

There is a case in one of the weekend papers for instance where a group of so called "investors" got together to buy some flats in a block of 15, exchanged contracts, but when the surveyer for the mortgage provider went round to value them he downgraded the asking price by some 25% or 30% (I can't remember exactly) and of course, they now want to pull out but can't without massive losses. Doh, doh, and double DOH [:-))]

I don't believe these can be fundamentally ignorant people but they obviously put their collective common sense on hold for this one.

No investor in the real sense of the word would have touched these schemes with a bargepole.

 

[Gluestick]

[quote user="Ian"]Well, I guess we are all largely the authors of our fortunes and misfortunes.  Every small business or investor has to struggle to manage the two emotions of greed and fear - and sometimes striving to do your best for your family's future can mean you make (in hindsight) dumb decisions - so much for "as safe as houses"!


[/quote]

In MH experience Ian, and I speak as an ex- occasional lecturer, External Examiner and Moderator to a university BSchool (Mainly Financial Strategic Management Development at MBA level) and some little experience as a Strategic Consultant with a raft of SME exposure, allowing greed to interfere with the cold analytical process of planning and operation, is usually the time when an otherwise reasonably successful businessman or woman decides the email from the nice Nigerian gentleman, urgently seeking assistance is real!

I also watched the Tonight programme and was amazed at the sheer cupidity of idiots in charge of sufficient of a credit rating, that an even more stupid banker would allow them a facility!

Sadly, it's nothing new and it will happen again.

As Mark Twain said, the one lesson we learn from history: is that we never learn from history!

And his wondrous words apply more to bankers than possibly to any other of the sub-species, which inhabit cities like London and New York.

 

 

[Ian]

You are right Gluey, practically everyone is subject to greed and fear - and when it gets the better of us good sense flies out the window.

 Not everyone's intelligence is necessarily financial-intelligence, perhaps they have linguistic intelligence, relationship intelligence or artistic intelligence instead.  Not everyone has the background (and accumulate years of knowledge and experience) of a post-grad financial-whizz. And not everyone gets a good roll of the dice.

They may not be stupid - though some of their financial decisions may appear in hindsight to have been dumb.  When they took those decisions they took the very best decision they could with the knowledge and resources they had at the time.  No doubt, they too in hindsight have learnt something. They have paid a high cost for that education.

I do have a good deal of sympathy for them.

There is always someone smarter than you - and if you look hard you can find someone less smart/fortunate.

In my experience, as someone with a French O'level and CSE grade 1 in technical drawing I'd choose not to label someone as stupid if they weren't millionaires by the time they are 30 - and likewise I'd find it unpalatable if Mark Zuckerberg (founder of facebook.com) say, if he labelled me as stupid cos I wasn't a billionaire by my 30th birthday. 

[Gastines]

I have every faith in the business acumen of the Building Societies and their staff. Some years ago I had a Mortgage for the grand sum of £15k.An endowment I hate to say.   I decided to pay it off early and phoned the endowment provider to ask what the position was at that time. A shortfall of £4k?? When I sold the property and the Solicitor had dealt with everything I recieved a cheque for £19K+. ?????   I phoned to ask if the Woolwich were supposed to get their £15k back or could I keep the lot?  They asked me to return their cheque and they would re-issue the correct one.

On selling another house,  the Solicitor got settlement figure from the Leeds. I duly pocketed the balance and departed to France. 4 Months later my Solicitor phoned to say the Leeds wouldn't release the Deeds as a balance  was owing?? I duly forwarded a cheque and about 6 months later got a  cheque back from the Leeds as they had made a mistake.

It fills me with confidence that us working folk entrust our lives/homes and cash to these companies.Perhaps a few more quid spent on staff training and a little less fingers in the till might be a good start.

Regards. 

[Patf]

We had a very c-cked up correspondence with the notorious Northern Rock last year, just before they went bust. Looking for a cheaper mortgage on our house in the UK, they were the only BS who would offer one. But they kept sending the wrong forms, lost our cheque etc. In the end we backed out, then came their downfall. So stayed with the Halifax, who also have made blunders, lost stuff etc.As you say not easy to put your trust in them.

[Gluestick]

[quote user="Ian"]You are right Gluey, practically everyone is subject to greed and fear - and when it gets the better of us good sense flies out the window.

 Not everyone's intelligence is necessarily financial-intelligence, perhaps they have linguistic intelligence, relationship intelligence or artistic intelligence instead.  Not everyone has the background (and accumulate years of knowledge and experience) of a post-grad financial-whizz. And not everyone gets a good roll of the dice.

They may not be stupid - though some of their financial decisions may appear in hindsight to have been dumb.  When they took those decisions they took the very best decision they could with the knowledge and resources they had at the time.  No doubt, they too in hindsight have learnt something. They have paid a high cost for that education.

I do have a good deal of sympathy for them.

There is always someone smarter than you - and if you look hard you can find someone less smart/fortunate.

In my experience, as someone with a French O'level and CSE grade 1 in technical drawing I'd choose not to label someone as stupid if they weren't millionaires by the time they are 30 - and likewise I'd find it unpalatable if Mark Zuckerberg (founder of facebook.com) say, if he labelled me as stupid cos I wasn't a billionaire by my 30th birthday. 
[/quote]

Ian, I mainly agree, of course.

That said, the lenders who supported these unfortunates ought properly to be excoriated as ought all the surge of outfits running courses - which cost upwards of £4K - to teach the gullible how to become a property millionaire in five weeks...................

Perhaps worst of all, these conmen are still running such courses!

And this is where the FSA ought to have stepped in years ago.

 

[Ian]

Here Here!

[dragonrouge]

Gastines when you received the settlement figure did you have any concerns that the figure was incorrect?  Did the cheque from the Leeds equate to the original cheque you sent them?

[dragonrouge]

Sorry I forgot to mention something.  When I moved in December 2007 and sold a house in Normandie and to move further south I was given by the Notaire a cheque that was some 70000 euros more than was due to me.

I knew that they had simply got it wrong.  Should I have brought it to their attention or banked the cheque?

I could not bank a cheque that was not due to me so we had to wait until someone went to the main office cancelled the original cheque and then came back to the sub office with the correct cheque.

I was then late for the completion in the Vendee and where the Notaire gave me a hard time!

[Gastines]

Patf. I trust that when the Halifax make an error you send them a bill?  Over the last 4years we have had one payment of £500 and 5 payments of £50.and one for £150.I kid you not.  We have had so much trouble caused by their incompetence it is like a comedy of errors. An earlier one was when we first asked about a Home Improvement Loan about 15 years ago,the quote they gave my wife didn't even repay the capital borrowed. When we said." Yes please,we'll take it," they kept putting off our appointment and once returning from a London site to Bournemouth to keep the appointment,they asked us to go to the Poole branch. On a Saturday at 11.00am. Basically an impossibility due to traffic and parking. Yes,another bill for £50.

We have found that the first letter or e-mail  of complaint, they advise that they will deal with it in 8 weeks.They usually manage to lose your letter etc and so you have to keep at it. For the £500 we ended up going to the Financial Ombudsman. Not a route to follow unless you have a strong heart and won't be fobbed off.

Make a point of complaining about their lack of service and errors and you might make more than the interest you are supposed to get. Having cancelled  a Halifax account and asking for the sum to be transfered to another bank ,it took them 15 days to complete this simple task.I suppose that's how THEY make their bonuses

Regards. 

[Benjamin]

[quote user="Gastines"]

We have found that the first letter or e-mail  of complaint, they advise that they will deal with it in 8 weeks.They usually manage to lose your letter etc and so you have to keep at it. For the £500 we ended up going to the Financial Ombudsman. Not a route to follow unless you have a strong heart and won't be fobbed off.

 

[/quote]

Interesting point. About eight years ago we had a complaint about an IFA. Several letters went backwards and forwards until a friend suggested asking them about getting the Financial Ombudsman to arbitrate.

Unbeknown to us, if a complaint is made against a financial organisation they immediately have to deposit  500  pounds with the  Financial Ombudsman aginst  possible costs. The IFA,  by return, sent a cheque for the amount under dispute of 545 pounds.

 

[Gastines]

Same with the banks. Nat West failed to pay a standing order which caused me some grief. They offered £15 compensation. I asked for a letter to be sent to the S.O. recipient stating it was a bank error,copy to me,so that I wouldn't get a black mark on my credit rating. Sent the manager a bill for £154.[odd amounts never seem to be queried] for time spent phoning bank etc etc. The amount was paid into my account the next day.

Regarding the original subject of house prices, I note today that 120 building contractors are being investigated by the Office of Fair Trading for price fixing. Perhaps we will be able to see some affordable housing being built now or perhaps this only applies to contractors on the Olympics site?

One thought that went through my mind at a dreamy moment. If the Government moved the Immigrants that are on benefit and other benefit families to these areas where we see rows and rows of boarded up houses, would it help the economy of these areas? The money recieved would be spent in the locality and the houses would have to be brought up to a reasonable standard, thus creating a spiral of work income for a run down area?

Regards.