How far will house prices fall? [Volume 3]

[RYH64E]

turbobloke said:

No doubt some mortgage holders would find an extra 2% difficult but the phrase in that report "loans that breached the regulator's affordability guidelines" takes the sting out of this as affordability guidelines are just that and like chicken soup average house prices they can't reflect individual positions that well. 'The computer says' is usually a prologue to bks.

People (not you I am sure, but people like my mum) think that an increase in mortgages rates of 2% is neither here nor there, £100 becomes £102. My business mortgage is 2% above base, so 2.5% currently which would become 4.5% after a 2% increase in base rates. If I was on an interest only my monthly payments would increase by 80%, not 2%, which could cause problems for a lot of people.

[turbobloke]

RYH64E said:

turbobloke said:

No doubt some mortgage holders would find an extra 2% difficult but the phrase in that report "loans that breached the regulator's affordability guidelines" takes the sting out of this as affordability guidelines are just that and like chicken soup average house prices they can't reflect individual positions that well. 'The computer says' is usually a prologue to bks.

People (not you I am sure, but people like my mum) think that an increase in mortgages rates of 2% is neither here nor there, £100 becomes £102. My business mortgage is 2% above base, so 2.5% currently which would become 4.5% after a 2% increase in base rates. If I was on an interest only my monthly payments would increase by 80%, not 2%, which could cause problems for a lot of people.

Yes got all that but your example, which makes the situation plain, doesn't include the broadbrush 'affordability criteria' step and that was the focus of my post. Whether or not those people affected can afford any rise - such as that you describe - is not determined for the purpose of the article by whether or not they can actually afford the rise but by 'affordability criteria' which doubtless apply perfectly to some people somewhere at sometime, probably.

[turbobloke]

Another element to this is that according to articles like that quoted, folk with less equity than desirable and on a lender's SVR have been unable to move their mortgage for quite some time, so if rates go back up again they will surely be in the same position they were in before the rates went down in the first place.

As per anybody with a mortgage, the types of event that would then make payments more difficult at the new-old-rate are those that would affect almost everybody in a tough economic climate, in terms of job security and health and so on.

[RYH64E]

turbobloke said:

Another element to this is that according to articles like that quoted, folk with less equity than desirable and on a lender's SVR have been unable to move their mortgage for quite some time, so if rates go back up again they will surely be in the same position they were in before the rates went down in the first place.

As per anybody with a mortgage, the types of event that would then make payments more difficult at the new-old-rate are those that would affect almost everybody in a tough economic climate, in terms of job security and health and so on.

We know that the current economic climate is tough, we know that interest rates can only go up, we know that neither the government spending cuts nor the confirmed tax increases have yet kicked in, and we know that job security isn't what it was (even in the public sector). So the answer to the long ago posted thread title 'How far will house prices fall?'? I would be surprised if it was less than another 10% over the next few years, in actual value, more when adjusted for inflation.

[turbobloke]

RYH64E said:

turbobloke said:

Another element to this is that according to articles like that quoted, folk with less equity than desirable and on a lender's SVR have been unable to move their mortgage for quite some time, so if rates go back up again they will surely be in the same position they were in before the rates went down in the first place.

As per anybody with a mortgage, the types of event that would then make payments more difficult at the new-old-rate are those that would affect almost everybody in a tough economic climate, in terms of job security and health and so on.

We know that the current economic climate is tough, we know that interest rates can only go up, we know that neither the government spending cuts nor the confirmed tax increases have yet kicked in, and we know that job security isn't what it was (even in the public sector). So the answer to the long ago posted thread title 'How far will house prices fall?'? I would be surprised if it was less than another 10% over the next few years, in actual value, more when adjusted for inflation.

The effect so far has been as much about market contraction as price falls, having recently come to the end of 12 months of house price rises at a time when according to many on PH we would all supposedly be living in rented tents already. Forced selling may increase and cause another temporary drop as has happened on previous occasions. Then prices will rise again at some point, maybe for more than 12 months next time, at which point certain people on here will presumably be more apoplectic than usual...not suggesting that you would be

[NoelWatson]

Hometrack goes negative YOY

http://www.bloomberg.com/news/2010-11-01/u-k-house...

[TonyHetherington]

Groak - play nice, or don't play at all. There's no need for name calling and aggresiveness.

Tony (moderator)

[Trommel]

anonymous said:

[redacted]

Looking at the adverts, it appears to set a higher entry level price but I'm not convinced it has a great effect away from the very bottom.

[Digga]

I was reading the bit about the replacement of Business Link and Regional Development Agencies with Local Enterprise Partnerships (LEPs) in yesterday's ST. Seems some LEPs site a shortage of homes as one of the key barriers to enterprise.

This wouldn't surprise me, even though prices overall are toppy, since virtually nothing - in volume terms - has been built since late 2007. Housing starts are very depressed and changes to planning aren't helping any.

Don't know where this will lead us.

[NoelWatson]

Digga said:

I was reading the bit about the replacement of Business Link and Regional Development Agencies with Local Enterprise Partnerships (LEPs) in yesterday's ST. Seems some LEPs site a shortage of homes as one of the key barriers to enterprise.

This wouldn't surprise me, even though prices overall are toppy, since virtually nothing - in volume terms - has been built since late 2007. Housing starts are very depressed and changes to planning aren't helping any.

Don't know where this will lead us.

Are the housing starts that bad? I have never seen so many newbuilds for sale round here.

[Digga]

NoelWatson said:

Digga said:

I was reading the bit about the replacement of Business Link and Regional Development Agencies with Local Enterprise Partnerships (LEPs) in yesterday's ST. Seems some LEPs site a shortage of homes as one of the key barriers to enterprise.

This wouldn't surprise me, even though prices overall are toppy, since virtually nothing - in volume terms - has been built since late 2007. Housing starts are very depressed and changes to planning aren't helping any.

Don't know where this will lead us.

Are the housing starts that bad? I have never seen so many newbuilds for sale round here.

Googe this: uk "housing starts"

And you'll see all the superlatives, lowest since 19xx going back over the last three years. The interesting thing is how fast housing starts declined - almost immediately after the Northern Cock saga.



A big part of our business is selling the digger tracks and buckets that builders break/lose/require for these projects and we know who is and isn't building.

I don't think prices are right, but neither is supply. It's a curious position, in the midst of what seems to be a rout on the housing market, but we need lower prices and more supply (of the right stuff in the right areas). Perhaps builders need to build to enable the market to drop?

[NoelWatson]

Digga said:

NoelWatson said:

Digga said:

I was reading the bit about the replacement of Business Link and Regional Development Agencies with Local Enterprise Partnerships (LEPs) in yesterday's ST. Seems some LEPs site a shortage of homes as one of the key barriers to enterprise.

This wouldn't surprise me, even though prices overall are toppy, since virtually nothing - in volume terms - has been built since late 2007. Housing starts are very depressed and changes to planning aren't helping any.

Don't know where this will lead us.

Are the housing starts that bad? I have never seen so many newbuilds for sale round here.

Googe this: uk "housing starts"

And you'll see all the superlatives, lowest since 19xx going back over the last three years. The interesting thing is how fast housing starts declined - almost immediately after the Northern Cock saga.



A big part of our business is selling the digger tracks and buckets that builders break/lose/require for these projects and we know who is and isn't building.

I don't think prices are right, but neither is supply. It's a curious position, in the midst of what seems to be a rout on the housing market, but we need lower prices and more supply (of the right stuff in the right areas). Perhaps builders need to build to enable the market to drop?

Any idea where to get some post '08 data? Agreed that it was dead back then, but thought it had picked up a fair amount.

[Digga]

NoelWatson said:

Any idea where to get some post '08 data? Agreed that it was dead back then, but thought it had picked up a fair amount.

This is the latest I have:

http://www.communities.gov.uk/publications/corpora...
"There were 28,590 seasonally adjusted house building starts in England in the June quarter 2010. This is 13 per cent higher than in the previous quarter and 84 per cent above the trough in the March quarter 2009, but 42 per cent below their March quarter 2007 peak."

What's intersting is that I reckon a far higher proprtion of this is smaller builders on smaller sites.

As intimated one here by our "tame national housebuilder" Sam68, planning issues are hindering the big developers. Where they were looking at bigger sites, they've been forced to downscale. So even companies with the muscle to finance and organise larger scale projects have been hamstrung.

The little guys we speak to aren't all doing badly. Some are, but others have kept busy right the way through the credit crunch. We know this because, in the same way as no one buys fuel or tyres for a car that' sitting idle, neither does anyone procure spares or attachments for an excavator that's not being worked.

An important fact that gets 'missed' is that headlines saying lowest housing starts since 194x or 192x etc. etc. the population was lower then and was not expanding so rapidly.

Edited by Digga on Monday 1st November 10:53

Edited by Digga on Monday 1st November 10:58

[NoelWatson]

Digga said:

NoelWatson said:

Any idea where to get some post '08 data? Agreed that it was dead back then, but thought it had picked up a fair amount.

This is the latest I have:

http://www.communities.gov.uk/publications/corpora...
"There were 28,590 seasonally adjusted house building starts in England in the June quarter 2010. This is 13 per cent higher than in the previous quarter and 84 per cent above the trough in the March quarter 2009, but 42 per cent below their March quarter 2007 peak."

What's intersting is that I reckon a far higher proprtion of this is smaller builders on smaller sites.

As intimated one here by our "tame national housebuilder" Sam68, planning issues are hindering the big developers. Where they were looking at bigger sites, they've been forced to downscale. So even companies with the muscle to finance and organise larger scale projects have been hamstrung.

The little guys we speak to aren't all doing badly. Some are, but others have kept busy right the way through the credit crunch. We know this because, in the same way as no one buys fuel or tyres for a car that' sitting idle, neither does anyone procure spares or attachments for an excavator that's not being worked.

An important fact that gets 'missed' is that headlines saying lowest housing starts since 194x or 192x etc. etc. the population was lower then and was not expanding so rapidly.

Edited by Digga on Monday 1st November 10:53

Edited by Digga on Monday 1st November 10:58

Agreed on small builders doing well - I guess that is what I am seeing here. wrt to population growth, has it really expanded that rapidly in the last decade compared to last century?


UK Population (Thousands) 1901 to 2001.

http://www.parliament.uk/documents/commons/lib/res...

1901 38,328
1911 42,138
1921 44,072
1931 46,074
1941 48,216
1951 50,290
1961 52,807
1971 55,928
1981 56,352
1991 57,808
2001 59,009

Currently ~62m

[Digga]

NoelWatson said:

Agreed on small builders doing well - I guess that is what I am seeing here. wrt to population growth, has it really expanded that rapidly in the last decade compared to last century?


UK Population (Thousands) 1901 to 2001.

1901 38,328
1911 42,138
....
1991 57,808
2001 59,009
2002 onwards; nobody knows because the borders were no policed.

Currently estimated at ~62m

EFA

[NoelWatson]

Digga said:

NoelWatson said:

Agreed on small builders doing well - I guess that is what I am seeing here. wrt to population growth, has it really expanded that rapidly in the last decade compared to last century?


UK Population (Thousands) 1901 to 2001.

1901 38,328
1911 42,138
....
1991 57,808
2001 59,009
2002 onwards; nobody knows because the borders were no policed.

Currently estimated at ~62m

EFA

Are those people that came by unofficial means really going to add to the demand?

[Digga]

NoelWatson said:

Digga said:

NoelWatson said:

Agreed on small builders doing well - I guess that is what I am seeing here. wrt to population growth, has it really expanded that rapidly in the last decade compared to last century?


UK Population (Thousands) 1901 to 2001.

1901 38,328
1911 42,138
....
1991 57,808
2001 59,009
2002 onwards; nobody knows because the borders were no policed.

Currently estimated at ~62m

EFA

Are those people that came by unofficial means really going to add to the demand?

They all live somewhere even if it is five to a room in one of their cousin's houses.

Edited by Digga on Monday 1st November 14:20

[Deva Link]

Digga said:

I don't think prices are right, but neither is supply. It's a curious position, in the midst of what seems to be a rout on the housing market, but we need lower prices and more supply (of the right stuff in the right areas). Perhaps builders need to build to enable the market to drop?

I suppose that with the escalating prices of raw materials there must be an issue that there's little or no money in house building at the bottom end of the market.

And it's presumeably going to get worse as the extra costs associated with zero-carbon building start to bite.

[NoelWatson]

Deva Link said:

Digga said:

I don't think prices are right, but neither is supply. It's a curious position, in the midst of what seems to be a rout on the housing market, but we need lower prices and more supply (of the right stuff in the right areas). Perhaps builders need to build to enable the market to drop?

I suppose that with the escalating prices of raw materials there must be an issue that there's little or no money in house building at the bottom end of the market.

And it's presumeably going to get worse as the extra costs associated with zero-carbon building start to bite.

When interest rates rise it will add a bit of efficiency into the market

[GT03ROB]

Oh well I exchanged contracts this morning on new place, so prices had better start rising quickly.....