How far will house prices fall [volume 4]

[AstonZagato]

hyphen said:

Derek Chevalier said:

rory said:

FTSE 100 was 6300ish when the original thread started, so not that great a return. .

You must be looking at different numbers to me. Just to confirm you are looking at FTSE 100 Total Return index?

Also how much in dividends paid out during this period?

FTSE 100 ignores dividends, FTSE 100 Total Return includes/reinvests them.

On 18 Oct 2007, FTSE 100 TR was 3772. It is now 6185. So a gain of +63% over 10 years, so about 5% annualised. FTSE 100 (excluding the dividends) has gone from 6537 to 7417 (+13% or 1.25% ann).

Some issues with that relative to housing. You'd have to pay tax in the dividend income and tax on the capital gains. There are management fees to be paid on the Tracker.

Also, housing returns are levered (and so, in theory more risky).

So £100 invested in FTSE 100 TR tracker would now be worth £165 but with a tax liability.

The average house price in that time has gone from £189,589 to £220,094, so +16% or 1.5%ann

£100 invested in the average house with a 50% mortgage would be double that though (and 75% would be 4x) - and no tax liability. There would be the mortgage to pay (but the rent to pay if you'd stuck your equity into the FTSE). Houses have maintenance costs too. Bills the same whether renting or buying.

It's late, so I have probably messed that up.

Edited by AstonZagato on Wednesday 12th July 23:52

[WindyCommon]

AstonZagato said:

hyphen said:

Derek Chevalier said:

rory said:

FTSE 100 was 6300ish when the original thread started, so not that great a return. .

You must be looking at different numbers to me. Just to confirm you are looking at FTSE 100 Total Return index?

Also how much in dividends paid out during this period?

FTSE 100 ignores dividends, FTSE 100 Total Return includes/reinvests them.

On 18 Oct 2007, FTSE 100 TR was 3772. It is now 6185. So a gain of +63% over 10 years, so about 5% annualised. FTSE 100 (excluding the dividends) has gone from 6537 to 7417 (+13% or 1.25% ann).

Some issues with that relative to housing. You'd have to pay tax in the dividend income and tax on the capital gains. There are management fees to be paid on the Tracker.

Also, housing returns are levered (and so, in theory more risky).

So £100 invested in FTSE 100 TR tracker would now be worth £165 but with a tax liability.

The average house price in that time has gone from £189,589 to £220,094, so +16% or 1.5%ann

£100 invested in the average house with a 50% mortgage would be double that though (and 75% would be 4x) - and no tax liability. There would be the mortgage to pay (but the rent to pay if you'd stuck your equity into the FTSE). Houses have maintenance costs too. Bills the same whether renting or buying.

It's late, so I have probably messed that up.

Edited by AstonZagato on Wednesday 12th July 23:52

You would be correct to use the TR (including dividends) index.

Equally though, rental income after voids should be included in the returns from the property. As should the costs of maintenance and repairs etc.

The comparison should be performed without leverage, and before income and capital gains taxes.

[Pork]

scenario8 said:

If a self-selecting group now believes price falls are a "good" thing and contend most people support the phenomena there doesn't appear to be overwhelming evidence to support this in the world of actual buying and selling. For years this thread has hosted posts from regular contributors commenting on how deluded vendors are when it comes to pricing and further commenting on the feeble number of sales. Wouldn't we expect to see more reductions and realistic pricing and increased volumes if lower prices were genuinely wished for?

Or is there a disconnect between what most people want (price falls) and those involved in the buying and selling. In the same way that I'd love Ferrari values to halve, as might "most people" but no-one interested in selling one feels the same.

Any discernible 'correction' would be driven by a factor beyond the control of many, i.e IR rise, financial or political events. As is, the prices will continue to rise as those that own see it as their right and an expectation and those helping in selling largely believe their own hype about rising prices because of poor availability. There's plenty of property available, it's correctly priced property that seems to be rare (stats show c50% of properties listed never sell). Those priced well sell quickly and I suspect will continue to do so for some time yet.

Anecdotal but I'm seeing more and more reductions in asking prices near me. I think that's more a cooling of the giddy prices of the past rather than a drop in values. Offers seem to still be well ahead of recent sale prices but not quite at the ambitious asking price.

[hyphen]

Kensington & Chelsea Council declines planning to turn flats into houses, government overrules it. Council take it to court and win

http://www.dailymail.co.uk/news/article-4692790/Bu...

[anonymous-user]

Pork said:

scenario8 said:

If a self-selecting group now believes price falls are a "good" thing and contend most people support the phenomena there doesn't appear to be overwhelming evidence to support this in the world of actual buying and selling. For years this thread has hosted posts from regular contributors commenting on how deluded vendors are when it comes to pricing and further commenting on the feeble number of sales. Wouldn't we expect to see more reductions and realistic pricing and increased volumes if lower prices were genuinely wished for?

Or is there a disconnect between what most people want (price falls) and those involved in the buying and selling. In the same way that I'd love Ferrari values to halve, as might "most people" but no-one interested in selling one feels the same.

Any discernible 'correction' would be driven by a factor beyond the control of many, i.e IR rise, financial or political events. As is, the prices will continue to rise as those that own see it as their right and an expectation and those helping in selling largely believe their own hype about rising prices because of poor availability. There's plenty of property available, it's correctly priced property that seems to be rare (stats show c50% of properties listed never sell). Those priced well sell quickly and I suspect will continue to do so for some time yet.

Anecdotal but I'm seeing more and more reductions in asking prices near me. I think that's more a cooling of the giddy prices of the past rather than a drop in values. Offers seem to still be well ahead of recent sale prices but not quite at the ambitious asking price.

Just put the MIL's bungalow in Leicestershire up for sale. Agent valued it 17.5% higher than we expected. It sold within a week for 25% more than we expected.......

[Pork]

Purely anecdotal but we viewed a house recently with a 'guide price' around the upper end of our limit. EA reckoned it would 'probably get around guide but won't go much over, if at all'.

We bid just over guide, chain free, as it was probably an 8/10 for us.

Told there were 7 bids, ours was 4th highest and the winner put a 'silly' bid in. The EA couldn't have sounded more pleased with himself.

This is Hertfordshire, very commutable to London. It's utter madness.

[EddieSteadyGo]

Just to add my anecdotal experience of the last few weeks. My property is currently on the market for a bit over £1.3m in Surrey. Detached, nice road etc etc. Fairly recently a similar property on the same road but a bit bigger sold in March for £1.65m, so our asking price we thought was fair.

Last time we placed in on the market 3 years ago we had a full asking price offer within 1 week. However, we didn't proceed as we couldn't find something suitable to buy.

Now we have found somewhere we would like to move to, we have advertised it with our local agent for almost 6 weeks and we only had one viewing.

The agent is telling me that the market in our area is dead, nothing is moving above £500k. He is very worried.

Of course my experience isn't necessarily representative of the market but I honestly thought I would look at this thread and see more examples of the market slowing, but it looks like it is just me

[g3org3y]

Pork said:

Purely anecdotal but we viewed a house recently with a 'guide price' around the upper end of our limit. EA reckoned it would 'probably get around guide but won't go much over, if at all'.

We bid just over guide, chain free, as it was probably an 8/10 for us.

Told there were 7 bids, ours was 4th highest and the winner put a 'silly' bid in. The EA couldn't have sounded more pleased with himself.

This is Hertfordshire, very commutable to London. It's utter madness.

Sounds very much like our experience of Essex.

[g3org3y]

anonymous said:

[redacted]

I suspect this is a big contributing factor. In the area we are looking in we viewed a house priced up as 'offers in excess of £650,000'. This was never a 650k house, nice but too close to the road, very overlooked garden etc. Probably 600k on a (v) good day. The nextdoor house which is pretty much identical but with a smaller and more oddly shaped garden sold this January for £585k. Unsurprisingly OIE650k house is still on the market and now (in the last week or two) with a different estate agent and the pricing changed to "Guide Price 625-650k". Go figure

[Pork]

g3org3y said:

I suspect this is a big contributing factor. In the area we are looking in we viewed a house priced up as 'offers in excess of £650,000'. This was never a 650k house, nice but too close to the road, very overlooked garden etc. Probably 600k on a (v) good day. The nextdoor house which is pretty much identical but with a smaller and more oddly shaped garden sold this January for £585k. Unsurprisingly OIE650k house is still on the market and now (in the last week or two) with a different estate agent and the pricing changed to "Guide Price 625-650k". Go figure

I've seen a few sticking around for a while that the come on with other agents. I don't really get that. While accepting EAs have lists of buyers, surely serious buyers check all the portals so will see when a house is up for sale?

Like Tonks observation above, good places still sell well. There's a mass of people with good equity so seemingly silly prices are still being (and will continue) to be achieved.

[Burwood]

EddieSteadyGo said:

Just to add my anecdotal experience of the last few weeks. My property is currently on the market for a bit over £1.3m in Surrey. Detached, nice road etc etc. Fairly recently a similar property on the same road but a bit bigger sold in March for £1.65m, so our asking price we thought was fair.

Last time we placed in on the market 3 years ago we had a full asking price offer within 1 week. However, we didn't proceed as we couldn't find something suitable to buy.

Now we have found somewhere we would like to move to, we have advertised it with our local agent for almost 6 weeks and we only had one viewing.

The agent is telling me that the market in our area is dead, nothing is moving above £500k. He is very worried
Of course my experience isn't necessarily representative of the market but I honestly thought I would look at this thread and see more examples of the market slowing, but it looks like it is just me

If you don't mind me asking, Eddie, where in Surrey?

[Matt p]

Looks like the government will be keeping that balloon inflated for a while longer.

http://www.leaseholdknowledge.com/government-ban-l...

Is this a cynical ploy for the conservatives to keepthe high end prime stuff in London inflated?.

[loafer123]

Matt p said:

Looks like the government will be keeping that balloon inflated for a while longer.

http://www.leaseholdknowledge.com/government-ban-l...

Is this a cynical ploy for the conservatives to keepthe high end prime stuff in London inflated?.

Unlikely, given this applies to houses only, not flats.

[TheLordJohn]

Just a token gesture to curry favour.
Quite why anyone would buy a leasehold property beats me anyway.

(I know, a lot of people have made a lot of money on owning leaseholds for a few years and working their way up in the SE)

[kingston12]

TheLordJohn said:

Just a token gesture to curry favour.
Quite why anyone would buy a leasehold property beats me anyway.

(I know, a lot of people have made a lot of money on owning leaseholds for a few years and working their way up in the SE)

I can't work out the possible justification to have a leasehold house with no shared land etc.

Flats are a bit different, but I'd never touch one with one of these leases with escalating ground rent, and would prefer one that comes with 'share of freehold'.

Hopefully, the legislation will make people looking to buy flats more likely to reject ones with unreasonable leases, even though the legislation itself will only apply to houses.

[rossi1001]

Anecdotal again but we are searching in the Essex area right now. Two agents we were chatting to at the weekend said that the market had slowed in the last 6-8 weeks but good properties were still changing hands quickly.

Good example yesterday we saw a 3 bed semi up for £310k reduced from a whopping £340k.

The other half of the semi had a significant two storey extension, separate garage, an extra bedroom, utility room and ensuite and yet sold last year for £296,000.

The finish on the place we saw was appalling which didn't come across in the pictures. Clearly a DIY job that should have been left to the professionals. Yet they want all that additional money for much less house!

Another genuinely good property we saw on Saturday had gone by the Monday although we thought the price was fair / reasonable on that.

[Burwood]

kingston12 said:

TheLordJohn said:

Just a token gesture to curry favour.
Quite why anyone would buy a leasehold property beats me anyway.

(I know, a lot of people have made a lot of money on owning leaseholds for a few years and working their way up in the SE)

I can't work out the possible justification to have a leasehold house with no shared land etc.

Flats are a bit different, but I'd never touch one with one of these leases with escalating ground rent, and would prefer one that comes with 'share of freehold'.

Hopefully, the legislation will make people looking to buy flats more likely to reject ones with unreasonable leases, even though the legislation itself will only apply to houses.

In NZ there are a few. It's a pretty horrific state to be in. Apartments receiving 10k ground rent increases. Ones on something like a wharf pay a huge sinking fund to re-pile.

[Matt p]

loafer123 said:

Matt p said:

Looks like the government will be keeping that balloon inflated for a while longer.

http://www.leaseholdknowledge.com/government-ban-l...

Is this a cynical ploy for the conservatives to keepthe high end prime stuff in London inflated?.

Unlikely, given this applies to houses only, not flats.

At the moment. Who knows what will happen in the near future.

[NRS]

g3org3y said:

anonymous said:

[redacted]

I suspect this is a big contributing factor. In the area we are looking in we viewed a house priced up as 'offers in excess of £650,000'. This was never a 650k house, nice but too close to the road, very overlooked garden etc. Probably 600k on a (v) good day. The nextdoor house which is pretty much identical but with a smaller and more oddly shaped garden sold this January for £585k. Unsurprisingly OIE650k house is still on the market and now (in the last week or two) with a different estate agent and the pricing changed to "Guide Price 625-650k". Go figure

I imagine it's because it worked in the past. It seems things are slowing down more/ stable/ dropping a bit depending where you are. So it doesn't work in the same way now. If people are in no rush to sell then it's potentially worth a shot, depending how much of a gambler you are (is it a pause or a reverse in the market).

[loafer123]

Matt p said:

At the moment. Who knows what will happen in the near future.

No indication this will happen to leasehold at all in the near or far future.