How far will house prices fall [volume 4]

[Sheepshanks]

nikaiyo2 said:

I think this is where my understanding falls down...

Why would a bank need to cover "worst case," if they commit say £200k today to me to buy a flat, they have paid that £200k to a 3rd party today at todays interest rates, they do not have to "go back to market" in 12 months for more funds for this loan, so why do they need to "cover" potential rate rises?

...because the person that deposited that £200K with them will ask for it back if the rate of interest they're getting is less than the market rate. If the bank has borrowed the money to loan it out then the issue is they can't borrow money themselves for 25 years at rates that would allow them to be competitive.

[FocusRS3]

Lots of these threads running now, sorry I'm late to the party.

I think the mkt has been falling 'quietly' for some time in London and the surrounds and whilst I agree it will be soft for some time I don't think the rug is going to get pulled.

Cleary political concerns are weighing heavy and for the South East a labour government will hurt the most.

No harm in taking profit and sitting out for a while if that's a possibility

[AstonZagato]

CaptainSlow said:

Building Societies typically deposit fund, banks or indeed B Socs can and do go to the money markets for long term funding..not usually via issuing bonds.

Which was why Northern Rock failed, IIRC. Lent long, funded short. Funding dried up, bank falls over.

[stongle]

AstonZagato said:

Which was why Northern Rock failed, IIRC. Lent long, funded short. Funding dried up, bank falls over.

That's quite some PH brevity.

You've just described a building societies business model, reliance in retail deposits and prolongation. Northern Rock and more acutely Lehmans (that was funding mega size mortgage books, ABS, CDO etc); relied upon wholesale funding markets that dried up when the stench of default raised its head (in fact Lehmans was probably pushed under by pre default haircut ramping - creditors wanted to reduce their LTV as it were). The underlying reason that Northern, Lehman etc went under was both excess carry trading and over leveraged.

It's worrying in the UK that people do not understand basic bank function. Extension of credit and maturity transformation are what a bank does. The inability to understand the difference between a call account and fixed term loan is astounding. Banks act as the on/off ramp for monetary policy it's the very vehicle enabling iPhones, plasmas and whatever consumer sh*te people splurge on. It's not the individuals fault, but A failure of the education system to explain modern day economics. Here's a scary stat (for the sky's falling market crash mo keys). EUROZONE bank balance sheet is 320% of the total EU (inc UK plac) GDP.

[Donbot]

Sheepshanks said:

...because the person that deposited that £200K with them will ask for it back if the rate of interest they're getting is less than the market rate. If the bank has borrowed the money to loan it out then the issue is they can't borrow money themselves for 25 years at rates that would allow them to be competitive.

I thought when people borrowed money it just went on a number merry-go-round of people/companies/governments pulling it out of their ass. Hence financial meltdowns.

[Tango13]

FocusRS3 said:

Lots of these threads running now, sorry I'm late to the party.

I think the mkt has been falling 'quietly' for some time in London and the surrounds and whilst I agree it will be soft for some time I don't think the rug is going to get pulled.

Cleary political concerns are weighing heavy and for the South East a labour government will hurt the most.

No harm in taking profit and sitting out for a while if that's a possibility

I'd agree with all of that /\

I was planning on renting for a while and seeing which way things went but the right property came along at the right price so I'm buying once again.

Having moved North I can both up-size and be mortgage free

[stongle]

Donbot said:

I thought when people borrowed money it just went on a number merry-go-round of people/companies/governments pulling it out of their ass. Hence financial meltdowns.

Case in point. It's not even 0.01% funny how poor understanding is of finance and monetary factors.

Given we export more financial service than cars is a fookin disgrace

The sad fact is, one black swan event wipes out most well built sausage stamping PH company directors. Most of this thread is anecdotal at best, and the obsession with interest rates is misplaced (as recent central bank meetings have clearly described).

[nikaiyo2]

Life time mortgages are a bit clearer thanks for the info.

[wisbech]

CaptainSlow said:

Building Societies typically deposit fund, banks or indeed B Socs can and do go to the money markets for long term funding..not usually via issuing bonds.

For money market funding instruments- what’s the usual length? Didn’t think it went out to 25 years.

[hyphen]

So what do we think?

https://www.standard.co.uk/business/entrepreneurs-...

A new estate agent startup, their USP being that they lend you the cash to buy your next home whilst selling yours!

[mike74]

hyphen said:

So what do we think?

https://www.standard.co.uk/business/entrepreneurs-...

A new estate agent startup, their USP being that they lend you the cash to buy your next home whilst selling yours!

Given that over half the houses currently on the market have asking prices (and vendors) so delusional that they fail to achieve a sale and subsequently get withdrawn and there's another large proportion of the market who are prepared to leave their property sat for years in some cases at kite flying asking prices... I don't see how they can make much of a go of this other than with the very small proportion of genuine, realistic and motivated vendors who are willing to price the property sensibly from the start to achieve a relatively quick and easy sale.

[BlackLabel]

Sounds interesting.

Here is the stock that they have on their books.

https://nested.com/for-sale

[HoHoHo]

hyphen said:

So what do we think?

https://www.standard.co.uk/business/entrepreneurs-...

A new estate agent startup, their USP being that they lend you the cash to buy your next home whilst selling yours!

Webuyanyhouse.com......

[stuckmojo]

HoHoHo said:

Webuyanyhouse.com......

This.

[Tebbers]

Bought for £2.175m in 2014, ‘extensively redesigned and refurbished’ and now on the market for £2m. Good bit of business that.

https://m.zoopla.co.uk/for-sale/details/48579074

[HoHoHo]

stuckmojo said:

HoHoHo said:

Webuyanyhouse.com......

This.

Nothing more, nothing less.

The difference is simple. Houses are far harder to sell and the numbers are different.

I would be interested in establishing how they value your house. As a person who is going through the selling and buying process as I write my house has sold for 6% less than the average valuation (from 4 agents) and two houses we offered on we’re both accepting lower offers from their valuations - one being 25% less than original asking price and the other 10% less than the original asking price.

With selling prices/offers so different from valuations they will have to value pretty low in order not to take a hiding and be out of business by 2020.

[stongle]

mike74 said:

hyphen said:

So what do we think?

https://www.standard.co.uk/business/entrepreneurs-...

A new estate agent startup, their USP being that they lend you the cash to buy your next home whilst selling yours!

Given that over half the houses currently on the market have asking prices (and vendors) so delusional that they fail to achieve a sale and subsequently get withdrawn and there's another large proportion of the market who are prepared to leave their property sat for years in some cases at kite flying asking prices... I don't see how they can make much of a go of this other than with the very small proportion of genuine, realistic and motivated vendors who are willing to price the property sensibly from the start to achieve a relatively quick and easy sale.

Well given their lending rates anything reasonably priced and sells within 3 months yields then 14% annualised. Raising finance not overly problematic as they have a short term ABS. Should be clearing 8-10% minimum on advances alone.

Expect the valuations to be at the conservative end of the scale and expect it only really works below a £1m. They suggest they eat the first loss, but ways around that. I also suspect whomever is the funding vehicle has set limits to advance to minimise losses. Interesting thread is interesting. Most London property isn't superprime, reading this thread you d think it was.

As a standalone business model, low risk, high return not bad. Hugely correlated to service sector employment though.

[ClaphamGT3]

anonymous said:

[redacted]

Added to that, it is a compromised refurb, designed to cram 5 beds and 3 baths into a natural 1600sq ft house - that's hard enough to do well in a natural 1750sq ft, the kitchen is hideous and the garden is small compared to what you can get for similar houses in other parts of SW6

[Burwood]

Is that only 1600sft?

[ClaphamGT3]

Burwood said:

Is that only 1600sft?

Not now but the house as originally built would have been 1600 sq ft