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Area: House prices
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Hard to believe? Well that's the figure according to Hometrack. Asking prices are down 8.7% annually, after slowing for three consecutive months, with agreed sales rising, new stock falling.
Technorati Tags: property, real estate |
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The May report shows house prices falling 0.2%, leaving the annual rate of decline at 15.9%, a light steadying on the 16.2% annual drop showed in April and March. Four English regions (including the south east) showed slight gains on the month, however transactions over the first quarter were still less than half where they'd been the year before... begging the question whether that upturn in enquiries reported by many agents in the new year has been translating into sales. Watch this space.
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... another big crash prediction from MoneyWeek.
House prices could fall another 40% from here.
The argument is both compelling and an old-chestnut. It's about affordability.
Today, the ratio, based on an assumed average household income of £31,200 and an average HBOS house price of £160,869 is still a very high 5.16 times. To give you an idea of just how high that is, it's still above the 1989 peak ratio of 5.02 times.
Remember, though, that homeownership is a relatively recent trend... comparatively rare until the post-war period. There's no reason to assume our current view of affordability - taken by averaging this limited data - will prove to be the long-term one. It's a good read, though, and recommended.
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Owning a house is not a prerequisite for economic maturity: many Germans never buy a property. And the idea that an Englishman's home is his castle has everything to do with his legal rights and nothing to do with owning the blasted place.
Edmund Conway has an entertaining rant in the Telegraph about the unsustainability of the British home-buying culture. The conclusions? 1) The Bank of England should control maximum loan-to-value ratios when it comes to mortgage lending. (But wouldn't that place more power into the hands of the cash-rich landlord class?) 2) Harsher home taxation, either in the form of a land tax, or by imposing capital gains tax to first homes. (What's the difference between Council Tax and a land tax? When would CG be payable? How wouldn't it stop people moving... and so damage the economy?) 3) Remove the stigma associated with renting. (Absolutely.)
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Rightmove's June snapshot of asking prices shows a drop of 0.4%, with accompanying comment blaming an unhelpful mortgage market for failing to support a property recovery. There's also evidence of a very polarised market, driven by the equity rich, hunting well-located homes that are short in supply, at one end, properties requiring a lot of work at the other. There's evidence of some regional polarisation, too, with prices in the north west (England) rising by 4.5%.
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Property prices will rise by an average of 1.4% over the next year according to respondents to the BSA's Property Tracker survey, as cautious optimism returns to the housing market.
Hmm. A lot has happened since March, clearly, when the same people forecast a 6.1% fall. Accompanying comment correctly pinpoints job security as the most likely issue to pop this bubble.
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To 1.1m homes, according to the Bank of England, and between 7% and 11% of UK homeowners. The Bank's research is based on a 20% fall from the peak of the market, leaving average prices at mid-1990s levels... so if you took out a proportionately large mortgage in the years since then, it might mean you. More here.
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The Department of Communities and Local Government house prices figures come out late, but represent completion figures, so they mean something. And they're showing a 1.1% monthly rise in April, bringing the annual rate of house price decline down 0.6% to 13%. Following the RICS figures, the recent Nationwide survey and reports by agents of increased enquiry levels, there's little doubt there's been some kind of bump in market activity in recent months. However, during most market downturns there are occasional months that buck the trend. Furthermore lending's still too tight to mention, and a shortage of supply is helping to prop up prices. If too many potential vendors respond by chucking their homes on the market, all this could change.
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Royal Institution of Chartered Surveyors data shows new buyer enquiries growing by their fastest rate since 1999, and up for the seventh consecutive month in May. The number of new vendors, however continues to fall... increasing demand, falling supply, possibly stabilising prices. More here.
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A rise of 2.6% in May, leaving the annual rate of decline at 16.3%. The three month average - a more reliable manner of reading the figures - shows a big cut in the rate of decline, from 6%-ish to 3.1%. Following a host of other positive data releases in recent weeks, the report's bound to be read as a sign of stabilisation in the market. We say, watch unemployment figures closely.
Positive data crunching continues [June 3, 2009]
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In six of the ten areas of England and Wales average house prices during April increased, with London prices climbing by about £4,200 during the month to £302,411.
That's according to this week's Land Registry data, based on actual completions. Furthermore:
The Knight Frank Prime Central London Index recorded positive growth for £1m+ house prices for the second month running in May.
Remember, though, how dramatically this index has fallen, down 22.3% from its peak. Mayfair, however, led May's charge, with a monthly increase of 2.9%. The sub-£1m sector has led the "recovery", the more expensive the properties, the less well they've been faring.
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Before you get carried away with all the sunshine and birdsong and rumours of a house price recovery... here's the Land Registry, with its monthly glance at actual, factual completions. April showed a fall, of 0.3%, leaving the annual rate of decline at 16.2%, exactly the same as where it stood a month ago. Yes... that's possibly part of a decline in the rate of fall, but it's neither recovery, nor cigar.
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Days after the Nationwide index's modest rise, Hometrack's stops declining for the first time in 20 months, showing zero change for May. On the year, prices are down 9.6%. Also like the Nationwide's report, the accompanying commentary isn't as positive as the raw data, and warns against ruling out further falls. All eyes in the Rat and Mouse office - from here on in - on employment data.
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It's the second house price rise in three months, 1.2% in May, leaving the average house price 11.3% lower than this time 12 months ago, after a 15% gap in April. Nationwide's chief economist is - however, cautious... pointing to similar small bounces during the early 90s and daring to hope - at most - that the data might translate into a moderation of the rate of fall. More here.
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And it's all down to property, according to research by the Centre for Economics and Business Research. In 2007, CEBR estimated there were 489,000 people living in the UK with assets of £1m or more. But much of those assets were in the form of bricks-and-mortar... now, the figure's more like 242,000... yep, half. CEBR expect the number of millionaires to start rising again in 2011.
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More data by National Association of Estate Agents property portal PropertyLive... this time showing that almost seven in ten wannabe first-time buyers have given up hope about being able to afford to step onto the property ladder. Eagle-eyed readers (and sub-editors) will have spotted that if they've given up hope, they can't be wannabe ftbs... but we know what they mean. NAEA-sponsored... the data appears to be directed toward the Government... a disguised call for help in loosening lending criteria.
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A 30% fall from peak to trough, and a recovery that should start by the end of 2009, says the Royal Institution of Chartered Surveyors, driven by a shortage of supply and an improvement in general economic conditions.
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Knight Frank's London residential report is out, download it here. Few surprises... an upturn in enquiries at the start of the year, a bit more sales action, lack of supply supporting prices after the big falls of 2008. The most eye-catching illustration?
Properties - a the bottom end of Prime - are showing, according to KF, modest price rises over the last three months.
Technorati Tags: London, property, real estate |
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Results of a survey commissioned by PropertyLive (the property search portal launched, with much fanfare, by trade bodies, including the National Association of Estate Agents) shows 70% of British property surf online without any intention of buying, but just because they're property-prurient. Twelve per cent are still valuing their friends' and neighbours' homes. In London, the figure's unsurprisingly higher, at 16%. More surprisingly, the most obsessed age group was 25-34. Remember, the average first-time buyer is now 34-years-old.
Technorati Tags: London, property, real estate |
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It's the fourth consecutive monthly rise in asking prices, by 2.4%... the largest monthly rise May has ever seen. It leaves asking prices 6.2% down on the year, the smallest amount since October. So what's going on? The lowest number of newly listed properties any May since 2003 might be a part of the story.
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Fathom Financial Consulting and Zoopla have compared auction data with Land Registry sale data to show that residential property sold at auction over the last few weeks is, on average, shifting for 25% less than estate agency-sold homes. According to the FT:
The 25 per cent auction discount and the sluggish market give a strong signal that prices have further to fall. But the recent uptick in the auction market also shows the gap is narrowing.
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The headlines shriek Surge In Homebuyer Interest, but - as usual - the RICS figures are a tortuous and confusing read. Forty-one per cent of surveyors reported a rise, rather than a fall, in new buyer enquiries, from 32% in March. That's more surveyors. But less than 300 were surveyed, and less than half of those apparently didn't report a rise. So exactly what kind of a surge is that? In London, things are more positive (70%, from 63% last month). But, hey, it's spring... and we're talking about movements from an unprecedentedly low base. Don't want to be the voice of doom... but let's think independently about this.
Technorati Tags: London, property, real estate |
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Homes in Kensington & Chelsea - according to the FT house price index - have lost 25% of their value (taken over a three month average) in 12 months, putting the average price of a home their down below the £1m mark, to £873,331. Nationally, April - the 14th consecutive month of falling prices - saw 1.1% knocked off values, leaving house prices at January 2006 levels.
Technorati Tags: London, property, real estate |
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The Halifax House Price Index shows a 1.7% fall in April, leaving the price of the average home 17.7% down on the same time, 2008. It leaves the index at 2004 levels. Comparing first quarter averages, London is showing a 20.9% slide, more than the UK average of -17.5%, and the biggest fall on the UK mainland.
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March's completion figures... a 0.4% fall in the average residential property price in March, leaving the annual figure down 16.2%. Within those figures, though, there's a wide regional spread, from a 1.8% gain in the North East to a 2% fall in the West Midlands. London? A 0.6% rise, leaving prices down 15.4%.
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Following last month's unsettling 0.9% house price rise, the Nationwide index returns to its comforting downward trajectory... a non-confusing 0.4% fall in April, leaving prices down 15% annually. Click this for a pdf of the report. And check out the following graph, which - in an entirely non-scientific way, and without accounting for recessions or pandemics - looks like value about to be achieved.
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Hometrack shows a 0.3% fall in April, the smallest red number in 12 months. Just 32% of postcodes showed a call, from 59% in February.
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If you believe the National Association of Estate Agents, allowing house prices to dip can trigger (or worsen) a recession, because people spend if they feel wealthy, and they feel wealthy when they're homes are rising in value. We've always been of the opinion that the feel-rich, spend-more theory is overstated. What matters are jobs. The unemployed feel poor. They are poor. They lose their homes. Property values drop. MoneyWeek appears to be of that school of thought too. It's employment that will kill or cure the residential property market, not the other way around.
Technorati Tags: property, real estate, recession |
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Asking prices are up 1.8% in April, according to Rightmove data. It's the third consecutive monthly rise, and brings the annual change down to -7.3% from -9%. Miles Shipside's accompanying comment suggests this is something more than the traditional "spring bounce", but there are plenty of causes for caution... mortgages approvals still historically very low and - perhaps most interestingly - a rising number of vendors coming to the market, pitching high, and then lowering their asking prices after a few months. The one big blip on the map, however, is London... which, contrary to national trends, shows a big fall of 3.2%. Breaking that figure down further, there are rises in Brent, Greenwich and Kingston-upon-Thames... more than compensated for by falls of 7.8% (Ealing), 7.2% (Hillingdon) and 5.7% (Croydon). Annually, if you live in Kensington & Chelsea, you're looking at a 32.3% increase in asking prices. In Newham, they're down 18.5%. For the full report in pdf format, click this.
Technorati Tags: London, property, real estate |
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Like numbers? You're in the right place. First off, it's the all-important Department of Communities and Local Government index... late, but accurate, since it's based on completions. The January-to-February numbers are in and they leave the average house price down a record 12.3% on the year, 2.7% on the month. It's the 16th consecutive fall revealed by DCLG data. Royal Institution of Chartered Surveyors research, meanwhile (which specialises in a tortuous estate agent hearsay method of running an index), shows that 31% more members report increased buyer enquiries than decreased. That's up from 21% last month. The average number of sales per member across the last three months rose... but insignificantly, from a record low of 9.6 to 9.7. Green shoots? Not yet. Finally, Primelocation.com has published its snapshot of prime property asking prices listed on the portal. March saw a slight weakening in the prime London market... with asking prices down half a per cent. Looked at annually, they're down a record 3.44%.
Technorati Tags: London, property, real estate |
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It'll be over by Christmas, according to Lombard Street Research. Their affordability index shows homes at an affordability level not seen for over five years. The methodology, however, is less clear than the more conventional comparison between earnings and house prices, and appears to place a great deal of emphasis on interest rates. With unemployment - a trailing indicator - almost sure to rise... it's hard to share their confidence.
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House prices may have less than 10 per cent to fall, sasy Cebr [Telegraph]
House prices will fall ANOTHER 10% before the market reaches rock bottom [Daily Mail]
It's a Centre for Economics and Business Research prediction... lower interest rates, lower prices and increased lending leading to a pick up in the housing market, with approvals and transactions accelerating through the summer months. In January, mortgage approvals were at 32,000. If - according to CEBR - they can reach 50,000 a month by late summer, we're looking at being 8% to 10% off the bottom of the market (in terms of prices). You can see, from that, why such a prediction could lead to wildly different responses.
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Research by consumer website Unbiased.co.uk suggests that most of us aren't expecting an upturn in house prices until 2010. The buyers are there... 28% of the population are apparently "interested in buying a property". But a quarter of them - that's more than three million people - are holding off waiting for further price drops. That's despite 50% of the population believing they can expect to knock more than 15% off asking price. Read the report here.
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Looks like the Nationwide figure earlier this week was something of a blip. It's business as usual with the Halifax House Price Index, down 1.9% in March, leaving the index 17.5% down annually. Accompanying comment, however, does highlight a few rays of light... including a house price to earnings ratio that's hit 4.34... not too far from the long term average of 4.0.
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Hold onto something heavy, the Nationwide index, which has been in free-fall since October 2007 and is one of the bears' preferred measures (last month it showed house prices down 17.6% on the year), shows a rise in average house prices in March. It's a rise of 0.9%, and it leaves the annual house price index down 15.7%. So how's this happened? Reasons to be cheerful (if you believe it's sensible to be cheerful about stabilising house prices) include recent news of mortgage approvals picking up and a consensus that buyer interest is on the rise. Reasons to conclude this may turn out to be a blip include the fact that we're probably still in the early stages of an unemployment cycle... and nothing screws the property market like high unemployment. All eyes on the Halifax index, due to report soon.
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Of course, they're both right. According to Hometrack, the annual fall is 10.3%, a record for the Hometrack survey, which launched in 2000. On a monthly basis, however, March's 0.6% was the slowest drop-off since May 2008. Other headlines: vendors achieved 88.8% of their asking price (slightly higher than in February, and the first time this figure has improved in a year); and London showed the month's biggest fall... 0.8%.
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It's a 2% fall in February, leaving house prices down 16.5% on the year... back at September 2004 levels. It's the 18th consecutive monthly fall, following 21 monthly gains, starting in December 2005. London saw a 1.9% monthly fall and is down 15.6% on the year. For a PDF of the actual report, click here.
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Figures from Primelocation.com show Prime London asking prices up a whisker off a per cent in February, the fourth successive monthly rise. In west/south west London, the figure was an extraordinarily bullish 2.84%. Remarkable, in central London, there's still positive annual growth (3.24%). Obviously, there are asking prices and their are achieved prices, and they're two different things. But the accompanying comment is clearly written from the perspective that one is a reflection of the other, and looks to low interest rates and the (connected) weak pound to suggest foreign money is helping prop up the specialist London market. Things look quite different in the lettings sector, with an eleventh monthly fall in rental rates in prime London, leaving rates 13.72% down on this time last year. Read the report here.
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What does it take to convince a vendor that not everything's hunky-dory? It seems not even a silent phone, a skinny estate agent with holes in his soles and six months on the market without a sniff of a viewing can dent a vendor's confidence. Asking prices were up in March, according Rightmove, by 0.9%. Okay... that's not as much of a rise as is usual while Spring is sprung, but it's still a rise. Annually, they're down by 9%, considerable less than actual sale prices.
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Over at Money Week, home to bear pits too deep even for HousePriceCrash, there are some interesting charts. Dominic Frisby looks at historic house price data, the shape of a bear trap and what it would cost to buy houses with silver. It's interesting... and scary. It's here. Meanwhile, over at the BBC, they asking homeowners - Are you scared? - and plotting responses on a map. It's a fascinating snapshop... but don't visit it using Safari (there's some kind of JavaScript issue); choose Firefox.
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According to Primelocation figures - hold on to your hats - central London vendors have increased asking prices in February (by just less than a per cent), leaving asking prices up 3.24% on the year. More here.
Technorati Tags: London, property, real estate |
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It's a 2.3% fall in February - a big monthly movement - leaving the annual figure down 17.8%, and 19.7% off their 2007 peak. Remember, though, that this time last month, we were looking at a rise of 2%. Interestingly, the average-price-to-income ratio is down to 4.4... not too far off the long term average of 4.
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It's a fall of 0.8% in February, leaving house prices 10% down on the year, Hometrack's biggest annual fall since 2000. Sales agreed... 60% down on a year ago.
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It's Nationwide, with the February numbers... a 1.8% fall, leaving the year-on-year figure down 17.6%.
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It's an excellent time to buy.
It's a brave broadsheet journalist who, these days, will point out what - to professional investors - is the obvious: if you wait until you have proof that the market has reached it's lowest point, you've missed it. Yes, you can wait, and buy at the same point on the way up. But time isn't on your side, you'll end up having to move quicker, and pass some of the bargaining power over to the vendor. How far the market has yet to all, of course, nobody knows. The only certainty is that the piece will no doubt be followed by reader comments accusing the writer of self-interest.
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Londoners are confident, according to Rightmove, and if they could only get the loans, they'd be setting out on another crazy bricks-and-mortar buying spree.
Technorati Tags: London, property, real estate |
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... Morgan Stanley, for their almost-exactly-on-the-money prediction of a 10% fall in house prices in 2008. Government figures - our own preferred measure - based on completions data and released today show a 10.2% fall.
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The Times's Anne Ashworth and Rebecca O'Connor talk to a number of agents on the subject of bargains, cash-buyers and the (far from discredited) theory that catching a falling market within 10% of the bottom is a decent deal (the nature of a recovery is that investors who wait for firm evidence of a recovery miss the boat). Inevitably, the readers don't like it:
A lot of talk and "Talk is cheap" but the market hasnt bottomed out by along way and most people reading this article will just think most of these people commenting are wishful thinkers and holding on to there jobs for dear life.
And more of the same. Yes, agents want the market to pick up, but it's in their best interests to sell lots of houses cheap, rather than a few expensive ones. Furthermore, if the market has dropped by around 20%, and it's possible to knock a further few thousand off with a confident cash offer, then is it really so naive to wonder whether that's a decent deal? It shouldn't need pointing out, but at some point we will reach the bottom of the market.
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The third month of growing enquiries hasn't stopped a sense of falling prices... the number of surveyors reporting falls compared to those reporting rises increased, the average number of properties sold by an agent in the month slipped to 9.9.
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Old habits die hard, and it's even harder to wean the British public off their property addiction. I'd heard, anecdotally, from a number of estate agents that January had been something of a good month, but I'd just assumed they were drunk or high or something. But here's the Halifax House Price Index telling us that January prices rose, yes that's rose, on the month, by a matter of 1.9%. A blip? Very possibly... people in the industry are only convinced of a change of direction once the three-month average moves from red to black or vice versa. But now here's the Guardian getting the same story I've been getting... not only that, but gazumping too.
Charles Peerless, manager of the West End and City branches of Winkworths estate agency, said: "We've had gazumping on two lower priced properties - around the £360,000 mark - in January. "We had abuse from the buyers because they think the market is dreadful and they couldn't believe they had been outbid."
Technorati Tags: estate agents, London, property, real estate, real estate agents |
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Knight Frank's posh London property index has just suffered its second-biggest monthly decline, dropping 3.7% in January, knocking prices 21% on the year. City jobs-losses are presumably a prime culprit, and this is a figure that presumably factors in the advantage London's most sought-after postcodes enjoy when the pound is low. It comes - however - after several years of double-digit growth.
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This one's interesting... a look at completions recorded in December. It shows prices down 13.5% on the year (-2% in the month).
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According to Nationwide, January saw a 1.3% fall in house prices, leaving them down 16.6% on the year. The three months to January figure dropped by 4% on the same time period year. The equivalent in the last Nationwide report was 4.2%. Interestingly, this particular figure - which is often used within the industry - has been improving for four consecutive months, providing some evidence that the rate of fall might be slowing.
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It's based on a survey of estate agents, and it shows a 1% fall in January, leaving the index 9.4% down on the year, and 10.2% of its August 2007 peak. Those figures appear overly mild to me. It now takes an average of 12.3 weeks to shift a property, and most properties can expect to achieve 88.3% of asking price.
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A 0.55% rise in December, the Primelocation Index's second monthly rise, leaving London asking prices 3.8% up on December 2007. Strong neighbourhoods included west and south west London; there were small falls in Islington, the City and Docklands. Here's Primelocation's Head of Insight, Andrew Smith:
"Over the past couple of months prime agents have reported a modest upturn in activity (albeit from a very low base), a trend which can be attributed to the impact of falling prices, lower interest rates and a rise in demand from overseas buyers attracted by the dip in the value of Sterling."
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"We are having the busiest January in five years, with more than a 100 per cent increase in enquiries since the beginning of the year and several sales agreed in the last two weeks alone. Buyers perceive that even if prices drop a bit further they won't get a better opportunity to borrow at these record affordable rates."
That's Cluttons' James Hyman, talking, primarily, about posh neighbourhoods (the piece name checks Clapham and Chelsea). His argument? If you've got cash, neither the banks nor the brokers know what to do with it, buying's cheaper than renting right now, so the clever people are shoving it back into property if they can find the right deal.
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The DCLG house price index is possibly the only thing I like about the Government. Based on completions, it's more meaningful than many of the other indices. In fact, I'll admit, I'm perversely excited about December's 12-month figure, due out in about four weeks. I know... I'll get help. For now, it's all about November, which shows a 1.9% fall in the month, a 4.4% fall in the four months to the end of November, and an 8.6% drop over the year... suggesting that the Government's completion price-based data is going to show a significantly smaller drop on the year than figures published by Halifax and Nationwide. Interestingly, first-time buyers are getting the best of it. Annual average house prices for ftbs in November were 11.8% lower than a year ago. Download the actual report here.
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Royal Institution of Chartered Surveyors figures show house sales continuing to fall, to 10.1 per agent in the three months to December (from 10.6 the previous month), once again breaking the RICS record. Confidence among estate agents (the number not expecting continuing house price falls), meanwhile, has improved very slightly, and new buyer inquiries are up for the second consecutive month, suggesting there might be a growing pool of interest either looking for bargains are preparing to enter the market once the worst of sliding prices is over.
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It's coming, according to London Development Agency boss Peter Rogers, unless we start building again. He cites pent-up demand and poor supply , but didn't - interestingly - predict when the explosion is due. More here.
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It might not get the coverage the Halifax index got a few days ago (there are only so many ways of saying the same thing) but the Nationwide index closes the year nasty. A 15.9% drop on the year is the biggest since Nationwide began keeping records, and it follows a December drop of 2.5% (after a modest 0.4% drop in November had us all wondering whether things were leveling out).
Technorati Tags: property, real estate |
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First off... a quick refresher. Here's what they were saying last year.
It's been that kind of a year... a year that made Capital Economics look bullish, and left the Rat and Mouse with egg on its whiskers. 2009's set of predictions look very different. It's a clean sweep for negative numbers. There are some notable names missing altogether (Halifax isn't playing, because it doesn't feel it's appropriate to publish independent research when the company's on the verge of losing its independence; Nationwide won't play because of a fear of current volatility; the Council of Mortgage Lenders because it's all too depressing; the National Association of Estate Agents because it has too much sense.) Some things never change, however. Notice, at the top... the estate agents; at the bottom... Capital Economics. Here goes:
Hamptons ↓5%
KFH ↓5%
Assetz ↓5%
Winkworth ↓5% to ↓10%
Hometrack ↓10%
RICS ↓10%
The Rat and Mouse ↓10%
Legal & General ↓10% to ↓15%
Barclays ↓10% to ↓15%
Propertyfinder ↓12%
Knight Frank ↓15%
Capital Economics ↓20%
Halifax NO BETS
Nationwide NO BETS
Council of Mortgage Lenders NO BETS
National Association of Estate Agents NO BETS
There are specific and special problems with making predictions for 2009. For instance, none of us really knows where house prices are right now. Transaction levels are low enough to be statistically unreliable. According to Halifax - the place we traditionally look at this time of year - prices are currently down 18% from their summer 2007 peak. The general economic crisis provides a further layer of uncertainty. Arguably more important than interest rates or the willingness/ability of the lenders to lend, is employment. If 2009's job-losses turn into the catastrophe some predict, they'll count out any kind of house price recovery, and may well add impetus to a downward spiral. Nor will the market act as a whole. New builds are likely to suffer, as developers decide they'd prefer a kicking to a fatal lack of cash. Internationally desirable locations and properties, on the other hand, could profit from a weak pound.
In other words, it will be complicated.
Happy New Year to you. The Rat and Mouse will be back on Monday.
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Accurate-ish, because based on completions. Lagging reality, because they represent deals often done six or eight weeks earlier. Whatever, the Land Registry November report is showing an annual decline in prices of 12.2%, which is about what most people were expecting. It's the 15th consecutive monthly drop. More here.
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Of course, we've still our 2009 predictions post to come... we'll do that nearer New Year's Eve. But right now... the 2008 facts are coming in thick-and-fast. Like... London's been hit hardest by the house price downturn. A Hometrack survey shows London's down 10.1% on the year, compared with an 8.7% national average. Those numbers sound conservative to me. We'll know something like the truth after the Government reveals its December completions figures in a month or two. Meanwhile, Globrix claim that - in the UK's most stagnant market, Rochdale's - one in four homes remain on the market after 12 months. Elsewhere - and this is slightly counter-intuitive given the dramatic recent cuts in interest rates - homeowners paid off a record £5.7b of mortgage debt in the third quarter of 2008. Presumably, this is about falling house prices and tricky loan-to-value demands from the lenders. Still... kind of mature, isn't it? More facts and figures as the year draws to an end. And hold on - of course - for those all-important 2009 predictions.
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Optimists dared to ask whether the first glimmer of sunshine had appeared on the horizon yesterday, after figures showed a modest increase in loans given to first-time buyers and some estate agents reporting possible sightings of "green shoots" in the market.
We Brits never give up, do we? This is Council of Mortgage Lenders data, showing a 15% increase in the number of loans to first-time buyers between October and November. The excitement is about seeing a figure that's black, but calling the end of the property crash would surely be premature. There simply comes a point beyond which volume just can't fall any further. It won't be enough to support prices, and it's unlikely to be followed by steadily increasing volume. Not yet, anyway.
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It's a Royal Institution of Chartered Surveyors survey, showing confidence among agents slightly improved, but completed sales down to their lowest level, to 10.6 each over the last three months (from 10.9) and 55% down on the year.
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A spokeswoman for the CML said: "There is questionable value in making a prediction on prices. Whatever we say will be very high profile and, unless we can do it credibly and with confidence, it is questionable whether it makes sense to do it at all.”
The argument is that with transactions at such a low level, we've no idea where prices are now, never mind where they'll be this time next year. Makes sense to me... although I know some estate agents who tell me they've a very accurate idea about where prices are.
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It's a 2.6% fall in November, according to the influential Halifax House Price Index, leaving the annual change -14.9%. It's likely that Halifax will further revise its predictions for 2009 in the coming weeks.
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"92 per cent of sales done by our Knightsbridge office so far this year were to foreign nationals," says Phil Tennant from Hamptons International.
Desperate vendors. A slow market. A cheap pound. It's not a bad time for wealthy foreign bargain hunters, according to the Telegraph. Hold on tight for the next interest rate cut.
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Knight Frank's index of posh London home prices fell 3.6% in November, the second largest fall since the record began (it was beaten only by last month's, of 3.9%). The annual index is now down by 14.1%, with 9.3% of that falling out in the last three months. Interestingly, family houses - previously pretty immune - fell more than flats (4.1% to 3.2%).
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Land Registry house price data is being accused of misleading buyers, since it doesn't reflect repossessions or auctions. This year, repos are likely to represent 6% of residential property transactions, and so the argument goes that they need to be included in any representative data. But a market isn't simply about supply and demand. It's about time, too. As any gazunderer knows, time constraints on the part of a vendor can have an unusual effect on prices. Repos and auctions bring a particular urgency to the deal... are they really a good way of measuring house prices on the open market?
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House prices are down 1.1% in November (less of a drop than October's 1.3%), leaving them 8.1% down on the year, and about where they were in January 2006... which was, if I remember, expensive. In London, specifically, the annual index has dropped 9.5%. Interestingly, there's (kind of) evidence that volume might have bottomed out. The time it takes to shift a house is now 11.8 weeks, compared to the previous report's 11.9 weeks; and vendors are accepting 88.9% of asking price, compared to 89.2%. Is there enough volume for such small variations to be meaningful? That's arguable.
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It's a 1.5% fall in October, leaving the October-to-October figure down 10.1%... or at summer 2006 levels. London's fall is more moderate, at 8.6%.
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That's the way some commentators are reading it. It's the Nationwide survey - which has shown some dramatic falls in recent months - and a 0.4% drop in house prices for November (after 1.3% in October). It brings the annual rate down to -13.9%, from -14.6%. Our reading? Most likely a blip. There's nothing - the economy, lending, number of trades - that points to a sudden change in the wind for house prices.
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Forbes has a look at London's property winners and losers, ranking boroughs for resilience to the market downturn. The most resilient? Westminster and Hackney share top honours (each with a year-on-year rise of 2.7%), followed by Kensington & Chelsea (up 1.7%). Topping the most ravaged by the bust list are Waltham Forest (an annual fall of 5.8%), leafy Ealing (down 3.6%) and Lambeth (down 3.5%). Read the feature, here.
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London's estate agents are selling just two properties each month, according to the latest report from the Royal Institution of Chartered Surveyors, and nationally volume's at its lowest level since the organisation began keeping records back in 1979. The Telegraph talks to an agent in Norwich:
"We have had no sales in October at all! The market can't get much worse can it?"
Actually, the second sentence is as relevant as the first, because the survey actually showed a slight improvement in the agents' and surveyors' confidence about things getting better, reaching the highest level since March 2007. Some people need to move. There comes a point below which volume just can't drop. There's also a sense that the slow market is creating a lot of pent-up demand. When buyers feel the market's close to the bottom, they may well return in force.
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There's a big bear in the house over at property market derivatives broker TFS. Gamblers Traders there expect the Halifax House Price Index to drop more than 40% of its peak by October 2011.
[via Brickonomics]
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The Halifax House Price Index shows a 2.2% fall in October, leaving the index 14.9% down on the year... the biggest annual fall since the index began in 1983. It puts prices 15.7% off their peak.
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Their posh London property index is showing a 3.9% fall in October, the fastest decline since they began keeping these figures. Here's Knight Frank's Liam Bailey, via PropertyWeek.com:
A 4% fall in price in a month is suddenly very noticeable – equating to £160,000 on a £4m house (or more than £5,000 a day).
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Seventy-four lots, 100 attendees... err... three bids, and no sales. Welsh estate agents Peter Alan have been blamed for overpricing the properties, but reports suggest that apartments that had at one time seen valuations of £200,000 were offered at £30,000; yet, still no takers.
The auctioneer was despondent throughout and said, ‘Look, have you got any bids at all?’
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It's a 1.4% fall in October, leaving house prices 14.6% lower on the year. Completions are at their lowest level since 1974.
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The Land Registry's completions data shows house prices in September 8% down on the year, and volume in the second quarter (compared with the same period a year ago) down 48%. Regional variation? You betcha. Welsh house prices are down 10.7% on the year. In Hartlepool, they're up - yes, that's up - 4.7%. London prices are down 1.5% in September, and 6.1% across the year.
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Hometrack's figures now suggest a 7.3% fall on the year to October, leaving prices at March 2006 levels. In October itself, prices slid back 1.3% (compared to a 1% in fall in September). Properties took an average of 11.9 weeks to sell, and people are paying an average of 89% of asking prices.
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You've heard the stories of those US ghost-towns, hardest hit by the sub-prime crisis. But what about London? Welcome to Hill House, Thamesmead, a riverside new-build apartment block where all but two of its 84 flats have been repossessed, and where - according to reports - the crackheads and vandals are moving in. Just two years ago, these were sell-out prospects. Now, they're bargain bucket. Take Flat 54. According to Land Registry data, it achieved £274,995. Now, it's about to be picked up for £88,000.
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How does this happen? House prices rise 1% on the month. The answer is... it's a seasonal thing, there's a traditional bounce at this time of year but it's normally much greater, which is why Rightmove's annual asking price inflation figure has dropped further into the red, at -4.9%.
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Mouseprice's ten fastest falling residential streets in the UK include a couple of London roads. Erebus Drive, in SE26, close to the river in Greenwich, is heavy on new-build apartments, but Russell Road in Barnet (NW9) looks like a fairly average residential road. You can see the full top ten on Mouseprice's actual report by clicking here.
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August? Yes... the figures are based on completions, and so take a while to filter through. What's more, completions are up to two months after exchange, so - really - this is a snapshot of the June/July market. It was a 2.7% monthly fall, leaving the annual inflation figure at -3.4%. More here.
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The Halifax index is at January 2006 levels, and posts the eighth consecutive monthly fall (in the 1990s slump, the run ended after seven months). The September fall was 1.3%, leaving the three-month on three-month annual rate down 12.4%. Interestingly, much of the media offers a 13.4% figure as an alternative annual decline, derived from a straight September-to-September comparison, despite having their knuckles wrapped for this last month. For HBOS's actual release, in PDF format, click this.
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Just because the stock market's dropping faster than a Geordie consonant and the future of the entire financial system is in doubt, it doesn't mean there isn't time for another aspirational mega-property piece from Forbes. Because that's what makes London great. Today... the UK's most expensive postcodes in exciting reverse order. I won't spoil your fun. Actually, I will. The top ten are all in the capital, and the top five are SW3 (Chelsea), SW1W (Belgravia), W1K (Mayfair), W8 (Kensington) and SW1X (Knightsbridge), where the average house price is £1,870, 354.
So what's it like up there? Top Ten super-expensive London sales so far this year [October 6, 2008]
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Down here, it's a bit quiet. But what about up there, where the super-rich pay £10m and up for their London properties? According to our friend Henry Pryor, it's not bad at all, thank you.
"Looking at sales so far this year we can see that there is still a market for properties over £10m with more than twenty six sales in London alone so far in 2008. Last year we counted just thirty eight in the whole year."
I can feel a Top Ten coming on.
1 14/03/2008 £16,800,000 Gainsborough House, Winnington Road, Barnet, N2 0TS
2 8/07/2008 £15,000,000 10, Chester Square, City Of Westminster, SW1W 9HH
3 25/04/2008 £13,500,000 34, Hans Place, Kensington And Chelsea, SW1X 0JZ
4 30/05/2008 £12,500,000 Walpole House, Chiswick Mall, Hounslow, W4 2PS
5 04/04/2008 £12,250,000 6, Chester Square, City Of Westminster, SW1W 9HH
6 27/05/2008 £11,990,000 14, Upper Phillimore Gardens, Kensington And Chelsea, W8 7HA
7 06/03/2008 £11,500,000 18, South End, Kensington And Chelsea, W8 5BU
8 03/06/2008 £11,500,000 199, 801 Apartment, Knightsbridge, City Of Westminster, SW7 1RH
9 24/06/2008 £10,324,725 21, Flat 2, Chesham Place, Kensington And Chelsea, SW1X 8HG
10 03/06/2008 £10,000,000 26, Phillimore Gardens, Kensington And Chelsea, W8 7QE
More from Mr Pryor:
"In March, Gainsborough House in Barnet sold for £16.8m and in May Thames-side Walpole House in leafy Chiswick for £12.5m. In both cases, agents say they would expect these mega homes to sell for similar sums if they went on the market today. To be honest, people with this kind of money tend to be rich because they understand the markets not despite them. As such, I'm not sure that this would be the case and I see no reason why these homes would not have lost up to 15% of their value as have many others in west London since the peak of the market 12 months ago."
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Later than we expected, Nationwide have published their house price figures for September. It's another 1.7% fall in the month, leaving the annual figure down 12.4%... a number that's getting a bit of press this morning since it's the biggest annual fall figure since 1991. Meanwhile, accompanying literature from Nationwide's Fionnuala Earley points out that the rate of fall is beginning to stabilise, and draws on the company's 50 years of house price measurement to suggest that these boom and bust cycles might mean alot at the time - if you're in a hurry to sell, or you've borrowed at the top on a demanding loan-to-value ration - but what they say about the long-term house price trend is negligible.
Recent trends are interesting, too.
These graphs are important, if we're to put current trends in perspective. But with volume at such a dramatic low, who really knows what a house is worth? If you want to read the Nationwide report yourself, click this for a pdf.
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... propped up by oil and commodity prices, according to Reuters, and a scarcity of London homes in the £10m-and-over band. Above £20m, according to Savills, deals were up 200% in the first six months of the year.
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Where's September's report gone? Last year, the report was ready for 7am, September 27 publication; the year before the embargo date was September 28. Seriously, I can't think of a time when it's been this late in the month.
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House prices fell 1% in September, according to Hometrack, leaving the average property worth 6.2% less across the year. Interestingly, London is showing a greater-than-average fall... down 7.1% annually.
CML admits prediction needs updating, but won't be drawn on nummbers [September 24, 2008]
Market report - Rightmove [September 22, 2008]
Market report - DCLG, and shock July house price rise [September 16, 2008]
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Why is Reuters doing this today, when they did this on Monday?
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Twenty reasons why they're a good thing... apparently... including "survival of the nicest estate agents" and "fewer advertisements by Polaris World".
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"Futile"... that's how the Council of Mortgage Lenders' Bernard Clarke has described the house price prediction game during the current financial climate, and the Rat and Mouse tends to agree. He does, however, admit that the CML's current prediction of a 7% fall on the year now looks "wide of the mark".
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According to Knight Frank, Monaco's overtaken London and become home to the world's costliest real estate. Square footage in the chicest London postcodes rose 1.8% (in the second quarter, from the same period last year) to £3,291; but in Monaco they rose 30% to £3,762. More here.
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Asking prices are down in September by 1%, leaving them down 3.3% on the year... which seems less of a fall than casual, unscientific observations would suggest.
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They're the Government figures, based on actual completions in July, and so - arguably - representing deals struck mainly in the April-May-June. The July-to-July annual inflation figure is -0.3%; in the quarter, they're down 0.5%. Interestingly - not, necessarily, significantly - prices within the month rose by 1%, something of a shock, but probably representing the long delay between exchanges and DCLG figures.
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And it's a fall in August, of 1.3%... the sixth consecutive move in a downward direction and the biggest single drop since October 1992. It leaves the annual inflation figure at -2.2%. Demonstrating the geographical nature of current house price trends, London remains in the black, Windsor and Maidenhead are still 19.2% up on the year.
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This is a bit of a regular item, with owners of relevant data (property portals, search engines, Land Registry subscribers) extrapolating figures purporting to reveal the catchment area premium paid by desperate London parents. Why's this one different? This one's a YouGov poll, targeting London parents, and it comes at a time of falling house prices and rising private education costs. According to the results, 19% would pay between a premium of between £5,000 and £100,000 for access to a good state school. Two per cent would consider paying more than £100,000.
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The headlines:
- a 1.3% fall in August (the fourth consecutive monthly drop)
- annual "growth" now -1.6%, pushing the figure into the red for the first time since 2003
- the cheaper properties are worst hit... with sub-£1m homes down 9.2% on the year
- properties priced between £5m and £10m are still 1.3% up on the year
- everything's fine in Mayfair, where properties are up 10.3% on the year
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The RICS have spoken, and it's bad. Nationally, estate agents made an average of 12.7 sales each in the three months to August. In London, the figure was worse... 9.4 transactions per agent or less than one a week. On the positive side, it's being reported that estate agents are getting really good at sudoku, and totally dominating a number of Nintendo DS titles. Perhaps cheered by this success, they've become (only) slightly less bearish in house price estimations... 81% more Chartered Surveyors reported a fall in house prices, but that's down from 83.1% in July, and it's the fourth consecutive move in the same direction. If you want to download the actual RICS report (in pdf format) click this.
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Yesterday, a number of news sources reported that the Halifax House Price Index showed an annual fall of 12.7% to August. The figure was convenient, since it allowed the media to claim it signaled the worst annual fall in a quarter of a century. Today, they're getting their knuckles wrapped by the Halifax, who in fact published a less exciting (although still hardly impressive) figure of 10.9%. Halifax work out their annual figure by compared a 2007 three-month average with the equivalent 2008 three-month average. The 12.7% figure was created by simply compared August with August... a system which - although logical - results in erratic monthly results. More here.
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What's this? Madness? Inebriation? No, it's a press release. According to London estate agents Alex Neil, improving lending conditions are the first sign of the boom returning. While other offices are closing, AN continues to expand, "to meet high demand". What's more visits to the AN website are apparently up 218% in the last three months. They predict a 15% rise in London house prices. Which begs the question... what's everybody else doing wrong?
Meanwhile, according to the Halifax, university towns in southern England continue to do (comparatively) well. with properties selling at a premium of as much as 20%. More here.
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This morning's figures from Hometrack show the index's 11th consecutive monthly fall... 0.9% for August, leaving the annual figure 5.3% down. Achieved asking prices are at 90.7%, which sounds - in the current situation - high, but is historically low. It's taking almost three months to sell a property.
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Knight Frank report that the average price of homes in London's nine most expensive neighbourhoods fell 1.6% between August 2007 and August 2008. However, there are distinctions to be made within the data, with the lower end (homes worth £1m or less) being most affected. "Super-prime" territory (properties worth more than £10m) gained in value in July, by 2.9%, leaving them an astonishing 19% up on the year. Profiting from high fuel prices, Russian and Middle Eastern buyers don't know the meaning of credit, never mind crunch.
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According to Nationwide, prices are down 10.5% on the 12 months, the biggest annual fall since the final quarter of 1990. And it's not over yet... the rate of the slide rose a little, too, with a 1.9% drop in August, after monthly falls of 1.5% in July and 0.9% in June.
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The market for flats might be flat, but it's marvelous in mews-land. The Rat and Mouse hears on the grapevine that mews-specialists Lurot Brand are breaking records faster than Phelps, securing £1,220 a square foot in Hyde Park Garden Mews (previous record: £1,112) and £1,256 a square foot in Leinster Mews (previous record: £1,000). While the National Anthem's played and Team LB receive their medals, we can inform you that the properties in questions sold for £2.2m and £1.44m.
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According to Rightmove, asking prices are down 2.3% nationally in August, leaving them 4.8% year-on-year. In London, the August figure was 5.3%, with Wandsworth being hit particularly hard, asking prices falling 7.9%. Annually, the London figure's down 3.8%. Rightmove's Miles Shipside, in his accompanying comment, blames the scarcity of mortgages, and suggests buying in the Olympic areas as the best hedge against falling house prices. More here.
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That's according to the Telegraph, that illustrates a piece about current property market jargon with some optimistic views of where we are in the downturn. James Greenwood, from Stacks, claims "the bottom is now visible" (insert obvious gag here), after a swifter and more sudden drop than commentators were expecting. Hamptons's Phil Tennant claims the clue's in the loans, with rising loan-to-value ratios pointing to renewed lender confidence in house prices.
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It's the RICS's monthly swellness index, and it's a little ambiguous. Few agents were feeling bad and reporting falling prices in July than in June, and there have been increased buyer enquiries for the third month running. Swell. Except actual sales per agency dropped to their lowest since records began in 1978... each office is currently shifting less than five properties a month. Of course, the question is... what effect Stamp Duty uncertainty? More here and here.
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Last month, theRatandMouse reported a 1.7% fall in house prices on London's most princely streets. Today, figures released by Knight Frank show that July wasn't much better for the fabulously wealthy either. Annual growth is still (just about) positive, but the average 'prime central London' property lost 1.6% in value during July, the third consecutive monthly fall.
By guest blogger, Poppy Dinsey |
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That's according to a new report which you can read up on over at the BBC. Apparently, we should expect to see prices falling 4.4% in 2008, 2.1% lower in 2009, recovering by 2010 and rising at over 9% in 2012 and 2013. Oh, and the report has been written by the National Housing Federation, whose members rely on us having confidence in the housing market. Hmmmm.
By guest blogger, Poppy Dinsey. |
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Mervyn King's position is unenviable. On the one hand... runaway inflation; on the other... falling house prices. What he could really use is some stability, some confidence returning to the property market, so that he could concentrate properly on inflation (his job, after all) and at least dare think about higher interest rates. Enter fellow MPC-member Blanchflower:
House prices could fall a further 30 per cent, the biggest crash ever witnessed in Britain, a key member of the Bank of England has warned. David Blanchflower, a member of the Bank's interest rate-setting committee, said there is a threat they could fall this far.
Blanchflower is apparently continuing to lobby for rate cuts.
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Hey, look, the world's stopped turning:
"Middle Britons" will lose more, in percentage terms, from the value of their homes, according to research by AXA and the Centre for Economics and Business Research, quoted in the Middle Britons' bible. Why? It's not exactly clear. The suggestion, though, is that they're less "resilient" to the credit crunch/falling market, because their homes have been gaining in value long after the rot set in elsewhere in the market:
John Ward, managing economist at the CEBR, said: 'Middle Britain will experience a sharper fall in house prices compared to the rest of the country because its resilience to the credit crunch is finally buckling. Whereas the country as a whole has been experiencing a slowdown for some time now, Middle Britain's house prices have remained steady until recently. This means the effects will be felt more starkly as prices decrease more rapidly.'
So, in other words, they won't be hardest hit. They've just been given a little longer to come to terms with what's about to happen. And - according to Ward - their homes will be the first to pick up in value after the bust (should there be a full-scale bust), because most of them live in south of England, which is better placed to weather the economic storm. Business as usual.
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Agents shifted just 15.3 homes per agency April-to-June, the lowest number since RICS records began 30 years ago, and 87% of agents/surveyors reported falling house prices. There's also talk of predatory buyers, as the cash-rich take advantage of desperate vendors.
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The Halifax House Price Index - a benchmark in many ways - is posting a 2% fall for June, leaving the annual change at -6.1% and the average house price at August 2006 levels. In the report, Halifax's Martin Ellis tries to paint this as a "moderation in the recent rate of decline", following May's 2.5% drop, but it's still a rate that will cause potential problems should it continue for too much longer. You can download the actual factual report by clicking here, or read some commentary here.
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According to 61% of the estate agents surveyed, the slowdown will be over with in a year. Only 28% thought it would take more than a year, 7% more than three years. More here.
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The Department of Communities and Local Government house price data reaches us last, because it's based on completions, but it's accurate, because - er - it's based on completions. April's figures, which arrived in early June, stood out from the crowd by showing a slight rise. May's figures, out now, don't. It seems the DCLG index has finally "caught up with the slowdown". May's index falls 0.3%, leaving the annual inflation figure still in black, but only at 3.7%. Remember, too, that these completion figures reflect exchanges made weeks, sometimes months, before. More here.
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If you're, well, not from 'round here... Evan Davis is the BBC's ex-economics editor, now Today presenter. And, yesterday, he was wondering aloud exactly how big a part the media played in building the boom into a bust...
Davis, who was interviewed by his BBC colleague Jeremy Vine in Glasgow, said the media may also have helped inflate the market by reporting on every new house price survey – even when several of them were coming out in the same week. "There was a period when online – not just online and not just the BBC – when house price stories were very interesting," he added. "If you report the same thing five times then it sounds like they are going up even more. We in the end drive these things up just as the media did in the dotcom boom," Davis said.
Right. And right. And, er, right. Hmm. Seeing a new pattern?
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According to Knight Frank figures, the crunch is hitting prime central London, with the average price in London's most expensive streets falling 1.7% in June, cutting the annual inflation figure to 7.5%. I know what you're thinking. They're rich. And they're still 7.5% up. Absolutely, but bear in mind that annual house price inflation in these same areas was at 38% last August. Sales in the sector are also down, by an astonishing 60%.
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The eighth monthly fall for the Nationwide index is a 0.9% drop for June, leaving annual property price deflation at 6.3% and the index down 6.4% since January 1. More here.
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It's a ninth consecutive fall according to Hometrack, of 1%, leaving house prices 3.2% down on the year, and 2.5% since the start of the year. Weeks spent showing houses before an offer... 10.3 weeks (last June, the figure was 6), new buyer registrations... down 5.7%, and now less than 50% of August 2007 levels.
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The figures are for May, and they show no change nationally, but a 0.8% rise in London. That leaves the annual growth at just 1.8% nationally, 6.9% in London. Remember, these are based on completion figures (so, on the one hand, they're accurate; on the other, they represent deals done weeks earlier), so we're either looking at the very early stages of a significant house price crash, or something more like the house-price-stagnation-combined-with-general-inflation model that might, in the long run, be the healthiest thing for the housing market.
Oh, and here's Reuters, showing how not to report house price indices (lucky they're not tradable stocks)
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They dropped by 1.2% in June (1.4% in London). Miles Shipside:
For most sellers that will mean whatever they thought of asking for their property at the peak of the boom, they need to take at least 10% off. Otherwise their property will stagnate.
More here.
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Mervyn King's comments at yesterday's Mansion House dinner make interest rate rises sooner or later almost inevitable. Inflation is clearly the Bank's foremost concern (as, technically, it should be), and King seemed to ready to take on the property sector with the warning that out-of-control inflation would be as bad for house prices as higher interest rates. In other words... how do you take your coffee? Without cream? Or without cream? More here.
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That's the question being asked by recent first-time buyers who've seen the value of their new assets fall, recently. The economists' answer - according to a survey by the Society of Business Economists for ITV's Tonight - is that it could take until 2012 for prices to regain 2007 levels. According to 44%, we won't reach the bottom of the slide until 2009. More here. The Tonight show is scheduled for - er - tonight, at 7pm on ITV1. This, from the ITV website:
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According to the FT house price index, out today, London's three-monthly average is up 8.5% on the same time last year. Across England and Wales, the figure's up 3.9%. More here.
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It's the Communities and Local Government data - so it's based on completions and therefore accurate - and it shows a slight rise (0.7%) in the average house price in April. But don't get too excited. Annual house price growth continues to fall, down to 4.9% for the year. Interestingly, this Government data is one of the rare places you'll find annual house price change still in the black.
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According to the Association of Residential Letting Agents (ARLA), 39% of agents are reporting tenant demand outstripping supply, and 77% of landlords are holding property with the intention of neither buying nor selling in the immediate future. A surplus of new-build two-bedroom flats is keeping rents stable in that particular area. In general, continuing demand looks likely, while it remains difficult to get a loan. More here. On the subject of loans, it's more difficult than it was to get one from Egg, the online bank owned by Citi, which - according to this - is pulling out of the mortgage market. It's also more expensive to get one from Busted & Broken, which is hiking rates across its offerings by as much as 0.55%. No doubt partly as a result, nobody's buying. According to figures from the Royal Institution of Chartered Surveyors (RICS) estate agents sold an average of 17.4 properties each in the three months to May. That's the lowest since records began in 1978. And they might be right to be wary. Data from the Council of Mortgage Lenders (CML) points to 23,000 potential negative equity cases in homeowners who took out 100% mortgages in the year to March 31. More on both those stories here. Finally, the other piece in the jigsaw, also supplied by the RICS, might surprise you. Sentiment - the estate agent/surveyor swellness quotient - improved marginally in May on less bad than expected sales figures. So, technically, what the figures reveal is marginally less rates of unswellness. More here.
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A big fall of 2.4% in May, almost twice the fall predicted by analysts. It leaves the three-months-to-May figure 3.8% down on the same period a year ago.
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There's interesting research by a York University professor (for Hometrack) that shows that at current levels 28% of young people are unable to buy anything locally. A 10% drop in house prices will help out a fifth of those, leaving the figure at 22.5%. But as house prices fall, the cost of buying (arranging and servicing a mortgage) continues to rise, and is currently higher than in 1990 (the peak of the previous boom), up 12% on this time last year. More here.
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It's a monthly fall of 0.2% and of course it's significant because it's based on completion prices. It brings annual inflation to just 2.7%. In London, the monthly fall was 0.5%.
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A monthly fall of 2.5% for May, the biggest drop Nationwide have ever recorded, leaves the average house £5,000 cheaper more of a bargain. This leaves annual house price inflation at -4.4%.
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It's been done before, but it's almost always interesting reading... this time Business Week takes $1.5m on the road to see what it will be in bricks and mortar. Not much - in the world's best cities - even during a credit crunch. The exception is, of course, Miami.
For Europeans, Miami's declining condo prices are "like Americans handing them the gift of the century," says [real estate agent David] Michonski. "The sun has not stopped shining. The beaches aren't any less white, and the whole thing costs them 30% or 40% less."
Head over to read the piece; there's a slideshow too.
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And now expects a fall in prices of about 7% this year, and a fall in volume of 35%. That's a revision from a -1% forecast made last October, and comes after new figures reveal a 16% drop in new loans and remortgaging March/April 2007 to March/April 2008.
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In an extraordinary development, asking prices rose in May - according to Rightmove - by 1.2%. What's more, the figure masks a significant amount of regional variation... the majority of regions showed reduced expectations, but in the house price happy south east, homeowners have been asking 6% more for their homes. Optimism? An attempt to factor the inevitable negotiation into the asking price? Whatever... it's unlikely to help. More here.
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The Royal Institution of Chartered Surveyors paint a gloomy picture this morning... the lowest number of transactions since records began in 1978. Eighty-two per cent of surveyed agents report falling prices between February and April, and the downturn is spreading everywhere, including Scotland (which - oddly - had been continuing to show price rises while the rest of the UK was stultifying). According to agents, unreasonably tight lending conditions have a lot to answer for, and it's interesting to note that other figures this morning reveal that average interest rates are up 0.4% despite recent cuts.
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The BBC is trailing interesting research from its new series of The Truth About Property that suggests that not only are more people "crash-proof" than in the early 1990s (it would take a house price drop of 56% to put the average borrower into negative equity), but that a house price crash would be far from entirely unwelcome, even among the property-owning class. People, apparently, are seeing a fall in values as an opportunity to trade up for less. The last series of this show was excellent, the Rat and Mouse has high hopes for series two, starting tonight, at 8pm, on BBC 2.
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According to Hamptons estate agents, properties in the £1m region have been hit the hardest by the slump, with prices falling by as much as 15% since September 2007. Only the super-prime sector - propped up by overseas buyers - continues to thrive. More here.
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It's the one the spread-betters and other gamblers go by, and it's reporting a 1.3% fall in April, knocking 4.2% off the value of the average home since the beginning of the year. Significantly, it's the latest in a series of indices that put the annual inflation figure in the red. According to Halifax, it's a 0.9% fall April-to-April. Read the actual release (in pdf) here.
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Nationwide report a six monthly fall (1.1% in April), leaving their annual inflation figure in the red for the first time to the tune of 1%.
Market report 2 - Land Registry [April 28, 2008]
Market report - Hometrack [April 28, 2008]
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... where they're warning of a 25% house price crash, between now and the beginning of 2010. Savills' Yolande Barnes is, however, also pointing out that it's in the power of the lenders to turn this into a 6% dip, by lending money once again. If you're shopping in the £5m+ bracket (see below) you don't need to worry too much.
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And another fall. This time... 0.4% in March, and - remember - this one's based on completions. And there's significant variation within the figure. In Wales, it was a 2.2% fall; in the north east, a 2.4% rise. Prices rose in London, too, by 0.6%. Transactions - year-on-year - were down by a quarter. The annual rate of inflation dropped to 3.6%.
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April's not over, but Hometrack's figures are out, and they show a 0.6% fall in the month. But that's not as important as the annual figure, which slips into the red at -0.9%.
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Talking to Empire magazine:
"The natives of England are sort of being left behind because the big money came in and if it wanted something it bought it and made a bigger fortune doing so. And as anyone who has tried to buy a house in central London knows, it's almost impossible to do so unless you have 10 million quid."
I know... I know... tell me about it... less than ten million quid and it's a bloody Transit van and a matress. But what can you do? It's those Russian oligarchs and American pop stars. More here.
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You've got to hand it to Capital Economics, they really grasp the principle that if you predict something for long enough it's bound to happen. It's probably little comfort to anybody who took their predictions at face value during the last five years and put their own money in the position of CE's mouth... that could have turned out an expensive spread bet. Few would argue, though, that now's the time of the bear, and CE continue to ensure there's no bigger bear than them. They've cut there 2008/2009 forecasts... and are now expecting a fall in house prices of 8% in 2008 and 10% in 2009. More here.
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The Evening Standard reports on falling asking prices here and there across the capital, including many of the top postcodes. According to Rightmove figures:
Average asking prices in Kensington and Chelsea have fallen £33,000 to £1,458,558 - down more than 2.2 per cent between March and April.
Oddly, though, asking prices rose (by 3.8%) in Hackney.
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According to figures by Shelter, the average price paid for a home by a first-time buyer was £52,674 in 1997. In 2007, it was £159,494. The average weekly income of a UK family over the same period, up 53%. More here.
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He's quoted here predicting that current falls in the London market - not helped, he says, be a non-dom exodus - have already triggered 15% falls which won't be apparent for a few months... until the DCLG index, which reflects completion prices, shows up.
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It's a big one - 1.6% - and you can't argue with it, because the DCLG figure is based on completions. It leaves annual house price inflation at 6.7%. Interestingly - although not without precedent - flats led the falls (-2.9%), bungalows were least affected (-0.6%). Inevitably there was regional variation, too. In London, the annual inflation rate is up at 9.5%. Something scary's definitely happening in Northern Ireland's recently over-heated market, with the annual inflation figure falling from 8.4% in December to just 3.7%.
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The BBC are headlining the radio news with the RICS survey showing that members (qualified estate agents) are more bearish on house prices than ever. Seventy-eight and a half per cent reported a fall in house prices March, that's up from 65.7% in February, and it's the worst figure since RICS began the (dubious, in my opinion) index in 1978. In an accompanying statement, the RICS thank low supply for saving the market from an all-out crash.
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According to this, using spread betting on London house prices as an indicator, Cantor Spreadfair is predicting an 18% drop in London house prices by the end of 2010. The piece suggests (I think) Spreadfair's launching a new spread-betting opportunity based around punter confidence, and how it turns out compared to the Halifax index... betting on the betting. Can't find any mention of this over at their website, though.
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It's a 2.5% routing, to be precise... the biggest monthly fall since September 1992, leaving the annual inflation rate at 1.1%, the lowest in 12 years, and Q1 2008 levels down 1% on 2007 Q4. The Halifax analysts aren't, however, talking about readjusting their 2008 predictions of a "low single digit" fall. Chief economist Martin Ellis is quoted, thus:
Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations.
He doesn't mention the scarcity of loans or decent deals.
Broken down, London saw a price rise of 1.6%, the East Midlands a rise of 2.2%. West Midlands was battered -5%, Wales -4.7%. One statistical surprise, perhaps:
The average deposit put down by a first-time buyer (FTB) in 2007 (£34,381) represented 20% of the purchaser price compared with 12% in 1989. Only 5% of FTBs took out a loan of 100% or more of the purchase price in 2007 compared with 35% in 1990.
Read the actual report (in pdf), here.
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It's all about February's Land Registry figures, which show a fall in London house prices of 0.4%... the biggest drop since March 2005's -1.2%. Kensington & Chelsea, one of the biggest winners over the last two years, got the worst of it, with a 0.7% fall. More here.
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This time, it's Hometrack, reporting a 0.2% fall for March, leaving the annual rate of house price inflation, March-to-March, at just 0.4%. More here.
Market report - Nationwide, tide continues to turn [March 28, 2008]
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House prices made it onto the agenda-setting Today programme this morning, after the Nationwide published its March figures. It's a fall - honest - of 0.6%, leaving annual house price inflation at just 1.1%, it's lowest since March 1996. The most dramatic figure, though, comes by looking at the last five months... over that period, Nationwide is seeing a 2.9% fall. Read the actual report in pdf here, but be patient, as the press appear to be hitting the server right now.
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When the National Association of Estate Agents put out a press release yesterday informing us that softening house prices signaled a more favourable market for buyers, I thought the only striking thing about it was that anyone thought it needed saying in the first place. But the comments, at the bottom of this, did better... picking up on the idea of a "buyers' market", and pointing out how far we've come, and in what a strange direction, when average prices around the £200,000 are a playground for buyers:
Its not a buyers market at the moment, its no-ones market.
How on earth can anybody call this a buyer's market? The only people who can afford to buy are those who have already done very well out of rising prices and have the cash. First time buyers have been frozen out completely because of inability to secure a mortgage.
A Buyers market?
First time buyers are holding out for a price drop, or cant afford the current price levels.
Home movers have to sell existing house..
So who are the buyers who can afford this market?
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Numbers of unsold properties on estate agents' books are apparently at their highest level since Rightmove records begin... back in the Web1.0, Elvis in the charts (not kidding) days of 2002; and yet asking prices have risen by 0.8% in March. Rightmove estimates that prices have fallen 10% from their 2007 peak, and recommends vendors mix themselves a reality Martini, and chuck in a couple of green olives. (Just make sure you don't get those ones with anchovies in them by mistake... done that, not nice... )
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How do I know? Because an insurance company is about to launch a product which will pay out if your mortgage repayments rise as a result of base rate hikes. It's called MarketGuard, it's the first product of its kind, and it's due to launch in a couple of months. On the subject of hedging, MarketGuard gets a mention in this very interesting Guardian piece about Government plans to offer some kind of crazy hedge against house price falls. Not general house price falls. Just the kind that affect your house. Read this:
In the Housing Finance Review, a 93-page document issued with the Budget, the Treasury says it intends to investigate the possible development of insurance based on house price movements, which would be hedged against detailed house price indices. Such insurance would pay out if the value of a home declined by more than the value of equivalent property in the indices.
What the hell does that mean? And how the hell will that be possible, given that national indices reflect broad movements, not "equivalent" properties? Are there "equivalent" properties? How many "detailed house price indices" would you need? One for every street? And who needs such a product and why? I'm confused.
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RICS gloom levels reached record levels in February, equalled only by the great sigh of June 1990. There's more unsold stock in estate agents' windows than there's been for a decade. 64.1% more surveyors reported a fall than a rise in February, up from 54.7% in January, and the greatest percentage since June 1990, when the figure reached 64.5%. More here.
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Halifax is reporting a 0.3% fall in UK house prices in February, leaving the annual inflation figure at 4.2% (from 4.5% last month). Stay tuned for this afternoon's interest rate decision.
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According to Knight Frank, the index on London homes costing £2m+ rose 0.6% in February, leaving the annual rate of posh house price inflation way down at a disappointing 24% (I know!), its lowest level since September 2006. More here.
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It's a fourth monthly fall, according to Nationwide figures... this time, 0.5% for February, bringing the annual rate of inflation down to 2.7%. The last time Nationwide reported four months of falls was 2000. More here.
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The plan was to bring you one of those little jpeg representations of the front page that the Rat and Mouse is so fond of, but the front page repeatedly crashed my capture client. So I saved it as a pdf... a 60 page pdf. It's now clear that I'm not going to be able to bring you an image of the House Prices Will Never Crash front page, because it's just too big and too mad... but what follows are a few highlights.
It's a truly extraordinary creation. It includes dinner party dialogue in screenplay format celebrating house price hikes, predictions of stratospheric rises in property values pegged to the Olympics and lots of pictures of rockets. Most of all, it's about the sell-to-renters. It doesn't like them.
In fact, the website's so crazy...
... that it's tempting to wonder whether it's the work of a HousePriceCrash agent out to discredit the bulls.
But... there are videos, too... 140 in the last three weeks, none of which I feel like embedding in the Rat and Mouse, and some of which are entirely unacceptable. What's going on? I'm scared. Who's Bruno?
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Good morning, and welcome to a new week. House prices have fallen again. This time... it's a February fall of 0.2%, according to Hometrack, leaving annual inflation at just 1.4%. The worst news is for vendors in a hurry... the average time taken to shift a property is up at 8.5 weeks, the longest since Hometrack began asking. More here.
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According to figures from Mouseprice, Kensington & Chelsea's glory days are over, and it's Courtenay Avenue, a road running parallel to The Bishop's Avenue, in Highgate that's now paved in the thickest gold and lined with the bushiest money trees. The average property price necessary to achieve this? Just £6.8m. Last year, the winner was Kensington Square, with an average price a whole 23% less than this year's... an example of what's happening in the prime-and-above market. Go here for some interesting analysis from Bloomberg.
Tumbleweed blowing down Millionaires' Row [February 18, 2008]
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House prices are up 3.2% in February, according to Rightmove, following a reported fall of 0.8% in January. A recovery? Not necessarily, says Miles Shipside. More, courtesy of Citywire, here.
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Reports of the return of sell-to-rent began to appear toward the end of 2007, and over the weekend they made front page property news in the Observer. According to Rightmove research, the practice - selling, hopefully, at the top, renting for a while while prices drop, and then either buying back in further up the ladder or taking a profit - is picking up pace. The Rat and Mouse can only applaud bubble-sitters' courage. Few financial decisions are as risky, or real-world calculations as tricky... taking in the cost of storage, rents (which can go up and down), the costs of selling and buying, the value of time, inconvenience and risk, all multiplied by however long it might take for prices to start to drop and then assuming it's possible to buy in just before everybody else does. The chances of getting all this right are low, and the Rat and Mouse has seen shrewd people brought down by this tactic. Exciting, though. Best of luck.
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Reports of the return of sell-to-rent began to appear toward the end of 2007, and over the weekend they made front page property news in the Observer. According to Rightmove Findaproperty (apologies, see comments below) research, the practice - selling, hopefully, at the top, renting for a while while prices drop, and then either buying back in further up the ladder or taking a profit - is picking up pace. The Rat and Mouse can only applaud bubble-sitters' courage. Few financial decisions are as risky, or real-world calculations as tricky... taking in the cost of storage, rents (which can go up and down), the costs of selling and buying, the value of time, inconvenience and risk, all multiplied by however long it might take for prices to start to drop and then assuming it's possible to buy in just before everybody else does. The chances of getting all this right are low, and the Rat and Mouse has seen shrewd people brought down by this tactic. Exciting, though. Best of luck.
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Despite the scare stories circulating at the back end of last year, of residential auction houses deserted but for a couple of spectators and a handful of derelicts who've come in out the cold, the auctioneers kicking the tumbleweed... day one of the Allsop Residential Auction sounded like the old days. We've a report of a thousand people on the day, including first-time buyers, an 86% sale rate, and properties going for way above what must surely have been some conservative guide prices. Big sales included Flat 6, 21 De Vere Gardens (Kensington) which made £1.925m (guide price: £1.25m-£1.5m). Day two... February 18, Cumberland Hotel.
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That was Mervyn King talking at a press conference for the Inflation Report, yesterday. He pointed to what is surely any intelligent person's preferred option... static house prices gently shifting price to earnings ratios over the next five years. Interestingly, he also tackled the decoupling of lenders' rates and base rates, suggesting surprise only at people's surprise. Naturally, he said, lenders will want to rebuild margins. More here.
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An interesting Merryn newsletter, on developer scams, buy-to-let gullibility, the Batoum Gardens house (tasty) heading to auction and what a central London agent let drop recently:
One agent caught off his guard told me a few weeks ago that going on his experience prices are already off 10-15% in some areas.
It's an interesting read. Catch it here.
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The number of surveyors/agents reporting a fall beat the number reporting a rise by 54.7% You'd need to go back to 1992 to equal that. More here.
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It's tempting to apply screenwriter William Goldman's first rule of the film industry - "Nobody knows anything" - to the property market. In the red corner... HousePriceCrash and HousingPANIC accusing the mainstream media of talking up the market in order to service vested interests. In the blue corner... this morning's heroes, Assetz, now accusing the FT and the BBC of talking the very same market down. (In the middle, in a freshly starched white shirt, the Rat and Mouse... when I say break, then break...)
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What's all the excitement about? It's the Government's official completion figures for December... the figures that are based on somebody showing somebody else the money, rather than what a vendor dreams about getting or a number pulled out of an estate agent's watch pocket. And December's particularly interesting because - as far as the Rat and Mouse is concerned - it gives us that true 2008 house price inflation figures, which was... 9.1%. (We got there, by the way, after a December rise of 0.4%.) That 9.1% figure is down from a July peak of 12.3% and represent a year low; and the three-month figures (10%, from 10.5% in November) also suggest a softening market. Now, back to the 2007 predictions. The looked something like this:
Which just goes to show what an almost unimagined peak prices are currently teetering on. A couple of Decembers ago, the Rat and Mouse called the above list "a big bunch of bulls", and yet only the very, er, bullishest came close. Well done, Assetz, the entire Rat and Mouse staff will be raising a toast to you tonight, on expenses, at one of London's swankiest champagne bars. (To see what Assetz have predicted for 2008, go here.)
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According to new research by the National Housing and Planning Advice Unit buy-to-let investment has had only a 7% effect on house prices in the last five years, throwing into doubt the assumption that the availability of buy-to-let mortgages has been an important factor in first-time buyer misery. The major causes of rising house prices and unaffordability have, the report suggests, been rising interest rates and higher numbers of households. The research follows similar finding by Capital Economics. Furthermore, both CE and NHPAU (NUPOW!!) believe that buy-to-let has had a positive effect on the quality and quantity of available rented accommodation. You might not like it, but that's what they're saying. More here.
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London's £2.5m plus property sector has clearly been too busy test driving Astons and lighting Cohibas to hear the news about the housing slowdown. According to Knight Frank, it saw a rise of 1.1% in January, with the market being led from the top... at £10m or more. Read more, here.
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No shift at all in January, according to the Halifax, leaving the annual rate of house price inflation at 4.5%. More here.
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It's a fall of 0.1% in January, the Nationwide index's third consecutive monthly fall, bringing annual inflation to 4.2% (from 4.8% in December)... the lowest figure since December 2005. This brings the all important three month figure into the red... a 0.3% fall. An interest rate cut next week? Here's a link to the actual, factual report from Nationwide (pdf). Scroll down the graphs. The Average UK House Price graph, plotted over ten years, shows just how serious a crash would be necessary to put a dent in the (theoretical) "profits" of anybody who's held property for five years or more. The Annual % Change in House Prices graph below it is fascinating because it shows how much volatility the market can take before producing annual losses. Note how, in September 05, the annual percentage figure dropped well below the current one... a year later it was at 8%. But the 3 Month on Previous 3 Month % Change graph is the news grabber... dropping below the horizontal for the first time in over three years.
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Hometrack recorded the fourth consecutive monthly fall in January, of 0.3%, leaving annual inflation at 2.3%, the lowest rate of growth since June 2006. It could have been much worse, but a lack of supply is apparently supporting prices. Meanwhile, the Centre for Economics and Business Research is predicting a 5.5% fall in 2008, followed by a rise of 3% in 2009, and increasing rates of profit in 2010, 2011 and 2012. Place your bets.
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It's a fall of 0.8% in asking prices in the five weeks to January 12, leaving annual house price inflation at 3.4%, its lowest since December 2005.
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In cased you missed them...
Kensington & Chelsea
Wandsworth & Battersea
Borough/Soutwark
Hammersmith, Chiswick & White City
King's Cross
Elephant & Castle
Docklands
Greenwich Peninsula
Lea Valley Olympic Park
Stratford
Not many surprises, there. A mixture of old favourites, where limited stock and high-intensity foreign interest tends to keep prices up, and well-telegraphed regeneration areas. The Rat and Mouse was a little surprised not to see more from the south-east, where the Dulwich spread continues but it's still possible to find family-sized homes for (a little) less than zillionaire prices. Read the full piece here.
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The Royal Institution of Chartered Surveyors' house price balance fell to -49.1 (in English, 49.1% more surveyors reported a fall than a rise) in December, its most negative position since November 1992. Unsold stock has jumped by a further 7.1% (after a rise of 9.1% in November and 10.3% in October). The RICS continues to urge interest rate cuts.
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Thanks Tom... you're right, I do. You have to take the Department for Communities and Local Government seriously in one (and only one) respect... their house price index is based on completions. They've just dropped the November data, and it's a fall of 0.8%, leaving the annual growth at 9.5%, the lowest it's been in a year, but still higher than it's likely to be in a few months. More here.
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The average house price has risen by an inflation-adjusted 160 per cent over 12 years, according to Nationwide. Owners of London properties have done even better, with a 193 per cent increase. Such inadvertent financial coups confer bragging rights at dinner parties from Barnet to Bromley. Yet the tiramisu-scoffing asset allocators could only realise their swollen capital if they relocated permanently to Barnsley.
The FT's Jonathan Guthrie tells it like it is in a fabulous column, here. It's brave and provocative - given the FT's core readership - while avoiding the apocalyptic suicide-pact attitude found elsewhere.
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According to figures by Knight Frank, London homes costing £2.5m and more rose by 1% in December, leaving them up 29% on the year. Price increases are said to have been fueled largely by foreign buyers. More here.
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Tonight's, er, Tonight With Trevor McDonald, is all about the nuclear winter that could follow a housing crash... negative equity, repos, genetic mutation...
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An interesting piece by Merryn Somerset-Webb, from the Standard, points out why London property is particularly susceptible to a falling pound.
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Halifax confounds and confuses this morning with news that its house price index shows a 1.3% rise for December, wiping out November's fall, and much of October's. The new figure leaves annual inflation at 5.2%, from November's 6.3%. Does this point to a rally? No more than a fall of 1.3% means a crash. Expect the indices to leap about a little during a period of uncertainty. But it remains to be seen whether the figure will have any bearing on the Bank of England when it meets on Thursday to decide interest rates.
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A reader asks ThisIsMoney, how can they make a bit of cash out of a house price catastrophe? The answer comes in two parts... spread betting and a new derivatives fund, due to be launched this month by Strutt & Parker, called the UK Residential Index. The first, we knew about. Strutt & Parker's entry into the pain relief market for the property over-exposed, we didn't. Interesting. According to this, it will use the Halifax House Price Index as a benchmark.
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According to Land Registry figures, house prices rose 0.6% nationally in November, leaving the annual inflation figure unchanged at 8.1%. London led the monthly gains, with 1.1%, leaving November 2007 up 15.6% on November 2006. The Land Registry's November figures compare with a -1.1% drop reported by the Halifax and a -0.8% tumble, reported by Nationwide... both of which created some hysteria in the wider press.
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Here's what they're saying:
Assetz 5%
Savills 3%
Knight Frank 3% (Prime London)
CML 1%
Hometrack 1%
RICS 0%
Lombard Street Research 0%
Rightmove 0%
Nationwide 0%
Halifax 0%
The Rat and Mouse -2% (national)
John Charcol -2%
Citigroup -3%
Global Insight -3%
Capital Economics -5%
Morgan Stanley -10%
What a difference a year makes. This time, 2006, the most pessimistic view was courtesy of Cluttons agents, and a 3% rise. Up at the top was Assetz, with a prediction of an 8-10% rise. The Rat and Mouse likes to hold fire for a few weeks and wait until the accurate DCLG figures before announcing a winner, but - after a late 2007 correction - it's looking as if the bears, including Cluttons and Capital Economics, are likely to walk away with the glory. However, it's probably okay to say right now that the general consensus was wrong. Just as it was wrong the year before, when a very bearish spread of predictions for 2006 misread the market entirely. The message? The experts' record for predicting house prices is very poor.
Another question entirely for 2008 is what should we wish for? The consensus is that it would be foolish to consider further bunker-busting house price rises a good thing, that they'd merely put off the inevitable, and make it more painful. The best we can hope for is, in reality, not very much... stable prices that allow general inflation to create a gradual, stealth house price correction in which nobody gets hurt, sanity is restored and first-time buyers profit. But that may take some time.
In the meantime, all that remains for the Rat and Mouse to do is wish its readers a very Happy New Year. Next time we meet, it'll be 2008.
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Nationwide's reporting a fall of 0.5% for December, leaving the annual inflation figure at 4.8%. The three-month figure is down to 0.9% (from 1.4% in November). In the accompanying comment, Fionnuala Earley makes the interesting point that house prices are finishing the year roughly where many analysts expected, however the route has been a little odd. That won't reassure chartists, however, who'll be focussing on the last few months' downward and seemingly sustained downward movement.
Meanwhile, lending's still down... 40% down November-to-November. More on that, here.
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According to Lucian Cook, director of Savills Research:
"The desirability of suburban life and the post war encroachment of suburbia, has resulted in the emergence of the super suburb.”
How do you spot a super suburb? Well, 50% of buyers in a super suburb are "high-ranking executives", 46% employed in City-related jobs. In the top 25 London suburbs, the average property value is £540,000. Space, quality-of-life, better schools... Savills gives a number of reasons for suburbia's popularity in the UK.
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Rightmove are blaming HIPs for a 3.2% house price fall nationally and - wait for it - a 6.8% fall in London in December, after a surge in one and two-bedroom homes hitting the market in the run up to HIPs day. A bit of mathematical voodoo reveals that the HIPs effect could have accounted for 1.1% of the national price fall and 2.3% in London. Rightmove's December figures leave their annual inflation rate at 4.8%, down from 7.9%. They aren't, however, being particularly bearish about the numbers, insisting that a monthly fall brought on by season and HIPs-related factors doesn't mean more falls in the New Year. More here.
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It strikes the Rat and Mouse that now is a particularly good time to be paying close attention to PropertySnake, the place to watch real-life asking price collapses as they happen. Today, we're particularly taken with this rather charming five-bedroom Victorian house in Clapham, down from an original guide price of £1.399m (according to this) to the current £995,000... that's a bargaintastic fall of 28%. Stay tuned for more. And have a great weekend.
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It's making BBC News headlines this morning... the latest Royal Institution of Chartered Surveyors is reporting a fourth monthly fall. Remember - this is the strange one, in which the RICS hold the hands of a representative number of agents/surveyors and ask them how they're feeling. The results? In November, 41% sensed a drop in prices over the previous three months, 23% sensed a rise.
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So much of the frenzied debate about house prices in the U.K. is conducted in such a way to make one think falling house prices in a region are a bit like spotting the plague.
That's Morgan Stanley's David Miles, quoted in Bloomberg today, pointing out the lack of swelling associated with falling house prices. The moaning and the headaches, however, still stand. Miles's point is that a 10% fall next year only brings us back to where we were a year ago, and will have a positive redistributive effect for first time buyers and/or the young and "people about to trade up" (the last group, presumably due to a combination of a narrow gap between price bands and less Stamp Duty). He also berates anybody doubting the wisdom of the City, when it comes to the likelihood of such a fall:
For people who say that's absurd, I turn it back on them. Why do you think people who are smart and know about financial things and trade derivatives are pricing things in such a way that that's what they imply?
Hmm, dunno.
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Professor Daniel Bernhofen of the Globalisation and Economic Policy Centre has warned that if the Government press ahead with plans to build three million new homes by 2020 they'll risk toppling the UK market into a full-blown catastrophe. Bernhofen's take is that a lot of the recent so-called demand has been quite different to need, it's been investment-motivated. When interest from buy-to-let investors wains, our impression of the need - supply relationship might seem quite different. A colossal building programme before the market has had a chance to ease down prices gradually (in relation to general inflation) would, he believes, be extremely misguided. More, here.
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It's always late (the new figures are for October), but at least it means something, based, as it is, on completions. The Government data gives us a 0.1% rise in October, down from 0.3% in September. Annual inflation rose to 11.3% from 10.8%, reminding us that most of us can afford a slight weakening in prices without suffering an actual stroke.
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Flamboyant property entrepreneur Nick Leslau has just bet £234m on the mid-term health of UK residential property. The deal is a derivative-style deal with Swiss Re, who are reducing their exposure to property by offering Leslau exposure to 3,400 homes acquired through equity-release policies last year. The average age of tenants is said to be 82, so - and don't read this is you're feeling squeamish this morning - the majority of the property is expected to be sold in the next ten years. The Rat and Mouse wonders whether - by this time next year - Leslau will also be investing in meals-on-wheels and free door-to-door medical services.
[via Property Week]
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It's the FT's property index, and it has England and Wales homes rising in value by 0.5% in November, leaving annual inflation at 9.1%. Yes, it's surprising. So how'd it happen? Firstly, it's based on transactions agreed before the panic really set in. Secondly, it's been skewed by some hot London action... with London discounted the index fell a little, and the annual rate was just 6.7%.
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That's London's most expensive tube line in terms of property prices. FindAProperty apparently have the answer - although I can't find it anywhere on their site. Luckily (and oddly), I found it via Country Life. Place your bets now. Answer after the jump.
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What's all the fuss about? asks CE Stuart Law. Demand will be boosted in 2008 by immigration, interest rates will drop back to 5%, buy-to-let will experience a second wind, with mortgage terms beating homebuyer mortgages and rents continuing to soar. Assetz are pinning a 5% growth tag on the 2008 UK property market. Courageous conviction or an attempt to talk up the market?
[via Mortgage Introducer]
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The third consecutive monthly fall reported by the Halifax means a 1.1% drop in November, leaving the annual rate of house price inflation at 6.3% (down from 8.9%). As Tom points out in the comment after today's linkage, this is the first time the Halifax as recorded three falls in a row since 1995. More here.
Market report - Nationwide and a dramatic tumble [November 29, 2007]
Market report - London hit by October fall says Land Registry [November 28, 2007]
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City bonuses are set, according to CEBR research, to drop by 20% this year, and 6,500 City jobs could go the way of cheap credit. The Sunday Times have spoken to estate agents who have already noticed a drop in enquiries in the property sectors most associated with bonus cash. Who'll get hit? Central London, the Cotswolds, the southwest, parts of Norfolk, Suffolk and Kent. Obviously, it's not all about a lack of City money. It's also about a lack of confidence in the property market. Caused by a lack of City money. Caused by a lack of confidence in the property market. Caused by a lack of ... you get the picture.
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What madness? This madness...
House prices alert after biggest fall for 12 years [Telegraph]
Biggest drop in house prices for 12 years [Guardian]
Analysis: dire data [Times]
UK house prices see sharp tumble [BBC]
House prices decline for fastest rate in over a decade [House Move]
Shock fall in house prices [Express]
and
Is the roof falling in on the housing market? [Independent]
Now, the Rat and Mouse isn't going to claim the housing market is pointing in the same direction it was pointing this time last year. Nor am I trying to sweep under the carpet the terrible lending data that accompanied the Nationwide figures. But to make out that yesterday's Nationwide numbers are in any way a reliable indicator that something dramatic has just happened, signaling the tipping point, the very moment when the UK housing market fell off its perch, is not only nonsense, it's surely willful mischief on behalf of the media. They know, I know, you know, that the November drop of 0.8% - the "biggest drop in house prices in 12 years" - came after a rise, in October, of 1.1%. Clearly, October's rise was an anomaly (it arrived in the midst of other data that was all pointing to slight falls); and because of that a dramatic, corrective drop was almost inevitable for November. Taken alongside October's figure, November's 0.8% fall still leaves the market 0.3% up on September.
Don't get me wrong. I'm not buying UK property futures. All I'm saying is... let's not throw out our brains for the sake of a headline. Mix yourself a Marge, and have a cool weekend.
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It's a 0.8% drop... the biggest monthly tumble since June 1995. The annual inflation figure now rests at 6.9%, down from 9.7% a month ago. Now - although there's little doubt the UK property market is cooling, and rapidly - it's important to remember that it was Nationwide who posted last month's shock rise. That October figure - a rise, against all other indices and indicators, of 1.1% - not only looks more than ever like a statistical blip, but also goes some way to explain the size of this month's fall. Nationwide's three-month inflation figure shows a softening, from 1.8% to 1.5%.
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"When Damien Hirst created his diamond-covered skull, one of our clients asked for the doorknobs of their new house to be similarly bejewelled. We used Swarovski crystals – at a cost of £257 for each knob. But for their favourite rooms, the master bedroom and reception, we created two knobs each studded with 4,328 diamonds, and costing £20,000 for each knob."
That's QuintessentiallyEstates' Lucy Russell talking to the Independent, about her work with extravagant knobs. The thrust of the piece is... if things are turning bad in the London property market... nobody's told the super-loaded.
"Another client requested a bright orange Cinderella pumpkin bed for her daughter. It cost £80,000," continues Russell.
So what? When I was a nipper I slept in a little bed made to look like a hat. Actually, it was a hat. I started in a bowler... got my first real bed when I grew out of the stetson. The real point here is that the top end of the market - the end catered for by these search agents and interior designers - obeys different rules. These properties are so different, and at this £25m+ sector so rare, that they're part art, part property.
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A greater fall - no less - than any other region, totaling 0.6% for the month. It didn't, however, cancel out the previous month's rise, and overall the national figure was a small gain of 0.1%.
Meanwhile, beleaguered vendors might want to turn to MoneyWeek and its essential four-point guide to shifting your home. Er... tidy up, don't waste your time with DIY, drop the price and choose your estate agent carefully. Obviously, a year ago, we were all blithely picking estate agents with a dice, raising the lounge floor with decking, leaving our unwashed pants on the stairs and adding £20,000 to a sensible asking price. Actually, we were doing that last one...
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Home Truths London is the name of a report by the Housing Federation (an organisation representing non-profit housing associations), and - with the media largely panicking about a potential downturn in the market - further emphasises where the pain is in the London market. (A clue: it's not where a 5% or even 10% downturn would make any substantive difference.) Some facts:
- in a quarter of London boroughs, a first-time buyer would need to be earning more than £100,000 to by an average priced home.
- The number of people on the waiting list for social housing has risen by 57% in five years (to 330,000).
- In Barking & Dagenham, the rise has been 150%.
More here.
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It's a 0.2% fall for November, the second monthly fall, leaving the annual house price inflation rate at just 3.6%. And this is a London thing, too... with falls as significant as 0.5% recorded in central London. More here.
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It would appear so. Last month they were predicting a 2% fall in house prices in 2008. Now, the figure's -7%... considerably higher than any non-tradeable forecasts, even the traditionally nutty Capital Economics, who are sticking with -3%. Is this a question of wise traders putting their money where their mouths are? Or wiser investors finding a hedge?
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Phil Spencer - advising the Telegraph - suggests holding off until February or March unless you really need to sell in a hurry. Prices - he believes - will stabilise in 2008. Right now - however - buyers are ultra-cocky and ultra-aggressive, and they'll try to force you to compromise on the price. Read more here.
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According to a survey by Savills, the following addresses are potential candidates for future primeness. The important driver is an influx of professionals combined with nice existing stock, preferably Victorian or Edwardian homes. The advantages to being "prime"? If you've been reading the Rat and Mouse at all over the last few years you'll know that prime London tends to outgrow the rest of London, indeed the rest of the UK. So here goes:
- Tooting ("the new Notting Hill")
- White City
- East Acton
- Tulse Hill
- Camberwell
- Fortis Green
- Finchley
- Brondesbury
- Willesden Green
- Cricklewood
[via the Times]
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It's reporting a 0.7% fall in the month to November 10. Remember, Rightmove bases its figures on asking prices, and this month's report comes after last month's dramatic 2.6% drop. It's pretty clear that vendors are low in confidence. Rightmove joins Nationwide in predicting flat house prices in 2008. More here.
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This time, from the Council Of Mortgage Lenders, and figures showing a sharp reversal in lending between August and September. CLM chief Michael Coogan lays the blame directly at the door of interest rates, expressing disappointment that the Bank of England didn't take the opportunity to cut rates last Thursday, and pointing out the effect on first-time buyers. Affordability was down - with the average ftb spending 20.4% of monthly income on repayments, the highest proportion since 1991. It will be a while before gently sliding house prices do anything to ease the discomfort for ftbs.
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The new RICS house price index shows another fall... except for us. London is the only region in England and Wales that isn't showing southerly motion in the house price department. The RICS blame high interest rates (they're higher, but are they really high?) and unaffordable property (okay), and claim that it's only a shortage of supply that's propping up the market. The details of the RICS's rather tortuous methodology... 22.2% more surveyors/agents (the people, in other words, who help the market set prices) said they'd seen a fall rather than a rise.
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Did you know that a fifth of London's workforce work in the financial sector? I didn't. Last year, 62% of end-of-year bonuses went into the property market. According to Savills' Yolande Barnes, this year that figure is forecast to be just 30%, as City people tighten their Prada belts for tough times ahead. What's more, vendors are accepting offers. More here.
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Telegraph call a cooling, and offer ten tactics for avoid falling house price pain, including looking for flats "with a difference" to avoid the value slide almost sure to hit the ranks of unsold identi-flats and list your home in the small ads to cut out the agent. Interesting, London-specific advice includes:
5. Watch for the £1m London house slide
Apparently the £1m to £3m house sector is likely to be hit the hardest, coming off record returns in the last year, has furthest to fall. This, from a Knight Frank agent:
"Six weeks ago I could sell a good house 20 times over. Now there is double the number to sell, but the phones have stopped ringing"
And this:
10. Buy in the comfort zone
Knight Frank says the strongest part of the London market is likely to be in the £500,000 to £750,000 bracket, fuelled by later first-timers trying to get a foot on the ladder.
A £750,000 comfort zone fuelled by ftbs. Only in London... Read it all here.
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It's a fall of 0.5% on the month, leaving the annual inflation figure at 8.9%. This, after the 1.1% rise shown in the Nationwide's figures. Is it enough to encourage a cut in interest rates? The Rat and Mouse doubts it... but we'll know for sure shortly.
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Nadeem Walayat - writing for the Market Oracle - gives five case studies aimed at first-time buyers, to demonstrate the relative costs of buying versus renting for five years, in different market scenarios:
- no change in house prices
- house prices rise 2% each year for five years
- house prices fall 2% each year for five years
- house prices crash 5% each year for five years
- house prices boom 5% each year for five years
The results (on a £200,000 home, and £160,000 loan) - from a net cost of buying over renting of £67,014 to a net gain of £37,694 - demonstrate how highly geared the process can be. It's an interesting read.
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According to the latest Knight Frank figures, prime central London growth has slowed to 0.3%, making October's the lowest monthly figure since July 2005. So where does that leave the annual inflation figure? Must have taken a hit, right? Haven't you been paying attention? 2006/2007 have been such crazy years that it still leaves the annual inflation figure at a ludicrous 34.1%. And we all know there's no such thing as a single market when it comes to property. Even on a given London street, it's not uncommon for one side to outperform the other. Within Knight Frank's prime central London index, the top end continues to outperform the rest, with £5m+ homes growing in (percentage) value by more than twice the £1m/£2m bracket in the three months to the end of October.
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They're an estate agency and they've a house price index all of their own. The October results show a 0.3% rise on the month, nationally. The top 20% of the market (I like the way Chesterton does this) is up 14.5% on the year, the bottom 20% is up 6%. Now, here's the kicker:
Prices in London fell 0.1% in October but annual inflation remains robust at +12.4%.
Yorkshire and the Humber also saw falls in the month. And here's another interesting bit of data:
The average property of a retired person is now £22,203 higher than the price of a property owned by a skilled manual worker – which is £123,203.
Exactly how the Rat and Mouse interprets that I'm not sure, but we like Chesterton's statistical creativity.
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That's the message from Royal Institution of Chartered Surveyors chief economist David Stubbs. There is and won't be a market free-fall, and so don't count of vendors biting any pillows in the near future. (Not his exact words.) The market isn't being flooded, he says, and so there's no incentive for sellers to drop prices:
"At the moment the supply side is actually holding up much better than most people would have imagined, and that’s actually keeping the market fairly tight, and should actually prevent sellers from having to give discounts to most buyers."
[via HotProperty]
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Which suggests that for some - living in particular high value postcodes - it might be cost effective to consider building your own tube station. But that's just something to think about. The research - by HotProperty - suggests that the crucial crib-to-tube distance is five minutes; but also that more and more cash-pressed Londoners are starting to write-off tube proximity in favour of a bargain. According to MD Shawn Luetchens:
"Walking an hour to get a to a tube station seems an extreme measure, however with mortgage affordability at an all time low and little relief in sight, people are having to make compromises."
[via AboutProperty]
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According to Nationwide, house prices took an unexpected turn in October, defying predictions, economic forecasts and media sentiment with the biggest monthly rise in four months. The national monthly figure reads... uo, 1.1%, leaving the annual figure at 9.7%. Nationwide's Fionnuala Earley, however, warns against any premature throwing of hats in the air/jumping off bridges (delete as per your own position) by marking the data really as a slowing down in the slowing down, rather than the start of a new upward trend.
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A YouGov survey for the New Homes Marketing Board suggests the perennial chatter about young people choosing to rent, for lifestyle reasons (freedom from debt, freedom to move with your job), is all about a very vocal minority. Over 80% surveyed said they'd be unhappy renting permanently; in the under-35 bracket that rose to 90%, presumably because this is the generation that has suffered most from unrealistic demands on the first-time buyer. What's more, according to NHMB's David Pretty:
Even if renting is seen as a worst-case scenario for many people, there seems to be an assumption that renting will still somehow be affordable in the future. But the supply and variety of homes for rent, like homes for sale, is ultimately controlled by land availability and the planning system, and an ongoing serious shortage of supply will simply drive up rents as it has driven up prices.
Yeah, I know... supply-and-demand. If tenants can't actually afford rents, then rents can't keep going up. But I think the point Pretty's making is that they'll be able to afford the rent, but unable to save for a deposit/cost of buying. Rising rents will lock tenants into renting.
[via The Move Channel]
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Hometrack records a loss - its first in two years - of 0.1% for October, with annual growth falling back to 4.4%. And it's the places that have seen the biggest profits that are now experiencing the biggest falls... central London and the City (-0.5%), south west London (-0.4%). Meanwhile, the Council of Mortgage Lenders has revised its 2008 predictions to a rise of just 1%. It expects base rates to end 2007 at 5.5% and 2008 at 5%.
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In this context my Board and I welcome the Government’s new target for the delivery of 240,000 net additional homes a year by 2016. If met we believe this will represent important movement towards stabilising affordability over the next decade. In the long run the country will need to deliver even more homes if we are to stabilise housing affordability. NHPAU estimates that about 270,000 new homes a year by 2016 will be required to achieve this.
The National Housing and Planning Advice Unit's response to the Government's green paper (Homes For The Future: More Affordable, More Sustainable) is published today, and emphasises not just the number of homes that need to be built, but the type and location. Common sense? You'd think so, wouldn't you? But when it comes to development in the UK, money talks and common sense walks. If we don't do anything, homes will average out at nine-and-a-half times salary by 2026. You can see the actual paper by clicking here.
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September's annual inflation figure is down to 8.7% from 9.4%. Prices rose 0.4% in the month, but that's skewed by London figures which, once again, led the market, with a monthly rise of 1.3% (leaving London's annual house price inflation at 16.5%). The overall picture? The market's slowing.
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Ms Barker can talk it up all she wants, Ray Boulger's having none of it:
He believes that even if the Bank of England cuts the 5.75 per cent base rate in the next few months, this will be too late to stem the tide of homelessness.
Tide of homelessness? Tsunami of misery sweeping hard-working families from their front rooms and depositing on the curb, tatty fake LV suitcase in one hand, eviction notice in the other? Too right. Boulger believes 2008 will see as many as 70,000 homes repossessed, and house prices fall 10%.
But isn't it interesting how the Bank of England blames the mortgage brokers for stupid lending, and the mortgage brokers blame the Bank for stupid interest rates? More here.
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Meanwhile, as things don't go their way, Kate Barker of the monetary policy committee (the Bank of England committee who vote on interest rates)...
... said it was "not immediately obvious" why recent developments in the markets should provide a "trigger which significantly alters previous expectations of continued robust house price growth".
Is she bovvered? Does she sound bovvered?
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The Sunday Times runs a handy, cut-out-and-keep guide to profiting from falling house prices. It's a risky business... especially on sell-to-rent:
For this to work, you need to earn more from putting your profits in a savings account than you would from property growth. The best accounts pay more than 6%, while forecasts for property next year range from a fall of 3% to a 4.5% rise.
And don't forget the cost of renting, the cost of selling, the cost of buying (sometimes the Rat and Mouse feels like it's the only entity in the whole property business shouting STAMP DUTY! STAMP DUTY! when listening to people calculate their theoretical profits), and the cost of putting three-quarters of your stuff into storage. And the risk that prices won't go in the direction you're thinking. The Rat and Mouse knows of several previous sell-to-renters who had their fingers burned, and they've become very angry people.
But Jeez, if you thank that's risky, how about this for an adrenalin rush... spread-bet with IG Index on building shares falling. Ouch! The other three tactics? Buy bank shares. Bet on a falling property market directly via IG Index. Bet on falling interest rates by getting a variable rate mortgage.
As always (we like the Sunday Times' property pages), it's a good read and something to talk about. But the Rat and Mouse's take... if you weren't familiar with these ideas before, you're not the right person to touch them now...
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Fionnuala Earley is quoted in the Sunday Times on the subject of house prices and 2008. It appears Nationwide are rethinking their 3% growth forecast for the year, and downgrading to something more like, well, nothing. In fact, don't be surprised, says Earley, by falls in some regions, and then a year or two of flat-lining after that. Of course, there are plenty who think we'll be lucky if we get away with that, and Capital Economics - never ones to miss an opportunity to spread fear and loathing at the UK property market - are quick to point out that this is a market that's all about emotion. Even if the economic fundamentals don't point unequivocally to a fall, a loss of confidence in the market might be enough. Which is probably why they're never ones to miss an opportunity... More here.
Meanwhile, there's a new Ernst & Young Item Club report that also shifts a 2008 prediction in a downward direction... from 2.5% to 2.1%. Their accompanying literature does, however, talk of a market that's likely to continue to grow, aided by interest rates, which, it predicts, will start falling again shortly. More here.
And economics professor Patrick Minford, writing in the Telegraph, is having absolutely none of it. He points to the two factors quoted in the recent, much misrepresented IMF statement that may well hold up property prices: lack of supply, growing demand:
How much does this mismatch between supply and demand drive up prices each year? According to our calculations, the scale of the underlying rise has been around three per cent a year after inflation over the past 20-odd years. Taking into account the savage decline in prices during the early 1990s, that has meant that prices had to rise much more to catch up in the late 1990s. Today they may have overshot a bit, but the evidence is not by much - perhaps 10 per cent or so.
He didn't think he was going to get away with that and escape controversy? Check the comments, including:
I rank economists just a shade below politicians and estate agents....
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Soap characters, property prices, complete blending of fiction and reality... it's the Sun and the Rat and Mouse loves it. The piece ("an exclusive investigation") looks at Eastenders, Emmerdale and Coronation Street, and asks whether the characters could really afford to live there. Obviously, the Rat and Mouse is interested in Eastenders, here, and that will only change when somebody proves to us that the north really exists. Apparently Albert Square is based on Fassett Square in Dalston:
According to a Foxtons agent interviewed by the Sun, Fassett Square prices have risen by 70% in the last three years, with a three-bedroom house costing around the £800,000 mark... not much more than what Max and Tanya Branning would have had to pay for their Albert Square semi. Max is a dodgy insurance salesman, Tanya's a slutty beautician... even if they'd paid a giant deposit, perhaps negotiated by their agents with the BBC (see how I can do that fiction-reality mix-up thing, too?), they'd still be looking at a 17xsalary mortgage. The Sun suggests they're dealing. Wouldn't put it past them.
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According to a report that looks analytically at the experience of previous host cities - cited here in the Telegraph - London's Olympic residential developments, if they behave like their predecessors, can expect to see 5%-above-market growth for the next five years. But the report points to a more interesting factor.. the issue of sustainability. The Thames Gateway area of the Lower Lea Valley is earmarked for 40,000 new homes, and the report casts doubt on whether there's been proper planning for infrastructure. There are concerns, too, that London's gone too far... that such a sudden glut of property could destabilise the market, actually damaging prices in Stratford... not - the Rat and Mouse is sure - what all those hand-rubbing property investors want to hear right now.
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Apparently, our market is even more overpriced than its US equivalent before the current decline. It's downgraded its forecast for 2008 growth to 2.3%. What's staving off a crash? Anything? They say:
- higher lending standards than in the US.
- strong immigration combined with constrained supply.
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The figures come from Shelter, and they're astonishing. More than a million people used high-cost credit card loans to meet rental or mortgage demands in the last 12 months. Of 2,000 households polled, 6% had relied on a card, and when payments were made by young people aged between 18 and 24 that figure rose to 7.5%. If their credit rating isn't good - and, let's face it, using a Barclaycard to cover the rent isn't a positive sign - they could be faced with punishing interest rates as high as 40%.
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The last time I wrote at length about British house prices, you were eating cold turkey and I was eating humble pie. You have long ago moved on from the turkey but I have continued to be force-fed the pie. Bearing in mind my earlier erroneous forecast of house price falls, you may well say "quite right too". But I am beginning to wonder whether my time of penance may soon be over.
Capital Economics' Roger Bootle has long been a prominent and outspoken bear when it comes to the UK housing market. Back in the last days of 2005, he forecast a 5% fall in house prices in 2006. Ultimately, the January-to-January DCLG figures (which measure completion prices) came in at 10.9%. Writing in the Sunday Telegraph, Bootle makes no bones that his record in recent years hasn't made him somebody you'd approach for racing tips, but he suspects his time may be about to come. He's probably right. And his analysis of the market is - as you'd expect from somebody with such a distinguished CV - compelling. But what the Rat and Mouse wants to know is just how long after making a prediction are you allowed to wait and still reap glory when it comes around. All over the place there are interested parties watching, waiting, as they've been for years... and when/if the property market starts sliding, they'll be jabbing the air and snorting I told you so's, even though the market might have risen 20% since they made their initial predictions. Is this a victory? Are these bets still valid?
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So if you're prepared to believe this, this and this, then you've got to believe this is evidence of a bullish, upwardly mobile British housing market... haven't you? Maybe not. Today's Righmove figures for September show a rise of 2.7% in the month, leaving annual inflation at 10.4%. Rightmove have managed to equate an increase in supply with an increase in prices, pointing out a sudden rise in the number of three-bedroom homes being marketed before the September 10 HIPs switch-on, which might have skewed the index by over-weighting it with higher value properties. They may well be right, although it always astounds the Rat and Mouse that - at a time when the market may be toppling and vendors have so many important issues to grapple with - a few hundred quid one way or the other within the context of an expensive move (especially at this end of the market) will be a factor.
Meanwhile, over at Forbes:
FYI - that 5% is the London gain... just like the good/bad (as you see appropriate) old days.
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The Royal Institution of Chartered Surveyors report is always an odd one... the proportion of professionals who estimate values who report that they've estimated higher/lower values than in the previous month. But these RICS reports tend to follow the general direction of price movement. In September, prices fell (for the second consecutive month), with 14.6% more surveyors reporting a fall than reporting a rise (in August the figure had been 11.3% 3.3%... see "comments"). Importantly, new buyer enquiries fell for the tenth month in a row, and by the sharpest amount since March 2003.
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There was a little excitement before the interest rate announcement (see how I did that? excitement and interest rate announcement in the same sentence?) when Halifax released its September house price figures and they were... a fall. It's a fall of 0.6% nationally, leaving the annual inflation rate at 10.7% (from 11.4%) or a truly astonishing 18.6% in Greater London. While the figures might be different, most of the indices are painting a similar picture of a market that's slowing down. But before we get too excited about this latest Halifax number, the Rat and Mouse would like to remind readers that Halifax reported a 0.9% fall in December, followed by eight solid months of growth.
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Morgan Stanley's David Miles described himself as "relatively pessimistic" about the UK housing market yesterday, claiming it's in worse shape than its European counterparts, and warning that limited supply won't continue to hold up prices into the future. More here.
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It's a big fat zero for September, nationally. In London, there was a slight shift upward, of 0.1%. The annual (national) inflation figure is 5% (from 5.4% in August). The accompanying report talks of inertia, with a tightening of supply holding prices up.
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There's a survey by Savills into (yes, that perennial) the effect a good local school has on house prices, and it comes up with some interesting headlines, such as:
- 75% of families, when choosing a new home, place more emphasis on good school proximity than the safety of the neighbourhood.
- Among those earning £100,000 or more, that percentage creeps up to 94%.
- Top private schools are adding 20% to property prices.
- Top state schools are adding 13%.
- Although the differences between school standards in primary education isn't as great as in secondary education, the effect on house prices is similar.
And it's all our fault. The unreasonable house prices - according to Savills - are directly the result of desperate Londoners realising that even if little Cosmo is crammed to the point of serious psychological damage and he does win a place at a good school, and even if they can scrape up the fees, the school's so oversubscribed it can't issue any guarantees that Cosmo won't end up down the road instead, getting beaten senseless by little Brooklyn on a daily basis. That's the point at which the flight instinct sets in, and the entire family goes house-hunting in the country, a clutch of OFSTED reports in the glove compartment. They fight it out with a dozen other London families, adding 20% to the cost of their house, pricing out any locals... and then settle into a new life, Cosmo's dad still in London four days of the week, running up a massive mobile phone bill and sleeping with Eastern European prostitutes. (The last bit isn't in the Savills report.)
For some fascinating commentary, including real world examples and a photograph of a boy dressed up like a painful accident waiting to happen, read this great Sunday Telegraph piece. Download the actual report here.
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The headline figures are a 0.2% rise, leaving the annual inflation figure at 9.4%. But what they hide is a London/rest of the UK split. In London, the August figure was 1.5%, and the annual figure 16.7%. Nine borough saw an annual inflation figure of over 20%, with Kensington & Chelsea leading the way with 29%. Sustainable? Unlikely.
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Nationwide is reporting a 0.7% rise in September, leaving the annual inflation rate at 9%.
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What would happen, according to Stroud & Swindon Building Society, is that the average first time buyer would need to be a millionaire in order to buy a property. And the situation will have spread to the rest of the UK by 2024. Obviously, the calculation takes no interest whatsoever in the market influence of affordability, supply-and-demand etc etc...
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 Props to CityWire for this very interesting report from the auctions. Repossessions appeared to be order of the day - but aren't they always? People over-stretch themselves even in a bull market. What's more shocking is how little was selling... even at a substantial discount on 2005 prices. CityWire's Richard Lander makes the assumption these are buy-to-lets, an entirely sensible assumption given that so many appear to be new-build apartments of one or two bedrooms. He goes on to interpret this as a sign of the buy-to-let market imploding. The Rat and Mouse might interpret the experience slightly differently. New builds - especially in 2005 - were in many cases hilariously overpriced. If the auction was a sign of any kind of chicken coming home to roost, it's as likely to be purchasers of so-called off-plan newbuild bargains as buy-to-let landlords per se wearing the feathers.
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What's sell-to-rent? It's the practice of taking a punt on a significant fall in house prices by selling up, moving into rented accommodation and buying back at either a lower price or higher spec. Why ouch? Because the fall needs to be significant enough to cover both rentals (and possibly storage) while you wait, and the cost of moving, which includes Stamp Duty, estate agency and solicitors fees, and all the other stuff that really adds up. And if you're wrong, and the market starts to climb again (unlikely, in the current climate - I know - but I've seen it happen before) then you're basically, well, screwed. I've seen this happen to people who have ended up very bitter about the market.
But that was then, this is now. Perhaps this time you could be lucky.
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 According to the estate agents interviewed in the Telegraph, forget Starbucks, forget Waitrose, it's the individual organic deli that does most for neighbourhood house prices. And they're cropping up in the unlikeliest places. Battersea High Street has seen house prices rise as organic pasta has distracted house hunters from the council estate. And delis have been seen cropping up in Stoke Newington Church Street and West Hampstead. Clearly there's an organic-free-range-chicken-and-organic-free-range-egg conundrum here; but property spotters take note nonetheless. The piece ends with a nice selection of properties for the greedy, none more than a few minutes away from a farmer's market or deli.
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Here's an interesting piece on Reuters, predicting a buy-to-let-induced disaster. If Northern Rock's the pin, it says, buy-to-let's the bubble. The story offers plenty of common sense, comparing earnings to interest payments on buy-to-let and offering the scenario that capital growth doesn't continue to offset any difference. The story's told with the that undercurrent of triumphalism that pops up in the press occasionally... as if it has never occurred to the writer that everyone - evil coyote landlords, honest families alike - will suffer either directly or indirectly from a serious prolapse in the housing market. What's crucial to know is the proportion of buy-to-let property that was bought-to-let long enough ago to absorb the RICS's (much quoted this morning) estimates of a (4-to-1) 10% crash in the London market or a (much more likely) year of zero growth, and how many landlords are on 100% mortgages. I don't know. Do you?
RICS offers 9-to-1 on house price crash... any takers? [September 18, 2007]
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Some interesting figures from the Building Societies Association... 71% are feeling less bullish, although only 9% think property prices will actually fall, and 65% think that prices will still continue to rise. Less than half bought a home in order to see a profit... most just want to own the building in which they live. Furthermore, falling prices wouldn't panic people out of the market. Just 2% said they'd respond to a 15% drop in the market by selling (which goes a little way to restore my faith in common sense).
[via Reuters]
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The Royal Institute of Chartered Surveyors has retreated from it's early 12-15 month house price inflation forecast of 3%, now officially quoting 0%. Over a similar period, the RICS's Simon Rubinsohn rates a 20% chance of a 10% dip in London prices; and a 10% chance of an almighty, early 1990s, Smells Like Teen Spirit-era crash of 35%. More here.
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After a difficult day, here's Lucy Farndon, writing in This Is Money, about an extraordinary secret she's decided to share:
In recent days, several executives have privately warned me that they think this financial crisis will not go away, having grown out of more than a decade of irresponsible lending. They fear dire consequences for the broader economy. One senior director at a FTSE bank actually wagered that, at some point over the next three years, UK house prices will have fallen by 50% from the level they are at now.
But the Rat and Mouse refuses to be brought down and orders all readers to make this your personal theme music for the evening and have a glamorous weekend.
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ABCMoney reports a leaked market report from Rightmove, due out Monday. The headlines: a sudden and significant fall of 2.6% in UK house prices in September.
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Monevator.com is an interesting new personal finance blog with a healthy distrust of the finance industry and an emphasis on personal responsibility. Here, you'll find an examination of the relative costs of buying versus renting in the W6 neighbourhood. It's a good read, and the end result suggests there's little value in buying. However, variables that are harder to quantify and calculate include the freedom to turn a house into home exactly the way you want, and - of course - the market. Certainly, it's fair to say residential properties boom days are likely to be (ought to be) over for the immediate future. But mortgages last longer than the immediate future... and although house price crashes and negative equity have been realities, it's difficult to find a full mortgage term in which properties haven't been a sound investment.
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The market may have lost a little bark but definitely not its bite.
... the words of Anne Currell in an interesting overview of the market by 13 estate agents and economists in the Times. If there is an overall picture, it's one in which first-time buyers are holding off and propping up rentals, a lack of supply means that the top end of the market remains unaffected by interest rate rises, but economists are predicting increases in mortgage arrears and a slowdown in growth in 2008.
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Meanwhile, Halifax report a 0.4% rise in house prices for August, leaving the annual inflation rate at 11.4%. In terms of trends, it's interesting that the three-monthly change to August is at only 1.6% (compared to 4.5% in March). Read the actual report (as a pdf) by clicking here.
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According to figures released this morning, a couple buying their first home today is looking for the equivalent of 96% of their annual earnings (after tax) to cover the deposit and stamp duty. After that, it would be plain sailing: with 44% of their take-home pay financing the mortgage.
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Meanwhile - with some arguing that the UK housing market is about to suffer a painful and embarrassing prolapse - Kirstie and Phil offer Sunday Telegraph readers some advice on how to deal with the new uncertainty. Phil talks to sellers:
In the mainstream market, this is not the time to be greedy.
And Kirstie to buyers:
Check out the sellers of the house you want. Are they in a hurry? Have they had an offer accepted on a property they want? If so, cut a deal.
Hmm, anybody sense a buyers' market just around the corner?
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Monthly inflation is up, to 0.6% from last month's rise of just 0.1%. However, the annual figure has dropped slightly, from 9.9% to 9.6%... resulting in some confusion:
House prices still rising [Channel 4 News]
Nationwide says house prices still slowing [FT]
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An ingenious post by Seattle-based bubble-blogger capturing a radio phone-in caller is scared of her husband returning home: "I actually had to leave with our kids because he was actually breaking things". Dr Laura asks if he was smashed. No. He doesn't drink. It's all about a house they bought, but couldn't really afford and, well, she kind of pressured him into it... a sorry tale. Read - actually, hear it - here.
[via HousingPanic]
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Thanks to a Rat and Mouse reader for this:
Land registry statistics for July just released. The headlines proclaims slow growth but that belies the fact that prime SW is on fire, for example Chelsea is up 2.8 for the July (30.9% for year) and Fulham is up 2.2 (23.5% for the year). Westminster and Islington are also up by 2.3% (21.6%) and 1.9 (23.7%) respectively.
My personal theory is that hedge funders and rich foreigners are buying up K&C property driving bankers and rich Brits to buy in Fulham, Islington and Westminster as they can no longer stomach the prices paid in Kensington and Chelsea.
Those slow growth headlines: a 0.1% rise nationally (the lowest monthly growth in 13 months), leaving an annual inflation figure of 8.8%. In London, those numbers are 1% and 10.5%.
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... now, according to the Telegraph, you don't. The issue is foreign buyers, picking up pukka properties and then holding onto them... slipping them into giant portfolios because... well... they can. It's tax effective, and their kids love a London playground. The paper also seems to have the scoop on the latest Knight Frank Prime Central London Index movement which, they say, will show an annual (July-to-July) inflation rate of 36.4% (the highest since 1979).
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Yesterday's Hometrack figures showed a drop in the annual rate of house price inflation from 5.9% (July) to 5.4% (August). The monthly figures left London, alone, showing a rise in prices (0.1%). More here.
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According to the National Housing Federation, and in the face of rising interest rates, slowing house prices in London and a market meltdown which is sure to hit City bonuses, the average UK house will rise by 40% in value in the next five years. In London, the average price of a home will be half a million pounds. The organisation is calling on the Government to put some money where Gordon Brown's mouth is, and act on social housing for key workers, before a crisis turns into a catastrophe.
[via 999today]
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a real estate broker named Becky Fatemi eases into her black Porsche Cayenne and heads for Connaught Square..." Now that's the way to start a London property story. It's an interesting Bloomberg tour of the London market, mostly - we're guessing - aimed at Americans (it explains phrases such as gazump, buy-to-let). But it's worth reading by anyone for its intimate look at Foxtons. Did you know this?
From his perch in Chiswick Park, manager Jean Jameson, a 37-year-old from South Africa in a gray suit and pink tie, plays a Foxtons version of Big Brother. He can peer into Foxtons offices across London via video camera to check up on brokers and see who's available for assignments.
Read it here.
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 Knight Frank's Prime Central London Index (July edition) saw a rise of 3.9%, the highest monthly growth since the Index began in 1976, leaving the annual figure at 36.4%, the highest (again) since '76. In the accompanying report, Knight Frank's Liam Bailey focusses on foreign ownership at the very top of the London market to explain supply constraint and increased demand. Foreign buyers are also, apparently, holding onto properties for longer.
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Rightmove reports this morning... and, although the national trend is still up (0.6% for August, 12.8% on the year), the London market has dropped slightly (0.1%) in August. What does it mean? Past experience suggests it's probably too early to say. Rightmove's comment piece suggests that Miles Shipside sees the data as proper evidence that "we have now genuinely reached the limit of buyers' ability to afford higher prices in current market conditions". It's difficult to disagree. Click here to read the original PDF.
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The general message recently has been that the market's coming off the boil. No bad thing, either. However, today's Halifax figures are like a return to 2006... house prices up 0.7% in July, the annual three-month rate up 11.2% (from 10.7%). Not even Halifax are taking this too seriously:
"We expect the downward trend in house price growth to continue as the five interest rate rises since last summer have an increasing impact on household spending and housing demand." [Martin Ellis, Halifax]
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Just 0.1% in July, according to Nationwide, leaving the annual inflation figure at 9.9%. These figures compare with 1.1% for June (and annual inflation at 11.1%).
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Whatever they are, Brits - collectively - had six and half of them wrapped up in assets as 2006 drew to a close, according to the Office for National Statistics. And of those trillions, 3.9 of them come in the form of property... that 60% of British wealth.
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Simon Heffer's stoking up emotion over at the Telegraph, on the subject of "Brown's plans to concrete over large parts of England". Is it that I'm just starting to notice the phenomenon, or is there an alternative view of the housing shortage just now starting to make itself heard? Much of what Heffer has to say is entirely sensible... if provocative in the wording. His main points are:
- previous, rushed social housing projects have resulted in slums or ghettoes, or just been despised and pulled down.
- there's too much empty property for there to really be a housing shortage.
- there's too much brownfield land to necessitate building on greenfield sites.
- we shouldn't build in the over-crowded south east... if we build elsewhere jobs will follow.
- nowhere is it written that homeowning is the natural state of being... there's nothing wrong with renting.
This made me wince:
And why, since we are so crowded, and since five million employable people live here on invalidity benefit, are we further crowding ourselves by having an open-door policy towards immigrants?
I wonder why [it made me wince]? Considered dispassionately and separate from the host of associations that pop up when confronted with such a statement, there's nothing wrong with highlighting the relationship between a housing shortage and immigration (although the logical connection to invalidity benefit defeats me). The comment thread that follows the piece is fascinating.
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Remember Patrick Dixon, whom you can watch here as he asks... what affordability problem? Well, Simon Jenkins can't seem to locate a housing shortage, either. In an audacious column in the Sunday Times, he rubbishes Gordon Brown's house-building plans, wonders what's wrong with renting, suggests house price inflation isn't all it's cracked up to be and blames Brown's pension-plan plundering for an obsession with homes as investments. You might not agree with him, but the piece is a great read.
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It's the one that's late, but the one that matters... based, as it is, on completions. The headlines are:
In May, house prices rose 0.7%, with flats (1.8%) leading the charge (contrary to almost all the current chatter about a surplus of apartments and a shortage of houses). Terraced houses were next best (0.9%), followed by semi-detached homes (0.6%) and detached properties (0.3%). The annual inflation figure fell from 11.3% in April to 10.9%; and for the three months to May, the figure was 11%. In London, the May-to-May figure was 14.5% (from 14% in April).
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