ahappychappy

No crashes where I am, just a case of sensible asking prices and price stabilility. Not sure which part of OZ you are refering too?

Quinkana

Looks like the Mania is London centric - as will be the Panic?

Mercedes

If people brought high and want to sell, they may loose money, but the ones who should be worried is whether by the interests going up whether they can afford the repayments. I've seen a few people loose their house due to interest rates going up outside their budgets and their houses are repossed by the Banks. If youre looking to buy Manc why dont you get a list of houses being repossed, you might find youself a bargain.

odaat

nice reading if you are renting..... :scared: - if you are trying to sell

First-time buyers quitting London
Mira Bar-Hillel, Evening Standard
24 September 2004

ENTIRE areas of London have become virtual no-go areas for first-time buyers as the housing market crisis deepens, it can be revealed today.

New figures show the full extent of the problems facing those trying to get their foot on the property ladder.

Across the capital the proportion of new buyers has dropped by half in a decade. Many cannot raise the money to buy even the smallest flats, which can cost up to eight times their salaries - and the knock-on effect is having a devastating impact on the market.

In affluent areas such as Richmond, only one in seven buyers, about 14%, now falls into the 'first-time' category as they are priced out. This compares with 38% in 1994.

Research carried out for the London Evening Standard shows a steady decline in first-time buyer activity throughout London, not just in the most expensive neighbourhoods.

In Bromley only 17% of buyers were first-timers, down from 40% in 1994.

The lack of 'fresh blood' is having a depressing effect on the market by stopping owners trading up to the next level.

London's cheapest borough, Barking and Dagenham, is the only one to see the proportion of first-time buyers steady in the past decade, at 68%. The sharpest fall was in Tower Hamlets, which in 1994 was still largely a deprived part of the East End.

Its success, reflected in massively higher property prices in much of the former Docklands, also succeeded in driving out first-time buyers, whose numbers plummeted from 65% nt to 29%.

The Halifax analysis echoes figures from the Council of Mortgage Lenders (CML), which also show a dramatic fall in first-time buyers in London over five years.

In 1999 the CML recorded 150,000 home loans, of which more than half, 83,000, were taken by first-time buyers. But last year, out of a total of 131,000 home loans in London, only 50,000 were to first-timers.

Halifax chief economist Martin Ellis said: 'The high level of property prices is also causing acute problems for key public sector workers getting on to the ladder.

'There is also an upward trend for people who are not related to buy property together, which can have its own potential pitfalls.

'We believe the Government should help first-time buyers by raising the lowest stamp duty threshold and linking it to house price inflation in future.'

Bernard Clarke of the CML said: 'The number of first-time buyers in London has gone down by 40% in the last five years, largely because so many of them have been priced out.

'Over that period, the price for an average first-time buyer in London has gone up by 60%, while their incomes have risen by only a third.'

The findings came as two major property firms warned of lower than expected profits because of the cooling market. Housebuilder Countryside Properties said five successive interest rate rises had sapped confidence. There was a similar warning from Countrywide, Britain's largest chain of estate agents.

odaat

Repo's will be at least another 18 months away - owners will probably switch to interest only loans, save on luxuries and live on sausages and bread, finally give in after a season of misery and debt and drop the keys off at the building society and make for the hills.

This will be the *fourth* property price freefall in just under 50 years - time to thump the next person who spouts "safe as houses"

Munchkin

I sold my house here in Nottingham late last year.

I knew the buyer who did a little bit of work on it then sold it on for another £16,000 (good luck to him too).

I wanted to put some of my money back into bricks and mortar, but realised that the UK was not the place to do it (the property had only cost me £33,000 back in 1991 and I can't see them tumbling to that kind of price again).

I ended up buying a villa repossession in Haines City, Florida.

So far we've not had any damage from the hurricanes so I'm crossing my fingers.

I suspect that property will hold a lot of the value it has gained here in the UK due to how small this place is, the size of the population and general reluctance to touch the stock market since Sept. 11.

MikeStanton

The fact is, in Oz, there isn't a crash - hence the quote marks. Oz is in a more precarious state than UK, because of 3 things:

i) there is an underlying housing shortage in the UK, much less so in Oz (except in cities and city beachfronts)

ii) the %age of buy to lets are much higher in Oz, because of tax benefits through negative gearing. Doing my own very limited research - ie peering into real estate windows - %age rental returns are considerably higher in UK.

iii) compared with UK, the increase in house values has caused a greater % of Oz households to increase their overall debt levels. House values go up and down with market forces, debt doesn't.


As interest rates go up, the gap between risk-free income via, say, term deposits and renting property will be almost zero. So, 'sensible' investors will sell-up and put their money on deposit, shares or other assets with better risk-adjusted returns. Of course, people who buy properties to let might counter-argue with "Ah. But we're relying on capital growth, not rental returns". Unfortunately, a lot of people will be waiting a long time to recover the capital losses that they may have already made - let alone getting any reasonable capital gain.

And, just like the UK, if there is a considerable loss of confidence in the housing market coupled with even modest interest rate rises, this could lead to a sharp contraction in consumer spending, followed by a recession.

Finally, let''s put any 'crash' in perspective. House prices could drop, say, between 5-30% (at worst) - but this represents the gains made, for many parts of the UK, of only the last 2 years : bad news if you bought during this period, otherwise it's a case of 'nice while it lasted'. For many people the house price rises were purely inflationary. Sure, your house went up, but so did the one you wanted to buy.

Don

I agree it's finally arrived. Sold out a bit too early (mid Feb last year, Bristol) but put the money to good use elsewhere and just relieved I'm not still invested in UK housing mkt right now.

Happy to wait out the next 5 years or so.

No Schadenfreude intended (serious).

Cold September for the housing market

Heather Stewart, economics correspondent
Sunday September 26, 2004
The Observer

Fresh evidence that Britain's housing market has ground to a halt will emerge this week as Nationwide reveals that estate agents saw little pick-up in business in September.


Five interest-rate rises since November have taken their toll on nervous buyers, and the closely watched Nationwide index will confirm that the downturn has stretched into this month.

'The market's grinding to a halt, and that's probably where we're going to stay for some time,' said Alex Bannister, Nationwide's chief economist. He is not predicting a crash, but thinks the most likely scenario is a long period of stagnation.

Nationwide will also release its quarterly regional breakdown of housing market activity this week, which is expected to show the sharpest cooling in the south east, with modest price rises elsewhere in the country.

Martin Ellis at the Halifax, which will publish its latest snapshot of the market in the first few days of October, said he believed the situation was now 'stabilising'. He added: 'Our feeling is the market is gradually slowing down; we don't think there's any reason to be alarmed about it.' The Halifax index has already showed one month of falling prices, in August, the first for almost two years. Fears about the health of the housing market were exacerbated last week by a warning from the International Monetary Fund that property in Britain looks overvalued and prices could crash. On Friday, property website Hometrack said prices dropped by 0.3 per cent in September. The Monetary Policy Committee is watching closely to see how much effect the slowdown has on consumer spending.

MikeStanton

What a ridiculous statement : at best it's pure speculation

The fact is nobody yet knows whether it will be a crash, slow-down or somewhere in between. A few months ago, the Oz papers were talking about a crash in Oz and that hasn't happened yet.

robertd

I think Oz will fair better than the UK, When the next ressesion comes,Australia debt levels are lower than the UK, and so are property prices,I think prices in the UK will come crashing down by about 40%, but not as much in Oz, there may be lots of land hear but 90% of it is desert, and every body then wants to live on top of each other,the property on the Gold Coast slowed up but things are now selling,so as long as people carry on moving hear hopfully, things sould not go to pear shaped.I think investing in Australia in the short term is safer than the UK, but when things start to pick up in the UK, thats the place to make a lot of money

Padsnbon

I'm normally over in the Canada forum, but this caught my eye. I work for an Estate Agents here in the Uk and nearly every Estate Agent in the country in the last two weeks in different parts of the Uk, north to south has said they have the property to sell, but the tap has been turned off with the buyers, not just offers, but interest in buying! Everyone is holding their breath.

We're actually getting general paperwork done, which a month ago, was unthought of....luckily being in the Lakes the prices fair better as its a place where everyone wants to move to and that holds the prices a little, good news for home owners, bad news for locals who want to get on that "ladder" where pay up here is c***p compared to the price of houses.

Anyway that's my 2p worth

Don

'Champ'? 'Chimp'?

MikeStanton

40%? Why not 30, 50, 70%...? The fact is no-one knows.

UK is still likely to be in a better position than Oz. Don't take my word for it, try the The Guardian in May 2004, just as house prices in Oz began to slide:

After taking off in 1996 the Australian housing market has boomed, much like ours, moving well above its long-term relationship with average earnings and undergoing a similar buy-to-let craze as Britain's.

Their economy is growing, likes ours, and unemployment is at its lowest for decades while interest rates are still relatively low. One crucial difference: Australian house prices, without any obvious trigger, have started to fall and rather rapidly.

Government officials, who dread the prospect of a housing crash ahead of next year's election, prefer to point to the Netherlands and Ireland, where booms have not ended in tears and house prices have stopped going up, rather than started going down.

So they are hoping the Australian experience is one that won't sail round the world and lap up on Britain's shores.

Ed Stansfield, a housing specialist at Capital Economics, has done some work comparing the two markets...

He notes that while the signs of price falls are provisional, the Australian central bank has done research showing prices falling in most major cities. Estimates of the falls for the first quarter are between 3.2% and 8.4%.

Australian interest rates were raised twice in 2002, to 4.75% and then late last year, to 5.25%. In Britain, they have risen three times since November, to 4.25% and markets are expecting them to be at Australia's level by the end of the year. At 5.25%, rates would still be low in historic terms, but would have risen by 50% in a year. For those who had bought in the past 12 to 18 months on stretched income multiples, that would hurt.

So does this mean British house prices will fall too? Not necessarily. There are two differences between the two markets. Household debt servicing payments reached an all-time high last year in Australia but are not at record levels in Britain, for now at least.

And housing supply is not as restricted in Australia as it is in Britain because land there is not in short supply. Housebuilding here has been slowing for years, there it is stable. So it is not clear that the Australian experience will translate to Britain.

Note the last 2 paragraphs. Neither UK or Oz is immune - but Oz is certainly in a more precarious position.

Don

That's OK then. House prices will (on average) stand still for the next 5-7 years until wages catch up (ie until affordability improves).

Not forgetting the slight matter of inflation eating away the real (not headline or notional) value of what your house is worth.

MikeStanton

I think this is the more likely scenario.

Probably a bit like Oz : prices stop rising, fall some (5-15%?) and stabilise (be "price neutral" to use the jargon) for the next 5+ years.

(Although, as you imply, in real terms house prices will probably fall by ~2-3% each year for next 5 years, ie representing an overall fall of 10-15%, but spread out over 5 years; not a sudden crash).