Buying A House

[Cambon]

What does a pention fund that only invests into commercial property have to do with house pricing exactly?

 

If you don't believe the government figures, how about hbos:

 

http://www.bloomberg.com/apps/news?pid=206...hc&refer=uk

 

Property is property. Remember it is in HBOS and the governments best interests to try to make the news look good, but for every "good news" link you can post, there are many "bad news" links like this:

 

http://www.channel4.com/news/articles/busi...per+cent/649777

[Slim]

Property is property. Remember it is in HBOS and the governments best interests to try to make the news look good, but for every "good news" link you can post, there are many "bad news" links like this:

http://www.channel4.com/news/articles/busi...per+cent/649777

 

 

Yet another link, a month old, that doesn't have anything to do with house prices. What exactly is your point?

[Tris]

To be fair it will have a positive correlation with house prices, it just may not be evident immediately. Banks are tightening their lending criteria due to the high number of repossessions which will obviously mean less people obtaining credit, and therefore less demand. House prices are suffering because of this and as the bloomberg link stated, although prices are rising, they are doing so at a much slower rate.

 

Residential prices in the UK (not the IOM) are forecast to hit a rise of around 5%, much less than usual. It will be interesting to see the prices in a years time over here but I don't think it will be quite as low as away.

 

The market is still extremely volatile and will be for the foreseeable future...

[Cambon]

Property is property. Remember it is in HBOS and the governments best interests to try to make the news look good, but for every "good news" link you can post, there are many "bad news" links like this:

http://www.channel4.com/news/articles/busi...per+cent/649777

 

 

Yet another link, a month old, that doesn't have anything to do with house prices. What exactly is your point?

 

Slim, I know you have difficulty keeping up, but this is from Droids original BBC post :

 

 

 

Last Updated: Monday, 10 September 2007, 10:48 GMT 11:48 UK

Prices are rising faster, contrary to expectationsAverage house prices in the UK are accelerating again, according to the Department of Communities and Local Government (DCLG). Its latest survey shows that in July prices across the country rose by 2% to an average of £218,479. The annual rate of house price inflation rose from from 12.1% to 12.4%, its highest since March 2005. [/size]

 

You will notice that in the second paragraph it is talking about JULY data. We are not talking current. The Spin is making this look like good news. In reality it is very bad news because the summer is when the price increase peak is supposed to happen. If the big annual peak has been .3%, we will see prices effectively fall as the year closes out.

 

Also, I doubt the release of this data is a coincidence - i.e. try to give some positive news before the PM tells the public sector workers they are getting a poor pay rise, and then the release of figures this moring stating that the level of consumer debt is at the highest it has ever been.

 

Edited to get rid of picture

[Cambon]

And, hot on the heels of July's information, here is August's (today's news from Bloomberg).

 

http://www.bloomberg.com/apps/news?pid=206...&refer=news

[ai_Droid]

And, hot on the heels of July's information, here is August's (today's news from Bloomberg).

http://www.bloomberg.com/apps/news?pid=206...&refer=news

 

"HBOS Plc, the U.K.'s biggest mortgage lender, said prices rose for an eighth month in August and gained 11.6 percent from a year earlier"

[Cambon]

And, hot on the heels of July's information, here is August's (today's news from Bloomberg).

http://www.bloomberg.com/apps/news?pid=206...&refer=news

 

"HBOS Plc, the U.K.'s biggest mortgage lender, said prices rose for an eighth month in August and gained 11.6 percent from a year earlier"

 

 

 

A very selective statement and the only potentially positive (from a home buyers point of view) statement in the whole article. As an HBOS investor, I can assure you the sub-prime issue has them crapping themselves. Governments can only intervene for so long.

 

"The number of real-estate agents and surveyors saying prices declined outnumbered those reporting gains by 1.8 percentage points in August, London-based RICS said. That's the first negative balance since October 2005. Prices in the capital rose at the slowest pace in more than two years."

 

August is still supposed to be a hot month for house selling and buying (warm weather, sunshine, light evenings, etc. that show houses at their best). Lets wait a couple of months and see. I would guess a 10% drop in prices by the end of the year.

[ai_Droid]

A very selective statement and the only potentially positive (from a home buyers point of view) statement in the whole article. As an HBOS investor, I can assure you the sub-prime issue has them crapping themselves. Governments can only intervene for so long.

 

I don't see how the sub-prime issue is relevant, that's about the US market not here.

 

August is still supposed to be a hot month for house selling and buying (warm weather, sunshine, light evenings, etc. that show houses at their best). Lets wait a couple of months and see. I would guess a 10% drop in prices by the end of the year.

 

The rics thing isn't good news no, but it is just one source of data, and not a particularly reliable one compared to the government data from actual house transactions and bank data from mortgages. It's definately illustrative, but not all properties are sold through estate agents.

 

There's also stories doing the rounds that new builds are at an all time low, the contrained supply should stop any drastic price changes. I'd bet on house prices flattening in real terms, provided rates don't go up any more.

[Sneak]

Also - I think that you would probably want to agree that there is a difference between worthless shares and property. A property (even perhaps over valued at some particular moment relative to other factors) is intrinsically more valuable than a worthless share in a stupid idea. People are not going to stop needing places to live and there are ever more people. Unless or until we go into space, property almost anywhere on earth will still be useful.

 

 

Hear, Hear

 

Property has always been the safer option.

[ai_Droid]

Also - I think that you would probably want to agree that there is a difference between worthless shares and property. A property (even perhaps over valued at some particular moment relative to other factors) is intrinsically more valuable than a worthless share in a stupid idea. People are not going to stop needing places to live and there are ever more people. Unless or until we go into space, property almost anywhere on earth will still be useful.

 

Does of course depend on what that share is a share of. A share in a manufacturing business that includes its property assets for example..

[Cambon]

I don't see how the sub-prime issue is relevant, that's about the US market not here.

 

Actually, the sub-prime issue is very relevant. If or when it brings down the american economy, it will bring down everyone else to a greater or lesser extent. It has already started to bring down the UK economy. Just this week your pound has over 1% against the Euro making european imports more expensive.

 

Interesting points about "worthless" stock. I will admit to having made more money out of property than other areas of the market, but certain other investments are also certain in the short and mid term. For example oil.

[John Wright]

Property prices are a function of all sorts of things.

 

First there is supply and demand. With too few houses being built and a growing population they will still go up relative to most things.

 

Even with the buy to let sector and a reduced public sector in UK the position except in a few depressed areas is to little property and too much demand

 

The same is true in IOM

 

The second is cost. But there the situation is strange, people will sacrifice other things to ensure they have their bit of bricks and mortar. Whilst we are seeing pheneomenal lending rates ie 5 and six times income, just remember that that income is bigger than ever before and our outgoings are lower in terms of food prices. Historically food was a third, housing a third and a third to live on.

 

Food is now 10% so housing can go to 50% plus.

 

The other major factor is not price or interest rtaes, they are low and likely to stay low, if we are in for a recession then it will not include higher interest rates but lower ones to stimulate the economy, so a banking collapse due to over exposure to high risk sub prime mortgages may have a short term effect on interbank rates until the shake out comes, but first class security, low risk will still be a popular place for banks and bulding societies to lend.

 

It may take a while to see who has been doing the kamikaze lending with too little security in the US, or has bought unstable lending books, but in the IOM it is not likely to be any of our main housing lenders.

 

The second major factor is sentiment, how peole feel. That may be influenced by interest rates, to a degree, they may also cap some low earners maxima, but builders will build down to affordability, smaller hutches.

 

The UK market is clearly a strange place, many people have used their equity to secure additional borrowing. Interest rates have risen 1,25% in 18 months, but they are still very low, and stable, by average of last 50 years. The indebtedness is of course a modern phenomenon, will it cause a crash or will it mean people do not move as much and their debt is wiped off at death by sale of property. I think the jury is out on that, it may not be as worrying as some peole think as long as you can meet the payments. Staying put and not moving up of course creates problems at the bottom end, no stock, or low stock and a demand for Ist time buyers homes. The rest of the market may stagnate whilst that sector booms.

 

That again is due to sentiment as much as suppy and demnand. Sentiment in UK and IOM is owner occupation, its what most people aim for. In Europe they have historically spent a greater proportion of income on housing then we have and housing is bigger and better quality it is normal for middle classes and upper classes to rent, so it was in England 100 years ago. Until there is a change in sentiment and whilst the urge to owner occupy is paramount then we will still see supply exceed demand and that means prices will not fall for long, if at all.

 

Sentiment covers other market influences as well. If US does suffer a recession and there is serious job loss threat then maybe people will not enter into long term contracts to buy and finance houses, in other words they may delay, stay at home with parents or rent and house share. The thing is we have never had a recession in UK in the post industrial era where our major industries are service industries, no one really knows what might happen.

 

Anyway is US power houe of world any more, is that China, is there a sign of downturm there, if so they may turn it to advantage by upping quality and price abroad and they still have a huge home market to supply.

 

maybe US will have to go through a bit more of a de industrialisation, it will have to stop spending billions on the military industrial complexes, and starting wars to maintain them, There is nothing productive about that in the end, its all artificial jobs at huge cost. Of course it could go madly protectionist and clog up the whole world economy. I hope not. That would be foolish and short sighted. In any event the pressure for free tade and antiprotectionsim is strong in th EU and elsewhere.

 

In US there is weakened sentimenst due to horrendous budget and current account deficits. They have to be controlled. We don't have the former problem yet and the latter has stopped being significant for some reason, the pound is in favour and massively over valued. When did we last hear about trade figures and a run on the pound which threatened the economy? It used to be monthly! Shows how sentiment can change.

[ai_Droid]

Interesting points John, particularly what you say about stagnation. I'm noticing an awful lot of extensions popping up lately, people turning their 3 bed semi's into 4 bed semis because the cost of moving is so expensive, this becomes more attractive.

 

This will feature on reports like RICS as showing fewer property transactions but it's really not a devaluation of the market.

 

Employment also is a key factor of course, and has been connected to previous slumps when combined with high interest rates.

[Chopsticks]

I've been hearing the doom and gloom brigade gleefully predicting a property market crash for bloody years now, it still hasn't happened and it won't happen.

 

We might have some short-term stagnation, maybe even a modest downwards correction, but the indicators and economic pre-requisites simply aren't in place for a crash.

 

I had a look in all the estate agents this afternoon, and was surprised to see that prices are up pretty much across the board from twelve months ago, not a massive amount I grant you, but a rise all the same.

[ourtess]

You need us baby boomers to drop dead.

Houses were so cheap just when many of us were earning more that enough that we bought more than one.

 

I have six.