Is it safe to buy a house right now ?

Hi Mike, Less rabble over here.

LOL !

The lack of first time buyers is not the real threat to the market. In order for the market to crash there would have to widespread selling. Two things are likely to discourage owners from selling houses even if they thing the prices are going to go down.

1. Most people live in their own homes and the level of hassle involved in selling your house and rent for a period until the prices drop is just too much for most.

2. Even professional landlords recognize that the costs of selling a house and buying one back at a later date are prohibitive. And for as long as interest rates are low, the rent on most properties is appealing.

3. If house prices do start to drop by any significant amount, then the government will very quickly drop interest rates in order to deter a consumer slowdown and recession. The consumer has been supported by rising house prices and equity withdrawal for some time now. The panacia that has kept us out of the global recession that occured early this century needs to be slowly taken away from the british people if any shocks are to be avoided.

Simon.

Gentle housing market recovery
MoneyAM
Latest monthly price data from the Nationwide Building Society shows the housing market on track for a gentle recovery.

Prices rose last month by 0.3%, giving an annual increase of 5.5% against April's 7%.

The average price of a home nationally rose to 157,272 (156,128).

The 0.3% increase in May confirms a longer term slowing trend evident since the start of the year. In fact, annual house price inflation is now at its lowest level since August 1996 and the average monthly increase of 0.2% over the last 3 months contrasts sharply with last year when prices were typically roaring ahead by 1.7%. Since then the typical cost of a home has increased by 8,252.

Fionnuala Earley, Nationwide's Group Economist, makes the point that the biggest change in sentiment during the month centred on interest rates. From the earlier expectation that the Bank of England's interest rate setting committee would increase rates in response to underlying inflationary pressures, the consensus now is that rates have peaked.

In addition, another month of dismal retail sales data has led to worries that the consumer, who for so long has supported the economy, is now retrenching and that this could lead to a sharper drop in economic activity than previously expected. The Bank of England adjusted its forecast for economic growth down, but the underlying economic background remains generally favourable and all of the major housing market drivers remain firm.

Earley adds that the decision to leave interest rates on hold is clearly good news for the housing market where deteriorating affordability has held first time buyers back amidst worries about higher sensitivity to interest rates due to higher levels of household debt.

Employment, income, interest rates and confidence are still supportive, but this doesn't suggest that the market will pick up again rapidly, rather that it will continue on its gently cooling path this year. The impact on house prices is coming primarily from lower levels of activity - estate agents having reported falling sales to stock ratios since February last year. This reflects stickiness of selling prices and, more recently, the reluctance of buyers to meet these, adds Earley.

Meanwhile, the relatively buoyant economic conditions mean that sellers are still under little pressure to reduce their prices. Buyers, on the other hand, affected by deteriorated affordability and changing sentiment, are not willing to stretch themselves further to meet them. The society anticipates that this will unwind, but gradually, as sellers adjust their own expectations, rather than as a result of forced or panic sales.

Mortgage approvals, which provide a good leading indicator of transaction levels, are significantly lower than this time last year but have shown some recovery since the start of 2005 and this may signal the beginning of some unwinding. Seasonally adjusted house purchase approvals in April increased to 95,000 and the society says it expects that they will continue around this level for some months.

genius

we'll see about that wally. unless inflation has its way.

when bread is 50 quid a loaf.

ps wally.

nice to see you so busy at 8.30 on a saturday night.

LOL!!!

I went to an auction last night for a derelict cottage the size of a garage- guide price 100k, I know the auctioneer vaguely, he assured me it might go +- 10% , he had looked at all angles, knock down re-build, refurbish- sold in a few mins.for 155k.
Don`t talk to me about bubbles bursting.

Another interesting property site:



Looking at the chart, what is likely to happen next?

1. Levelling off?
2. Sharp correction downwards?
3. Property values continue to rise?

The chart would suggest a fall....but that cant happen, it's different this time!

Sequestor - I am not sure whether you are being ironic about the tumble down cottage!
One sure sign of a bubble is when people are paying highly inflated prices for something when common sense screams "It's not worth it!" Mind you, I was saying that three years ago so what do I know?
But, seriously, do you really think property prices are just going to keep going up and up and up when wages are not keeping pace and people are more in debt than ever - not to mention rising energy costs?
I have recently come back from Australia where everyone was being equally defiant and upbeat about soaring house prices - despite what common sense told them. Now, at last, reality is setting in Sydney prices are starting to fall.
UK house prices are completely insane right now and in two years time we will scratch our heads and wonder how it ever got this way.

Migrationwatch has recently said that mass immigration has driven up house prices and I have seen estimates that there are now over 5M immigrant households in the UK.
Elsewhere, a think tank has just come up with the solution to our our pension shortfall - they have said we need another 10m young immigrants over the next 20 years to balance our ageing population.
But I love charts and if this were a stock I was holding, I would regard this rise as unsustainable be selling the lot.

Buy land - God isn't making any more.
Finite supply + Growing demand = rising value.
To add fuel to this the Rowntree Foundation predict decling private house ownership but increasing corporate ownership as people need to be more mobile for careers.
As more properties become owned by corporate landlords, the cost price will rise.
The price vs income argument bears serious thought, but there is a leap in logic. The real comparison should be moortgage payments vs disposable income. When you do the maths these days you find that even though the debt is higher than at any time in the past, as a percentage of disposable income it is still relatively low. The reasons for this are due to larger deposits as a generation benefits from large, property based inheritances, low interests rates and historically lower taxes.
It is an area that i would argue will see continuous growth, with short term corrections along the way. For the moment the equilibrium is about right and will not move dramatically in either direction. The next real move will be either a sharp checkback, because of anything that lowers disposable income, or a sharp rise based on 2-3 years of little movement.
As an investment alternative, I am not a great fan of buying and holding property as it inevitably becomes too large a percentage of a single portfolio for comfort and is just about the least easily liquidated, if the need arose.
All IMO, of course, but I have been involved in property and finance for many a long year.
Alan

Cannot believe you guys dont discuss landbanking, the rewards can be tremendous, if a share doubles in a year you would be happy, if your tiny piece of land quadrupled you be even happier.I was sceptical at first till my 5k turned into 20k within 12 months.

BSA: Highest July mortgage lending on record

Building society gross advances amounted to 4,888m in July 2006, compared to 3,970m in July 2005, report the Building Societies Association (BSA).

Net advances reached 1,662m last month compared to 1,295m in July last year. Meanwhile, approvals totalled 5,499m, up from 4,385m a year ago.

Adrian Coles, Director-General of the BSA, said: "July was yet another strong month for the mortgage market; gross advances were up 23% year on year and net advances were up significantly, increasing by 28%. Net mortgage approvals, which give a good indication of how business will look over the next couple of months, were the highest July figure on record."
Link

3 rate rises in six months...interesting times ahead

Looks like prices have, in many areas, topped out, at least temporarily.

It doesn't matter what the housing bulls or bears say the people with the power, the surveyors, are now reported to be cutting estate agents prices when on valuation surveys.

Looks like 10% or so could be coming off previous best achieved prices and the market will need a couple of rate cuts to regain any upward momentum.

I have thought the Housing market was going to implode about 3years ago. I thought a lot of the upward movement was proportional to the "Buy and Sell at a quick profit" programmes on the TV.

People listened to the quick buck without realising the hourly rates for the "buck".

I would have been very apprehensive about buying some of those properties after the "improvements".

Also while the majority of the Buy to rent brigade were paying tax on the rents they collected many were not and the the tax man is now being organised to chase the latter.

Another part to the property "problem" as I see it, is the number of second properties bought as second homes, with hopes of letting out to cover the costs of mortgages. (To friends , still taxable.)

Another few bad summers like this one and the financial gains of this type of property will be hit on the head.

I may be wrong but I think there will be a drop of 15-20% in the market in a large portion of the market.

The knock on effects are hard to judge.

From the Daily Telegraph

Overheating sees house price downturn in Europe - Last Updated: 1:07am BST 27/08/2007


House prices in the overheated markets in Europe have begun a downturn , writes Ambrose Evans-Pritchard

House prices on the overheated fringes of Europe have begun to turn down sharply, replicating the early phase of the sub-prime property slide in the United States.

Housing booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes

Irish property has fallen for the past four months in a row as higher eurozone interest rates start to bite harder, while the speculative bubble in the Baltic states has burst.

House prices in the greater Riga region of Latvia fell 3.5pc in June, following a 1pc fall in May. Flats in the old city became more expensive than Berlin by early this year in a speculative frenzy, much of it with euro, Swiss franc, and yen mortgages that could prove disastrous if Latvia's currency is suddenly devalued - as may well happen, given the country's current account deficit has exploded to 26pc of GDP.

Similar booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes. Danske Bank has warned that much of Eastern Europe has been inflated by a "monster bubble" that recalls conditions in east Asia shortly before the crisis broke in 1997.

In Ireland, house prices dropped 2.6pc in first six months of the year to June, with falls of 3.3pc in Dublin. The slowdown is rapidly spilling across into building. House registrations are down 34pc over the first half. Roughly 15pc of housing stock lies empty, according to the Irish census.

Jean-Michel Six, chief Europe economist for Standard & Poor's, said extreme levels of household debt across large parts of Europe left the region vulnerable to tightening credit conditions. Debt levels are above 100pc of GDP in Ireland, Britain, Spain, the Netherlands, and Denmark.

Spain is heading south. Local real estate companies have reported price falls on a quarter-to-quarter basis in Madrid and several other provinces," he said.

French property prices fell 1.5pc in July - though they were still up 5pc over the year. "House price inflation could turn negative in the second half of this year," he said, adding that proposals by President Nicolas Sarkozy to allow new buyers to offset part of their interest costs against tax would help support the market.

"The spate of interest rate rises by central banks is exacting its toll on disposable incomes already weighed by rising household indebtedness," he said. The European Central Bank has doubled rates from 2pc in December 2005 to 4pc.

The recent turmoil has pushed up the effective rate of borrowing even further in some countries.

It may not have popped but there's definitely a nasty hissing noise which needs the patch of a couple of rate cuts to mend it I think!

LONDON (Reuters)Tue Aug 28, 2007 8:00 AM BST

UK Subprime mortgage borrowers are facing a sharp rise in rates as credit market turbulence adds to pressure on funding costs....

Subprime lender Kensington raised rates for its core adverse range by 0.55 percentage points last week, while Northern Rock will this week raise rates for future borrowers by as much as 1.25 percentage points....

Britain's subprime mortgage market is far smaller and far more recent than its U.S. counterpart, dating largely from the recession of the 1990s. Subprime loans accounted for around 8 percent of lending in 2006, against 20 percent of U.S. lending.....

The rating agency said borrowers would be hit by the Bank of England's five rate rises in the past year, but also by lenders' tighter criteria, as they withdraw products and re-price others by as much as 2.5 percentage points....

Northern Rock are only doing that because they failed to hedge against interest rate increases above a certain level, which have now been surpassed. They are now trying to claw back losses which they have incurred against borrowing, as most of their funds do not come from investors.
On another subject, I have a work colleague who has been offered a mortgage at 9 x salary. Absolutely crazy lending!! 'Tighter criteria' - I certainly hope so!

Blimey, I thought it was mad when they were giving 6x. Seriously, the people borrowing and the banks lending at those rates deserve to go under IMO.

My first mortgage was at 4 x salary, with an add-on of 1.5 x salary of wife. Even then it was hard work not to get in to arrears on a bog standard repayment mortgage (mind you, interest rates were at 15%!).
Now everyone is mortgaged & credit carded up to the max, with the knowledge that if you know how the system works, much of the debt will be written off if you default, as they will nearly always offer you a deal. Pay half & we will forget the rest. Crazy system imo.

I remember having a credit card debt of over 2500 in 1986, when I was out of work, HARRY. I never heard anything when I simply stopped paying. ;-0

House prices hit a standstill


Last Updated: 12:19am BST 29/08/2007

House prices slowed to a standstill during August, according to the latest survey from Hometrack, the property website.

The group recorded the lowest rate of monthly growth since November 2005, with average house prices "unchanged".

London, the real engine for house price growth over the last 18 months, was the only region to record a price increase over August. However, it was a rise of just 0.1pc. Three regions recorded price falls of 0.1pc, namely Yorkshire and Humberside, the North and South West.

------------------

As prices back off, sales number stall and turnover reduces maybe by as much as a third it's going to have a major impact on certain sectors.

Problems is - it all seems negative, as far as I can see anyway, and as I don't short shares, apart from selling up, I can't see anything elso to so do make a profit?

Are there any sectors or individual shares that might profit from a housing pull back?

Contraction in housing market to be worse than expected in rest of 2007 - Fitch


MUMBAI (Thomson Financial) - Fitch Ratings said the contraction in the US
housing market is likely to be more severe than anticipated during the rest of
2007, mainly due to tighter mortgage standards and disrupted mortgage markets.
The rating agency added it sees 2008 to be another challenging year for the
housing sector, as it expects operational and financial pressures not only to
persist but to intensify for public homebuilders.
Fitch said it is lowering its ratings on most of the public homebuilders and
has put a negative rating outlook on most of the homebuilders.
It considers excess inventory as the most challenging issue for housing,
both new and existing.
Fitch assumes that year-over-year declines in starts, new home sales and
existing home sales will be more pronounced during the last five months of the
year.
It expects full year revenues of the builders to drop 30-35 pct, on average,
while pretax profits, before real estate charges, could plummet 75-80 pct.
The rating agency said price competition will persist at current levels and
may well intensify, putting margins under pressure.
It expects deterioration in credit metrics to continue during the rest of
2007, particularly for profit related metrics.
It will be important for builders to continue contracting their balance
sheets, further reducing land and development spending and adopt more aggressive
pricing to lower inventories, Fitch said.
It expects homebuilders to reduce debt where possible and to exercise
restraint as to share repurchase, dividends and acquisitions in these uncertain
times.
Looking ahead, Fitch said the stronger economy will aid the housing sector
in 2008, but will probably not be robust enough to counter continuing negative
buyer psychology, and tight credit qualification standards.
TFN.newsdesk@thomson.com

Will interest rates rise to 6% - Not if housing has anything to do with it!

House prices are rising at the slowest rate for more than a year, with some regions suffering a highly unusual sustained drop in property values, according to authoritative government figures.

Indi


The figures are unlikely to settle the debate on whether interest rates have peaked at 5.75 percent, but may add weight to the view that the housing market is coming off the boil in the wake of rising borrowing costs.

"There are now clearer signs of slower demand in the market," said Fionnuala Earley, Nationwide's chief economist.


Reuters

more dependant on retail sector i suspect...
rate cut for christmas, followed by an increase in January and slapped wrists for spending too much...

Next Monays Rightmove report for September is all over the internet.

Down -2.6% - Some areas (Brent etc) down -7%

Looking at the timing (hit the net at lunchtime yesterday) it was probably 'leaked' on purpose to aid Northern Rocks application for help from the BoE.

Recession looming ?

Prices in many areas have been coming off for ages. It depends how these outfits calculate the numbers. Many use asking prices, which is plainly bogus.

Things could get very messy if prices do start tumbling. Presumably most of the mortgage books are valued based on the property portfolio. If they're struggling to get money at the moment (Northern Rock being the most extreme case), what happens if prices start tumbling and the banks asset values decline dramatically?

I feel we're still at the tip of the iceberg, and I suspect the credit crunch will create a much bigger domino effect in the wider economy over the next few years.

Strawbs.

It's going to get far worse yet, Strawbs. ;-))))

You can tell it's only just begun coz daytime telly is still full of dickheads showing everyone how to buy properties at auction and overspend whilst doing them up. The sooner these folks go to the wall the better IMO. ;-0

UK house prices slump 2.6 pct in Sept from Aug - Rightmove - sources UPDATE
AFX


(Updating with further details, analyst comment)

LONDON (Thomson Financial) - UK house prices fell sharply in September, the latest Rightmove survey has found, sources said.

The survey shows asking prices for houses slumped by 2.6 pct in September from August, taking the average price to 235,176 stg from 241,474 in August, the lowest September for new sellers since 2004. This brings annual growth down to 9.6 pct from 12.8 pct the previous month.

The details of the release were leaked in the market ahead of the official release scheduled for Monday.

Rightmove blamed the sharp falls on distortions caused by the implementation of Home Information Packs, but the news will spark fears of a housing market crash, particularly after today's news that Northern Rock has had to turn to the Bank of England for emergency funding.

Commenting on the figures, Howard Archer at Global Insight said he still expects house price growth slowdown to 'become more marked' over the coming months before prices settle down into 'an extended overall period of very modest rises'. However, there are clearly risks of a deeper slowdown, given the current credit crisis.

'Clearly ... if the current turmoil in global credit and financial markets is extended and increasingly feeds through to have a marked dampening impact on UK economic activity and employment, the risk will grow that the housing market could see a sharp slowdown,' he said.

The report comes after the Royal Institution of Chartered Surveyors earlier this week reported the first fall in house prices since October 2005.

You can short uk house prices on IG index either London area or UK as a whole, they told me it was based on the latest HBOS suvey. Might be good way of hedging if selling up is too risky or hassle

Further to my 30, asking prices may be bogus, but when those surveys start to indicate falls, it has already happened coz Joe Punter drops his asking price way after actual selling prices have begun to decline.

;-)))

In my area I can see that the estate agents are twiddling their thumbs and yawning...house price will be crashing next.

Greenspan says "painful correction ahead" for UK housing: http://www.telegraph.co.uk/money/main.jhtml;jsessionid=FSZEWDGW3IL4ZQFIQMFCFFOAVCBQYIV0?xml=/money/2007/09/17/cngrspan117.xml

UK inflation jumps to 4pc, double the target
British inflation surged to double the Bank of England's target in January, raising pressure on the central bank to seriously consider raising interest rates.

9:45AM GMT 15 Feb 2011


The Office for National Statistics said that the rate of consumer price inflation rose to 4pc in January, in line with economists' forecasts, from 3.7pc in December. It is the biggest increase in more than two years.

The rise, which was driven by higher oil prices and the increase in value added tax (VAT), means inflation has been at least a percentage point above the Bank of England's 2pc target for more than a year.

Mervyn King, the Governor of the Bank of England, will have to publish a letter to finance minister George Osborne later on Tuesday explaining why inflation remains so high.

Previously Mr King has blamed above-target inflation on a succession of one-off factors, including rises in value-added tax, the depreciation of sterling and spikes in commodity prices.

Economists expect the Bank of England to raise interest rates from their record low of 0.5pc later this year, and investors are betting a rise will come by May.


http://www.telegraph.co.uk/finance/economics/8325130/UK-inflation-jumps-to-4pc-double-the-target.html

Vince Cable says interest rate rise would be 'very difficult'

Vince Cable has been accused of creating difficulties for the Bank of England after branding a rise in interest rates as "potentially very difficult", ahead of figures today which are expected to show inflation running above 4pc


By Jonathan Sibun 6:11AM GMT 15 Feb 2011


The Business Secretary's comments come ahead of the release of economic data today which are expected to show UK inflation climbing to over 4pc, more than double the Bank of England's target level.

Mr Cable used an interview with Bloomberg Television to suggest the Bank of England retain its loose monetary policy.

"As an outsider looking in, I take the view of the doves," he said. "Although you have inflation, it's almost entirely imported. There's not very much evidence of British inflation taking place. It's virtually deflation."

Mr Cable said that with the Coalition's fiscal squeeze in full throw, tightening monetary policy was "potentially very difficult".

Mr Cable's views follow comments from David Cameron last month when the prime minister described inflation as "worrying". While Mr Cameron was careful to point out that he supported the independence of the Bank of England, he faced criticism from some quarters for involving himself in the debate.


http://www.telegraph.co.uk/finance/economics/8324233/Vince-Cable-says-interest-rate-rise-would-be-very-difficult.html

Is there any point in having the Bank of England?

http://www.rics.org/uk/news/news-insight/press-releases/uk-house-prices-to-increase-by-3-in-2015/

Liberum note today:
"Bellway remains a top pick in the sector as we find the valuation compelling. We believe that volume growth should be sustained, protecting profits if prices do fall a little as expected. The valuation is also compelling given the expected resilience of its return on equity.

We maintain our Buy on Berkeley in spite of the general caution around London, as the company has secured significant forward sales to protect prices and volumes, and has successfully added value to sites. By moving out of central London into more affordable parts of the city and the South East, place-making should succeed in generating value. Further, we believe the dividend is very secure, given the strength of forward orders and long landbank. With some of our earlier caution having proved unwarranted, and following strong interim results, we have upgraded our 2017E EPS estimate by 11 %.

Gleeson’s unique business model gives it industry leading margins and excellent growth prospects with limited competition. It also has the advantage of selling in housing markets that have yet to see any meaningful house price inflation. Valuation may be constrained by the sector, but growth is in its hands. Our 630p target price is based on a sum-of-the-parts analysis.
We like Persimmon for its high dividend at low risk, and are confident that the company will achieve the payments pledged because of management's incentive scheme. Additionally, its long landbank means it could cut land spending entirely to boost cash flows, and the strategic landbank may continue to boost margins too. Northern areas have much better affordability than the south, which may mean better pricing in a weaker environment.

We downgrade Barratt to Sell as its lower margins make it more exposed to downside risk, and its relatively short landbank and high land creditors mean that it has less scope to reduce cash outflows in support of the dividend than others in the sector.

While Bovis now looks very cheap, we have continued to resist the temptation to become more positive on the shares, as its margin profile makes its earnings most geared to downside risk. The business has suffered hiccups in better markets. We are also concerned that as the slowest builder, it may be most at risk from any “sticks” the government could bring out in its Housing White Paper in January.

We keep Redrow at Hold in spite of strong trading, as we believe that risk aversion among investors may now limit appetite for investing in a housebuilder with a degree (even though comfortable) of debt. We also think the portfolio concentration in London is a potential risk. We are perhaps still too cautious in leaving Taylor Wimpey as a HOLD, especially given the high level of dividend expected. For now however, we limit our choice among the "returners" to Persimmon.