Is it safe to buy a house right now ?

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.

;-)))