With the US subprime crisis spreading to Europe, shockwaves in Northern Rock which would spread to other banks, UK economy growth not looking healthy, increasing trade deficits, sharply rising mortgage costs, falling corporate profits and job cuts especially in the City, and as market turmoils escalates, housing price which shows a first drop of 2.6% (from Rightmove last month), this are the signs of the beginning of a housing crash. PROPERTY SHARES ARE A SELL!

i happen to own my house, which we bought in 1986 at what we thought to be absolute top dollar, but that has increased 6-fold and perhaps more ..... it happens to be in an ace positon and, for various reasons, almost unique (for lack of a better word) ...... even if prices fall, and our house is included, i'll not care much, for if we move then it will be to downsize.

i also bought a small freehold off Portobello Market in 1978 for what is now a risible sum ...... that has risen exponentially and for various reasons has further still to go . ..... by miles the best investment i ever made, though did not realise at the time.

point i am trying to make is that with property, quality and location (location, location) will always be a sound investment ....

though beware of companies who try to drag you in on that, for we also got totally screwed on a couple of EIS deals where the commercial properties, allegedly bought on the cheap, seemingly did no better than stand still over a number of years.

even if X rents, then Y has clearly bought, and Z has obviously sold!

Never bought and sold property as an investment but might be worth looking at should prices retract in the future.

ED: Sorry getting off topic here.

I agree with you, cynic (ha, make a note!) "quality property in the right location will always be in high demand", but that doesn't constitute the market as a whole by any stretch.

hi choccy .... long time no flirt!
one could draw the same parallel with shares!

Cynic, it is shares I'm talking about now...but in the near future, house prices will also drop.

Indeedy you old grouch ;)

But in my simplistic view it's all swings and roundabouts.

Ok, so in the case of mortgage default, house prices will be affected as lenders will dispose of properties at less than market value for a quick return. But aside of the impending dilemma facing property owners with negative equity, if prices slump considerably at the bottom end of the market, this would surely enable 1st time buyers to either move out of rented accommodation, or (please, please) give their parents some longed for space :)
Result: reduced BTL = more demand to buy property.

House builders might not be building as many new houses, but there is an increasing demand, having by nature been prevalent at the lower and median range of the market, but more recently closer to the higher range, for property extensions - and some of them are quite considerable. In the last couple months I have counted 14 skips just within walking distance. There are also as many houses on the market - one for almost a year!

Another subtle change which I assume is not localised to south Manchester, is that councils are finally listening to residents and slapping on conservation orders in many areas. This has two effects of course. The market for BTL is slumping, and therefore in the short term diminishes the value of previously suitable property for development - but conversely these areas as a whole have shot up in value, as ordinary 'professionals' are willing to pay the price to move into a markedly improved neighbourhood - and closer to work. Imo, these properties will always remain 'desirable'.

5 interest rate rises this last year, people forget they take a few months to take effect, on top of that add the extra supply of houses prior to 1st August to dodge the sips package (this includes all houses, as it was only a last minute decision to limit to 4 beds, most sellers had already marketed their property), 5.75% is low, and demand is still high... The growth in prices has surely got ahead of itself, but retracements in prices will only be to the serious sellers who have marketed their property at an over-inflated price in the first place.
Even if the government plan to build 250,00 starts a year it will take 10 years to solve the demand problems...
I see turmoil and panic in the stock markets and in general, but i still see people filling restaurants and buying expensive cars, plenty of money to be spent.
A slow down was predictable, but demand is still high and borrowing relatively affordable, i dont see a crash unless rates go much higher, or demand tails off.

What utter twaddle from most posters! House prices have been increasing at a steady rate since 1979 - see link below.

During that time mortgage rates have been at 15% and more (I know because I had one) and still prices rose!

The only dfference now is that, aided by easier borrowing, borrowers stretch themselves and, not realising the mortgage rate is historically low, run the risk of negative equity situations. It people weren't so greedy and didn't borrow the most they could afford, there would be no problem.

When push comes to shove, people realise bricks and mortar is a good investment and will sacrifice other spending to get on the ladder.


The property market occasionally slows down and these slow downs sometimes turn into a drop for short periods - but look at the facts - the prices always have regained their past levels after a drop and soared past them.



http://www.wheresmyproperty.com/prices/historicprices.htm

Historic mortgage rates since 1989 here:-

http://www.moneyextra.com/dictionary/Interest-rate-history-003455.html

oblomov ..... you contradict yourself ..... unless Alan tells me off yet again yet again, negative equity arises because your house price has fallen below the price at which you bought, not because mortgage rates rise ...... the latter might well hurt badly, and you may be forced to sell, but that is not the same thing.

you then continue correctly, by agreeing that over time, especially in UK, "prices always have regained their past levels after a drop and soared past them".

Agree cynic, though I dont think I contradicted myself. I didn't make myself clear. What I should have said was that negative equity is only a problem if you have to sell and that usually happens because of the mortgage rate rise because borrowers didn't account for the fact that the mortgage rate can rise! They borrow what they can afford at the current interest rate, not what they could afford if it goes up a couple of per cent.

Partly the lenders fault - they used to build in a margin so thet borrowers could afford a rise. Now the onus is on the borrower to do it themselves, and greed often prevents them from doing so.

Had an estate agent round today out of interest, they valued it 40,000 less than the last agency to my surprise and said that a lot of people had put their homes on the market before the hips came in, then again never trust an estate agent!

certain companies - e.g. S*****'s - are known to over-value so they can get the house on their books ..... when it does not sell at their initial vakuation, they will suggest reducing .... verges on sharp-practice

Amazing how we copy the Dow verbatim whilst theycould not care less if we descend into a sub prime we truly are the 51st state without the benefits

OO's

This will not be good news for house prices and property shares....


BoE looks reluctant to reduce interest rates just yet - AFX

LONDON (Thomson Financial) - The Bank of England looks no closer to cutting interest rates than it did at the start of the month, if governor Mervyn King's words today are anything to go by.

Since the start of the credit crisis this summer and the recent deterioration in overall liquidity conditions, marked by the Northern Rock debacle, economists have been slowly moving towards pricing in a rate reduction. Some have even called for a cut as early as November.

But in an appearance before a parliamentary committee today, King was adamant, saying the option of cutting rates at the first sign of trouble is not the way to go.

'King is finding it very hard to conceal his true colours as an extremely conservative monetary hawk,' said David Brown at Bear Stearns. 'Short sterling futures are reining in some of the optimism for easing after King dampened expectations for any near-term cut in rates.'

Matthew Sharratt at Bank of America echoed this view. For him, King's statement the central bank will not be taking short-term options was crucial.

Comments from other ratesetters at today's hearing also appeared to indicate support for King's view. Kate Barker, the resident housing expert, said UK mortgage repossessions are 'not alarming'' despite recent rises in defaults, adding the housing market remains 'relatively robust.'

Meanwhile, Andrew Sentance said it is too soon to see adverse effects of the crisis on the wider economy.

Today's data also proved supportive. Retail sales in August did not fall as some had feared but rose somewhat strongly for a second month. Money supply was also back at levels not seen since May.

The underlying trend in retail sales remains robust, said Sharrat at Bank of America.

Even housing market data came in strong, with the British Bankers Association's key mortgage lending figure topping 6 bln stg in August, up on 5.8 bln in July and just a shade under the 6.2 bln stg record set in November last year.

'With King arguing that the BoE should not be taking easy, short-term options and retail sales and M4 money supply data for August coming in on the strong side, the chance of a near-term rate ease from the BoE next month still looks small,' said Sharratt.

But these figures are partly backward-looking and it is very hard to see the UK economy escaping unscathed by the confidence-denting events of the past few weeks. In particular, the drying up of liquidity in the interbank market, the highly public nature of the run on Northern Rock and the emergency measures taken by the government and the BoE may exact a toll on consumer confidence.

The financial sector, for one, may see business slow slightly, leading in turn to a smaller contribution to services sector growth.

Already some observers are downgrading UK growth prospects next year.

Lehman Brothers has revised downward its forecasts for UK GDP growth in 2008 as a result of the financial market turmoil. The US investment bank said it is now forecasting GDP growth of 1.7 pct in 2008, down from its earlier forecast of 2.3 pct.

Michael Saunders at Citigroup pointed out the longer the strain in the money market runs, the greater the likelihood of a rate cut in the UK. But the BaoE also has another option: lowering the standing facility lending rate, which now stands at 6.75 pct, he added.

For Daragh Maher at Calyon, the general observation among the ratesetters that it is still too early to gauge the economic effects of the recent credit crisis suggests a wait-and-see period where the BoE will hold off cutting the base rate, even if it offers additional liquidity to money markets.

By Sivakumar Sithraputhran; sivakumar.sithraputhran@thomson.com

i'd sell ya houses and buy back 50% cheaper next year...almighty crash coming

Well, that confirms it then. Maestro said so.

Wolseley is a very good one to short now...short today at 820p.


Wolseley profits slide - MoneyAM

Wolseley said FY pretax profit fell from last year, hit by its exposure to the gloomy US housing market.

The group said there are no signs yet of any upturn in the US housing market.

In Europe, Wolseley said underlying fundamentals of the construction markets remain sound, and its operations are expected to show further good progress.

'Europe continues to progress, achieving strong profit improvement and benefiting from acquisitions during the period, whilst in the US we have been fast and decisive in reducing our cost base in reaction to deteriorating market conditions,' CEO, Chip Hornsby, said.

The building materials and plumbing supplies group said pretax profit before exceptional items was 758m, compared with 817m last year, and pretax profit also fell 17.6% to 634m.

In North America, the results were also adversely affected by price deflation in lumber and panels, weakness of the dollar, and one-off restructuring costs, the company said.

The company added that Wolseley UK grew strongly in a market which showed a gradually improving trend over the year, despite rising interest rates.

The commercial and industrial market should remain positive, albeit at lower rates of growth, the company said.

Sales for the year ended July 31st rose 14.6% to 16.22bn from 14.16bn, the company said.

Irrespective of market conditions, the group said it will look out for acquisitions.

The company also lifted its full-year dividend by 10.2% to 32.4p.

Don't suppose anyone will be surprised by this:

BBC News: Borrowers told to lie about wages

Strawbs.