The House Price Crash Thread

[Gringo]

Hmmm interesting Gringo - they have a new housing development going up near here and have something I would be interested in - time for a bit of wheeling and dealing

Phone up their sales office and offer to buy the show house for 20% below. Show house completes first, you complete, and then they'll be paying you rent covering the mortgage for the next 18-24 months. You'll have to make sure they fix all the walk through damage when they leave, but it means you've got a discounted house, and by the time you're looking for tennants, all the roads and landscaping will have been completed.

[drat01]

maybe some guy returning from Spain to escape the East European criminals :-)

[Gringo]

Not that I'd trust a woman to understand complicated numbers but....

Bank warns of more economic risks

The Bank of England's deputy governor has said the outlook for the UK economy in 2008 has "changed dramatically".

Rachel Lomax said there was uncertainty over the full impact of "the largest ever peacetime liquidity crisis".

The deputy governor believes the credit crisis will significantly reduce demand over the next two years.

Inflation is also forecast to rise more sharply. Ms Lomax warned this may lead to higher interest rates than expected if prices and wages rise further.

[drat01]

Gringo - are the Spanish finance people making similar claims?

[snowychap]

Not that I'd trust a woman to understand complicated numbers but....

Bank warns of more economic risks

The Bank of England's deputy governor has said the outlook for the UK economy in 2008 has "changed dramatically".

Rachel Lomax said there was uncertainty over the full impact of "the largest ever peacetime liquidity crisis".

The deputy governor believes the credit crisis will significantly reduce demand over the next two years.

Inflation is also forecast to rise more sharply. Ms Lomax warned this may lead to higher interest rates than expected if prices and wages rise further.

Well for that quote she wouldn't be getting the thumbsup from Joe Stiglitz who was interviewed, briefly, on Newsnight last night about a book due out next month called The Three Trillion Dollar War (The true cost of the Iraq conflict).

He seemed very firmly of the opinion that the current and future economic struggles were in some considerable part a result of current conflicts.

[Gringo]

The spanish economy will outperfom the rest of the eurozone for the next couple of years, in terms of manufacturing and services, but as mentioned on page 1 of this thread the spanish housing market is on it's arse. Interest rates are however set by the ECB and so will remain low for the rest of the year.

Each market is different. This year northern ireland will outperform the republic, scotland will outperform north england, belgium will outperform the netherlands and germany will outperform france. It's not a global phenomenon. The UK housing market is overstretched more than most other european markets, with the other suspected casualties being Ireland and spain, who however will have interest rates at least 100 basis points lower than those available to those in the UK.

[drat01]

I would disagree Gringo it is a global phenomenon. My "territory" is EMEA with a bit of the US market thrown in and all of the indicators are saying that countries are facing difficulties. Ironically according to the figures we get the UK market is still seen as amongst the strongest.

The housing markets are different in places like Germany where there is a lot less ownership I suppose and more in rental.

I suppose the true test will come when people who are putting on hold the prospect of moving have no option

@EDIT@ Then again should we ever trust those "analysts" who say this or that - where is their accountability? :-)

[Awol]

He seemed very firmly of the opinion that the current and future economic struggles were in some considerable part a result of current conflicts.

Maybe we should start stealing their houses then because we're obviously not stealing enough oil!

[Gringo]

I would disagree Gringo it is a global phenomenon. My "territory" is EMEA with a bit of the US market thrown in and all of the indicators are saying that countries are facing difficulties. Ironically according to the figures we get the UK market is still seen as amongst the strongest.

The housing markets are different in places like Germany where there is a lot less ownership I suppose and more in rental.

But surely that means it is not a global phenomenon, if some markets suffer more than others. Yes the global crunch impacts all economies, but the housing markets of different regions and different countries are impacted to different degrees because of the exposure of those markets and previous expansion in those markets. Housing price growth wasn't a global phenomenon, and housing market crash won't be a global phenomenon. Similarly house price boom wasn't a national phenomenon, it was london-centric, and spread. The central london market will be protected to an extent, but the shoeboxes in the sky built in the surrounding commuter belt will suffer when the market correction comes.

[snowychap]

He seemed very firmly of the opinion that the current and future economic struggles were in some considerable part a result of current conflicts.

Maybe we should start stealing their houses then because we're obviously not stealing enough oil!

IIRC, he was pretty scathing about the idea (in the very early stages) that the Iraq invasion, occupation, &c. was going to pay for itself.

Was that Wolfowitz's call? I can't remember.

[drat01]

I would disagree Gringo it is a global phenomenon. My "territory" is EMEA with a bit of the US market thrown in and all of the indicators are saying that countries are facing difficulties. Ironically according to the figures we get the UK market is still seen as amongst the strongest.

The housing markets are different in places like Germany where there is a lot less ownership I suppose and more in rental.

But surely that means it is not a global phenomenon, if some markets suffer more than others. Yes the global crunch impacts all economies, but the housing markets of different regions and different countries are impacted to different degrees because of the exposure of those markets and previous expansion in those markets. Housing price growth wasn't a global phenomenon, and housing market crash won't be a global phenomenon. Similarly house price boom wasn't a national phenomenon, it was london-centric, and spread. The central london market will be protected to an extent, but the shoeboxes in the sky built in the surrounding commuter belt will suffer when the market correction comes.

Sorry gotcha now. I was alluding to the economic things that all western economies are facing and as a result it impacts the local housing markets too. The fact that different countries have a different model for house ownership will mean that each has to deal with it in a different way, but the underlying issues will still be the same across borders.

For the UK the London centric economy may well be affected but TBH that is not a totally bad thing for the UK as too much now is centered in an area that cannot sustain it.

[Gringo]

The only thing that can save the market now is rigsby et al

Buy-to-let market still thriving

The number of buy-to-let loans rose by 23% last year, taking their number to 1,038,000 and accounting for 10.3% of all outstanding mortgages.

This lending picked up in the second half of the year at a time when general mortgage lending was starting to fall.

The CML said demand from landlords had been resilient, despite problems at some lenders like Northern Rock.

"Tenant demand for private rented property remains strong, and buy-to-let is fulfilling an important role in helping to deliver an increased flow of high-quality homes to rent," said Michael Coogan, the CML's director general.

"Many buy-to-let loans have interest rates linked to interbank rates, so may have seen hefty increases in payments when Libor rose to abnormally high levels in the second half of 2007.

"These are now likely to be returning to lower levels in line with the reduction in Libor rates since December last year," he added.

I would guess the BTL market is picking up quite a few repo's and so the shift between ownership and renting continues.

[Awol]

I would guess the BTL market is picking up quite a few repo's and so the shift between ownership and renting continues.

Not meaning to pull a 'Tony' but I said that earlier in the the thread. Are you still giving out points?

[Gringo]

I would guess the BTL market is picking up quite a few repo's and so the shift between ownership and renting continues.

Not meaning to pull a 'Tony' but I said that earlier in the the thread. Are you still giving out points?

Sorry sir, but my opening remark (page 1) included:

The BTL market would pick up any slack, as rents were still strong, boosted by the lovely immigration that keeps the economy going. I was convinced it was going to take more than a change in sentiment for the market to change direction.

So whilst I reckon rigsby is going to play a part, and indeed pick up some cheap properties along the way, I still predict that the average house price on jan 1 2009, willbe lower than jan 1 2008. You can have a point for effort though as I've had a few and feeling generous.

[snowychap]

The only thing that can save the market now is rigsby et al

Buy-to-let market still thriving

The number of buy-to-let loans rose by 23% last year, taking their number to 1,038,000 and accounting for 10.3% of all outstanding mortgages.

This lending picked up in the second half of the year at a time when general mortgage lending was starting to fall.

The CML said demand from landlords had been resilient, despite problems at some lenders like Northern Rock.

"Tenant demand for private rented property remains strong, and buy-to-let is fulfilling an important role in helping to deliver an increased flow of high-quality homes to rent," said Michael Coogan, the CML's director general.

"Many buy-to-let loans have interest rates linked to interbank rates, so may have seen hefty increases in payments when Libor rose to abnormally high levels in the second half of 2007.

"These are now likely to be returning to lower levels in line with the reduction in Libor rates since December last year," he added.

I would guess the BTL market is picking up quite a few repo's and so the shift between ownership and renting continues.

I find it interesting that the number of mortgages is now the thing discussed rather than the overall value in £ of that sector of the market.

In monetary terms I think the increase is around 13% as opposed to the 23% relating to the numbers.

Does this suggest a change in property values overall?

Does this suggest a change in the type of property in the buy to let portfolio?

Does this suggest a change in the amount being lent in this sector?

A question for anyone:

Which measure of LIBOR are buy to let mortgages aligned to?

Is it the 1 year rate.

This fell dramatically from 4.2% to 2.8% in the last month - which I'd imagine was more down to the Fed's two cuts rather than the BofE's cut?

It brings me quite nicely back to Stiglitz's interview last night when he spoke about the Fed in less than glowing terms in the fact that stimulation of growth seems to be its only driver.

[Gringo]

Only larger landlords with portfololios of 25m+ will have libor inked rates - most of them will be linked to the UK Libor rate as they will have been burnt by the rise of sterling in the past years and euro banks aren't willing to lend against UK property on EU rates, and US banks won't touch at all. The larger landlords aren't the ones who are likely to suffer during this period, it will be the ones who have bought, remortgaged, bought, remortgaged etc etc at 85-89% LTV rates and who are most exposed to any blank rental periods. The larger landlords will have a larger chunk of equity available and more easily available refunding during any down turn.

[snowychap]

Surely there are not many landlords with 25m+ portfolios in the buy to let sector?

I was of the same opinion as you about the second part of your post.

It will especially be true of those coming to the end of (or who recently came to the end of) their fixed term, will it not?

[Gringo]

I'd say the BTL sector followed the pareto split, 20% own 80%, 80% own 20% etc etc. So whilst not the majority of BTL landlords they own the most property, After all in dat der landun 25m is only 80 flats or so, whereas in darlington it's 300 terraced houses.

Though I do wish you hadn't quoted that post, more spelling mistakes than an angry dyslexic on acid.

[snowychap]

Edited my post for you - I hope that helps. :winkold:

[Gringo]

FSA say no mortgages for the poor

FSA sees big changes for UK banks

The Financial Services Authority (FSA) has warned banks that the crisis in the financial markets will force them to change the way they do business.

FSA chief executive Hector Sants said banks will never again be able to raise as much money as cheaply as they had been doing by selling off their loans.

In an exclusive interview with the BBC, he said they will have to keep more of their loans on their own books.

That, in turn, may permanently push up the cost of borrowing for all of us.

"Banks themselves need to give consideration to how their business models will need to adapt to the changed market circumstances they have seen," said Mr Sants.

"Secondly, we will be looking for firms to treat their customers fairly in these arguably more difficult times in prospect."

BBC business editor Robert Peston said the implication of Mr Sants' position "will be a pretty steep reduction in the amount of credit available and the cost of it".

Mr Sants will also deliver this stark message to 300 banks and other financial institutions in a speech later on Wednesday.

And the housing repo's are about to ensnare another victim