The House Price Crash Thread

[PaulMcgrathsknees]

And the crash goes on!

[Gringo]

That's not the continuation of the crash - that's the start of the next bubble. Construction firms are laying off staff or closing down. So when the financial markets return to normality (2010/11) the supply will be even further diminished compared to demand. Welcome to bust and boom economics.

[PaulMcgrathsknees]

True. But it shows prices have to keep reducing to start to get some equity back in the building firms again. Laying off so many shows unemployment is on the rise. Include that with Councils being asked to help as repossessions will hit 45,000 next year. Link It is still got a way down to go before the demand returns. And the Libor rate at over 6.2% currentlyAnother.........

If it is worse than anything since the 1930's the prices need to re-adjust to the market first. So, the crash continues?

I think we all agree prices will sort themselves out in 18months-2 years, therefore the first tightening of purse strings from the banks is by that arguement the start of the bubble? Because we agree the bubble will return?

Quite like this one?

[drat01]

Maybe we should have affordable plentiful council housing............oops

[jasthevillan]

Maybe we should have affordable plentiful council housing............oops

As opposed to a load of crap flats in town that have walls so thin that you could chuck someone through them.

[snowychap]

Maybe we should have affordable plentiful council housing

:nod: A very good point especially with predictions like this:

Families face six year home wait

A family whose home is repossessed may have to wait more than six years before they are permanently rehoused in a two bed home, council leaders have warned.

The number of families on social housing waiting lists in England will hit five million by 2010, they claim.

They blame a combination of falling house prices, the credit crunch and a lack of affordable homes.

Sir Simon Milton, chairman of the Local Government Association, will make the warning in a speech later.

If a family becomes homeless they will normally be offered temporary accommodation, such as bed and breakfast, and they will be placed on a waiting list for a permanent home.

Sir Simon says four million people are already on waiting lists for social housing in England - and this number can only grow.

Ministers say they are investing £8bn to provide 70,000 homes a year by 2011.

But the number of new homes being built by local authorities and housing associations during the past decade has fallen to its lowest level since 1947.

'Unprecedented pressure'

In a speech to the Chartered Institute for Housing, Sir Simon will warn that around 1.6m households, or four million people, are currently waiting for social housing.

"With the repossessions, the end of small-deposit mortgages and the millions of people already on social housing lists, it will mean that those trying to get a home they could call their own from the council could wait more than six years for a two-bedroom house," he will say.

"Although house prices are slowly falling, they are still beyond the reach of many.

"The slowdown in private sector house building will eventually affect the amount of affordable housing that is being built. That will mean fewer new social homes at a time when there will be more demand for them."

He says strong house price gains in recent years have put unprecedented pressure on social housing.

Sir Simon says the credit crunch has led to around 40% of new mortgage offers being withdrawn, while lenders are demanding increasingly large deposits, making it harder for first-time buyers to get on to the property ladder.

Housing associations are also struggling to secure loans to build new affordable housing, while developers are cutting the number of homes they are building, so the amount of new affordable homes is being squeezed.

"With the banks overstretching their credit facilities, it could well mean that in the coming months that councils will have to help pick up the pieces as people end up on social housing lists," Sir Simon will say.

"Even when the economic good times were rolling, councils saw ever-increased pressure on their housing stock.

"Now that the credit crunch is upon the country it appears that thousands more people will look to councils to provide them with a permanent home as they either find it impossible to get on the housing ladder or see their home repossessed."

'Top priority'

Sir Simon will urge ministers to free councils from the overly tight financial restrictions they face so that they can meet demand for social housing.

This includes allowing councils to borrow on the open market in the same way that housing associations do, and reform of housing finance.

Local authorities should also be given greater flexibility to allocate housing based on local area need.

"Social housing has to be a top priority because the harsh reality is that fewer people are getting on to the housing ladder," Sir Simon will add.

Housing Minister Caroline Flint said the government had "taken action" to support borrowers in difficulties because of market conditions, including providing £9m more "for face-to-face debt advice".

"We are investing £8bn to provide 70,000 affordable homes a year by 2011, including 45,000 social homes for rent," she said.

[ianrobo1]

interesting that a Tory says that and they were the ones who allowed the sale of the council stock meaning there is not enough of it

He has no answers of course because the flaming obvious one is for councils to build new peoper social housing instaed of using housing association stock which in comparsion is more expensive over the long term

but the tories hardly care anyway

[snowychap]

interesting that a Tory says that and they were the ones who allowed the sale of the council stock meaning there is not enough of it

....

but the tories hardly care anyway

With a quick google of this Milton bloke, it appears that his opinion on social housing has been relatively consistent, Ian (even before his conversion to a bit of a one nation Tory).

One excerpt from a Grauniad article last year on it:

As far as housing is concerned, we have sold something like 6,000 flats and houses. Most of those were under the right-to-buy scheme, very few came under the scheme that ended up being ruled illegal. And if we had been allowed to reinvest the proceeds from right-to-buy in social housing then that would have been better, but the real problem we face today is that the amount of money being spent on social housing in London has dropped. This year we will deliver fewer than 100 new homes in Westminster, compared with 500 just three years ago because of the changes in which social housing grant is administered.

He has no answers of course because the flaming obvious one is for councils to build new peoper social housing instaed of using housing association stock which in comparsion is more expensive over the long term

From the report I quoted in my previous post (is this not him seeking to find a solution?):

Sir Simon will urge ministers to free councils from the overly tight financial restrictions they face so that they can meet demand for social housing.

This includes allowing councils to borrow on the open market in the same way that housing associations do, and reform of housing finance.

Local authorities should also be given greater flexibility to allocate housing based on local area need.

"Social housing has to be a top priority because the harsh reality is that fewer people are getting on to the housing ladder," Sir Simon will add.

[ianrobo1]

look at it closely he never advocates building more council housing, tories shy away from that word, he says 'social housing'

in the main this is done by housing associations who believe me charge more over a term that it would cost the councils.

I don;t have to remind you who did not allow the proceeds of sales to help build stocks do I ?

It is and always be a problem because poltical trenad including labopur have allowed this thought that somehow council hopusing is bad when in fact the opposite is true

I said before when the history of this period is written, selling off of the council housing will be seen as one of the worse ever policies for social cohesion. Lumbering mortgages on to those who can not afford them (abeit at low sell off rates) just re-enforced the belief owning was the ultimate dream and forced too many peopel down this route scrambling for shrinking stock and even higher multiple mortgages.

[snowychap]

look at it closely he never advocates building more council housing, tories shy away from that word, he says 'social housing'

When the term used by those of all political persuasions is 'social housing' then it is a bit disingenuous to berate a Tory for using the same term as a Labour party bod would.

in the main this is done by housing associations who believe me charge more over a term that it would cost the councils.

He says:

This includes allowing councils to borrow on the open market in the same way that housing associations do, and reform of housing finance.

Does that not imply that he suggests that councils ought to be able to borrow on the open market in order to provide housing? Why would he suggest that this would make a difference if he were not speaking about councils providing housing?

It is and always be a problem because poltical trenad including labopur have allowed this thought that somehow council hopusing is bad when in fact the opposite is true

And perhaps this kind of statement is 'bucking' that political trend?

[ianrobo1]

don't think it is

reading it again I see it as simply giving money to housing associations and having the council place peopel in these

[snowychap]

don't think it is

reading it again I see it as simply giving money to housing associations and having the council place peopel in these

Why would a council complain about not being able to borrow on the open market if all they wanted to do was give that money to an organisation which was allowed and able to borrow on the open market?

[PaulMcgrathsknees]

Ouch!

Hypothetical here:

I want a house worth £165,000.

(In above article) Halifax 2yr fix at 7.29% with 10% deposit!

£150,000 to borrow at 5% is £887. Say a few months ago this would have been the rate banks could offer.

Then came the credit crunch and banks take a bigger hammering than we realise.

So today:

£150,000 to borrow at 7.29% is £1,101 per month! Monster rise - never mind food/ petrol etc

To get to £887 per month you could only borrow £121,000. This puts house value at £133,000 with no real term reduction, i.e. saying it was not over valued in the first place!

Does that alone not suggest the crash is yet to come?

[Gringo]

That's for the lucky people with a 10% deposit.

What if you got a 100% mortgage for 150k @ £887 / month back 12 months ago.

In 12 months time, their fixed deal runs out - and they either move to the standard rate and find an extra 250 / month or magic up a 10% deposit so they can remortgage. They can't sell as the price has dropped 5% (so far) and so they'd have to find the 7k shortfall to pay off the mortgage.

So they're trapped in negative equity and will watch their investment fall further over the next 18 months.

Of course the other option is to stop paying the mortgage bill, live rent free for 3-6 months, and use the savings for a holiday once they've found a private rental to move into.

[Gringo]

A couple of months ago I reckoned a 20% drop over two years, think I might have understated it. Once a market has momentum, it gets hard to turn it around.

House prices still falling

House prices fell for the ninth month in a row during June, to cost 3.2% less than they did a year earlier, figures showed.

The number of homes changing hands is now expected to slump to levels last seen in the 1970s as the credit crunch continues to take its toll on the market, property information group Hometrack said.

The group said the average home in England and Wales lost a further 1% of its value during June to cost £170,500.

Prices have now slid by 2.5% since the beginning of the year, as the loss of confidence in the property market continues to undermine both activity levels and prices. Overall, prices fell in 84% of postcode districts in England and Wales during the month.

The situation looks set to get worse going forward, with the number of new buyers registering with estate agents falling by a further 5.7% in June to stand 52% lower than at the start of the credit crunch, while the number of unsold properties on the market rose by 1.4%.

Hometrack said more than half of all transactions in recent years had been driven by aspirational movers, rather than those who had to move.

It said these buyers were now sitting on their hands until the outlook for the market became clearer, leading to a sizeable drop in transactions.

It added that the number of homes changing hands looked set to continue falling to reach levels not seen since the 1970s.

The level of their asking price being achieved by sellers continued to fall during June, dropping to just 91.6%, the lowest level recorded since the survey was launched in 2001 and well down on the 95.6% being achieved 12 months ago.

Homes are also taking longer to sell at an average of 10.3 weeks, up from six weeks in June 2007.

[snowychap]

Mortgage squeeze 'will continue'

The availability of mortgages is expected to fall further in the next three months, lenders have told the Bank of England.

Lenders say they will put a further squeeze on the availability of home loans in July to September, the Bank's Credit Conditions Survey says.

They also expect the number of people who default on mortgages to rise.

The amount of unsecured lending, such as overdrafts and credit cards, is also expected to fall.

House prices

The survey asks lenders to gauge what they have experienced in the previous three months and what they predict for the following quarter.

A significant factor in the tightening of the mortgage market over the past three months was the fact that lenders expected house prices to fall, the Bank said.

The Nationwide Building Society, one of the UK's biggest mortgage lenders, reported its eighth consecutive monthly fall in house prices this week.

But the Bank of England predicted that the demand for home loans was also expected to fall in the coming three months. It fell by more than lenders anticipated from April to July, the survey revealed.

The number of people defaulting on their mortgages also rose by more than lenders had expected in the past three months, the Bank said.

There was more bad news for first-time buyers without significant savings, with mortgage suppliers expecting to ask for bigger deposits in the coming months, instead of putting up the cost of a mortgage.

[snowychap]

Persimmon makes 1,100 UK job cuts

UK housebuilder Persimmon says it has shed about 1,100 jobs since the start of the year as it tries to deal with the downturn in the housing market.

Completions of house sales in the first six months of the year were down by 31% it said, during the "most challenging period in our recent history".

Difficulty getting mortgages and lower confidence were blamed by the firm.

Separately, exclusive estate agent Savills said that central London house prices had fallen 7.5% this year.

It added that the volume of transactions in the English capital was down by 45%.

Only the "very top end" of the market, where property values exceed £5m, was proving "relatively immune" to the downturn, Savills said.

The news sent Savills shares 14% lower in early Tuesday trading.

Meanwhile Persimmon, which has seen its shares sink in line with other housebuilders, lost a further 6%.

Last month, the decline in Persimmon's share price meant that it was demoted from the FTSE 100, the share index which contains the largest UK-listed companies.

Industry trend

Persimmon said that its job cuts would save about £65m per year, meaning it could cope "efficiently" with its downturn in business.

Revenue was down 34% amd sales on its order book were 30% lower than at this time last year, it added.

"We now have a lower level of overheads and structure appropriate for the current levels of business, whilst at the same time remaining well placed to achieve an increase in output whenever mortgage availability and the overall market improves," the firm said.

Persimmon is the latest housebuilder to cut jobs, with 2,000 jobs going at rivals Taylor Wimpey and Barratt Developments.

Last week, Taylor Wimpey shares more than halved in value after the firm announced 900 job cuts and said it had failed to secure an extra £500m of funding.

And Barratt is shedding up to 1,000 jobs in another blow to the troubled UK property market.

Off topic but mentioning Barratt - anyone remember the old adverts with Patrick Allen in the helicopter?

[dundeevilla]

Our flat's been on sale for three months now without a peep of interest from buyers.

Had to drop the price, all in all an extremely frustrating experience thus far.

[Jon]

Our flat's been on sale for three months now without a peep of interest from buyers.

Had to drop the price, all in all an extremely frustrating experience thus far.

out of interest, why are you choosing to sell now. It's most defeintely not a sellers market.

Is it one of those "no option" things?

[dundeevilla]

Our flat's been on sale for three months now without a peep of interest from buyers.

Had to drop the price, all in all an extremely frustrating experience thus far.

out of interest, why are you choosing to sell now. It's most defeintely not a sellers market.

Is it one of those "no option" things?

We've just got married and want to start a family - our current flat is tiny. We need some space badly.