Oh god, have I really started this thread... (property market in ED)

[Jeremy]

pinkhalf Wrote:

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> One of my other neighbours said she

> got rid of her place for ?400,000 and described

> her buyer "as a mug".

What a charming lady.

[MrBen]

Also worth noting I think, that the Land Registry "actuals" are based on completion dates which can be anything from 3-9 months after the date at which the sale was agreed. Especially if there was a chain that delayed buyers from completing.

At the moment if you are chain free you are in a strong position...it has taken some I know almost a year to sell and move up in this climate.

[binary_star]

Very useful info Sue, thanks!

[JohnL]

pinkhalf Wrote:

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> I think a lot of people tell pork pies about what

> they sell for. One of my other neighbours said she

> got rid of her place for ?400,000 and described

> her buyer "as a mug". I suppose she got it wrong

> because when it came up on Land Reg, the selling

> price was ?327,000. People like to boast, and

> don't want to lose face.

Some buyers were mugs to some extent and some sellers - look at this from 2006

http://news.bbc.co.uk/1/hi/magazine/4826444.stm

Now we have a different climate - the solicitors who chased the banks to recoup a moderate sum of money over PPI for me

now ring me up out of the blue wanting to chase .. mortgage advisors

[dully]

www.mouseprice.com is quite straightforward

[karter]

There has been a drop in prices for flats and house and also commercial properties, give it another year and they should drop even further, sorry to be realistic.

[Sue]

I bought my house off North Cross Road for ?87,000 in 1991, eat your hearts out :))

Sorry couldn't resist it, but hey at least you're probably not as old as me!

(Bought my first flat for ?650 (sic) in Dundee around 1976, with a bank loan. It had no bathroom and the bog was shared with the flat next door).

[aspidistra]

Ahem, I bought for 39.5k in 1986... (Goose Green)

[Sue]

:)-D

[JohnL]

However rents are soaring - so if a deposit is there then BTL is a proposition now.

karter Wrote:

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> There has been a drop in prices for flats and

> house and also commercial properties, give it

> another year and they should drop even further,

> sorry to be realistic.

[Saila]

yes - i looked into this the other day

i think 3-bed, terrace houses are renting out for ?500/week (correct me if i'm wrong here - i didn't spend much time looking at it)

which at 20x makes the value approx >?500k to buy which i think is about right?

[????]

...or wait another year, get a better ratio and save yourself upto 2 years rent off the asking price...maybe

[karter]

Cheers quids getting your cash ready right?, doom and gloom aint all bad.:)-D

[Huguenot II]

How about me - ?4,800.00 in February 1970.

I think I must be older than Sue though.!!!

[Sue]

Huguenot II Wrote:

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> How about me - ?4,800.00 in February 1970.

> I think I must be older than Sue though.!!!

xxxxxxx

I actually bought my first flat around 1970, but it was with my then husband, and in Dundee.

I think it cost around ?1000 or something :)) Top floor of a tenement block. We then got a council grant to get a bathroom put in, and a new kitchen. Oh those were the days ......

When we split up he stayed there and I bought the ?650 flat mentioned above. Which was subsequently compulsorily purchased by the council and combined with the flat next door, however by that time I had moved back to London.

How old are you then H II?

[pearcesa]

???? Wrote:

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> ...or wait another year, get a better ratio and

> save yourself upto 2 years rent off the asking

> price...maybe

So, are people generally in agreement then that the housing market will remain stagnant for the next 12-18 months & that prices will actually fall? I've seen differing opinions in the press .... I'd be interested in people's thoughts about how prices in ED/Peckham/Nunhead/HOP might go....

[benmorg]

The latest RICS survey suggests that prices are falling slowly in most of the UK but, on average, rising slightly in London. The apparently regional difference is probably caused by variation in activity in different price brackets. High-priced houses that tend to sell to people with a lot of equity are holding up best. Lower down the price scale, where first-time buyers usually dominate, the mortgage drought is preventing buyers without huge deposits from getting on the ladder and prices are still falling.

Location isn't really the issue. As far as ED is concerned, prices of 1-bed flats are probably

Still on the way down, big houses in the best streets rising, and everything in between flatter.

[Penguin68]

I suspect that the key issues here are simple economics 101 factors.

(1) Different types of house operate with different elasticities of demand - properties targeted at first-time buyers (who have little equity to trade) are price elastic - falling prices bring buyers in, rising prices exclude them, primarily as a function not of desire but availability of funding (affordability). At the other end properties are relatively price inelastic - quite significant changes in price will have limited effect on purchase as people are in a better position to exercise choice less constrained by funds availability (simply because they probably already have sufficient equity to be able to borrow lower fractions of the total house cost).

(2) Prices also vary as a function of scarcity - so scarce desirable properties (right size/ location/ build quality etc.) carry a higher price premium than less scarce properties. First-time buyer houses are comparatively scarce (as a ratio against those seeking them) but very price elastic - so in the current borrowing climate to sell them the price must fall - houses at the top end which meet the desirability criteria are also scarce but more price inelastic - so their values are maintaining or even rising (i.e. their selling owners can benefit from scarcity whilst not being penalised by elasticity issues).

[pinkhalf]

I was thinking about buying (FTB with cash). But my rent is still very much cheaper than buying an equivalent house, probably by ?600 to ?900 a month (taking into account interest rate changes). If I set that off against having a bigger deposit, then it is worth it to wait. I am looking (3 bed flat/equiv house) and what is available is poor quality and expensive.

You have distressed sellers who have paid too much and are in negative equity. They stick out because the prices of their places are very high. Also, interest rates are going up and unemployment due to increase (with tax rises to come!). There is little to make prices go up and a lot to bring them down.

[benmorg]

Penguin68 Wrote:

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> I suspect that the key issues here are simple

> economics 101 factors.

>

> (1) Different types of house operate with

> different elasticities of demand - properties

> targeted at first-time buyers (who have little

> equity to trade) are price elastic - falling

> prices bring buyers in, rising prices exclude

> them, primarily as a function not of desire but

> availability of funding (affordability). At the

> other end properties are relatively price

> inelastic - quite significant changes in price

> will have limited effect on purchase as people are

> in a better position to exercise choice less

> constrained by funds availability (simply because

> they probably already have sufficient equity to be

> able to borrow lower fractions of the total house

> cost).

>

> (2) Prices also vary as a function of scarcity -

> so scarce desirable properties (right size/

> location/ build quality etc.) carry a higher price

> premium than less scarce properties. First-time

> buyer houses are comparatively scarce (as a ratio

> against those seeking them) but very price elastic

> - so in the current borrowing climate to sell them

> the price must fall - houses at the top end which

> meet the desirability criteria are also scarce but

> more price inelastic - so their values are

> maintaining or even rising (i.e. their selling

> owners can benefit from scarcity whilst not being

> penalised by elasticity issues).

Another factor is the new stamp duty of 5% for +?1 million houses, which comes into effect in April. The deadline is likely to cause a bit of a rush to complete on expensive London houses by the end of this month, which may be causing something of a false dawn by pushing up prices at the top.

[MrBen]

Good points well made there from the Penguin and BenMorg.

Distressed sellers? We need a good hike in the base rate to really shake those out. Most of them are sitting on super low SVR's and making a decent profit from renting it out, praying that rates won't rise fast soon.

[trizza]

I do have a feeling that those waiting for prices to fall substantially may be disappointed. My thinking is as follows:

a) London is generally insulated (but not immune) to house price reductions than other parts of the country. It is a (comparatively) wealthy city and ED is a popular area.

b) Although many think ED is expensive, it's really not when you compare it to places like Balham, Clapham, Islington etc. I think many who aspire to live in these areas see ED as a good alternative. A friend just sold his 1100 sq ft 3bed in Balham for ?630K - so about ?130K more than in ED. Apart from the Tube and maybe better secondary schools I really don't think Balham has that much over ED. I think this helps feed demand in ED.

c) Even if interest rates go up I would hazard to guess that the majority who have bought houses in ED will still probably be able to afford the mortgage but would have to cut back on other things. There will obviously be cases where this does not apply, but I don't anticipate there is a large number of potentially distressed buyers in great houses who will need to sell once interest rates go up.

d) How high will interest rates really go? Given the leverage of many loans I think the government realise that very substantial rate rises will do a lot of damage and I can't see the bank of england letting this happen.

e) There has been a huge constriction in the amount of credit available. This will not last and people with decent incomes and credit histories will be able to get better mortgage deals in the future. This will help feed demand.

If I was a betting man I would say that house prices will remain generally flat in ED over the course of the next few years, subject to the odd spike. I suspect many will just stay put rather than sell. However, if you are a cash buyer I suspect there will be the odd "bargain" available.

The bizarre situation is that if you have equity in your home and a bit of money, house price falls may not be a bad thing if you want to trade up as it ends up saving you money.

I fully appreciate the above may be wrong. I was lucky enough to get a 100% mortgage in 2003 and made good money on a couple of flats which as allowed me to buy in ED. However, I don't think the housing market is at all healthy - I find it really odd that people who have good incomes struggle to buy relatively modest homes in the suburbs of London. It may just be an enormous bubble, but if it ever pops we are all probably going to be in a world of pain.

[DaveR]

To add another economics 101 factor - 'the UK property market' or even 'the London property market' in facts consist of a very large number of tiny and quite distinct local markets with limited substitutability between them. In practice this means that many people continue to buy (if they can) when it might make more sense to rent, and many people continue to buy in 'desirable' areas when it might make more sense to go somewhere cheaper. London itself is a highly desirable area (people choose to buy in the city when it would be cheaper to commute, for example) and ED (for the time being at least) is a comparatively desirable neighbourhood (it still seems to command a price premium over Nunhead and Forest Hill). When you add to that the fact that London is likely to suffer less than almost anywhere else in the UK from unemployment and falling incomes it tends to suggest unexciting but not disastrous prospects for ED homeowners.

[Huguenot II]

I've p.m.'d you Sue.

H II

[Sue]

This link leads to a lot of information about house prices, property trends etc:

http://www.moneysavingexpert.com/mortgages/free-house-prices