Has the housing market in ED reached its bottom yet?

[local estate agent]

1/2 bed flats are selling quite well

2 bed period props upto ?400k are doing very well

Anything above ?500k are not really moving at all.... lots of people looking at these types, but who are not under offer themselves, so cant proceed forward on these

[SteveT]

The same as usual Lozzyloz bargains!

[benmorg]

AcedOut Wrote:

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> As for agents trying to increase the prices

> through talking-up the market, it's probably more

> in their favour JUST TO SELL! A good strategy in

> the current climate would actually be to talk the

> vendor into dropping the price to get a quicker

> sell. Ok, so they loose a little commission, but

> at least the liquidity remains high. Better to

> have some commission than none at all. For an

> agent on 1.5%, a ?10,000 drop in price is only

> costing them ?150. If the place is worth ?250,000

> then that goes from ?3750 to ?3600, or a 4% drop

> in commission. It will hurt them, but better than

> to loose out to another agent.

It's an estate agent's job to talk down vendors' expectations and talk up buyers' expectations, hoping the two will meet in the middle. I think there are probably more buyers than vendors on the forum, given that internet forums appeal to a younger crowd, so it still makes sense for a shrewd estate agent to talk up the market on the east dulwich forum, while privately telling his (older) vendors that the market is in dire straits and they need to drop their price now or they'll be taking a bigger hit in 2009.

Last few days have seen a large surge in the number of properties coming onto the market in east Dulwich. A rise in supply generally means a fall in prices. Whether this trend keeps up remains to be seen. If the state of the market deters buyers to such an extent that supply starts to dwindle, then prices will stop falling and may stabilize.

However, we now have a recession on the cards and the banking crisis of a century threatening to tip America into a depression. I think a lot of buyers will be waiting to see what kind of fallout this crisis creates, as it could change the economic landscape beyond recognition.

[Moos]

If young people buy and old people sell where do the old people live afterwards?

[local estate agent]

The childrens lofts and cellars

[Brendan]

Moos Wrote:

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> If young people buy and old people sell where do

> the old people live afterwards?

They retire to Spain and use the luca they made off the house to employ a firm bodied masseuse to rub oil into their thighs.

[benmorg]

Moos Wrote:

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> If young people buy and old people sell where do

> the old people live afterwards?

well, ultimately they live in a hole in the ground (a lot of chains end in vacant premises sold by beneficiaries of an estate), but in the short term they move out of London for a better quality of life - whether they are retiring or merely past their 30s and tired of London. As local estate agent pointed out in a earlier post, a lot of the biggest discounts currently being had are where the vendors are moving out of London to somewhere where prices have fallen substantially, allowing them to pass a discount back down the chain to their london buyer. Note also that older vendors are more likely to have substantial equity and therefore be more relaxed about taking a hit than recent buyers who won't sell for less than they paid.

[AcedOut]

I'm waiting until the majority of people have to re-mortgage when they reach the end of their fixed rate periods. This (particularly in the BTL market) is going to force prices down further, since I would predict that the number of repossessions will carry on increasing. These BTL landlords that got in late, are suddenly going to have to find significant equity in order to keep their LTV's at 75%.

It's all going to get a whole lot worse in my opinion, but it'll be interesting to look back in this thread in a year's time!

[EDOldie]

Probably said this before, but the property market is incredibly unpredictable. Just when you think you know where it's going it turns round and bites you in the arse. Having already experienced, the two worst property recessions since the war, the only advice can be extreme caution. Either buying or selling. Now is not the time to make a hasty decision, but you can still make the right one. So this could actually be a very good time to buy, or sell.

benmorg, what are you taking about over 30's being tired of London??? Thats a bit early.

"Why, Sir, you find no man, at all intellectual, who is willing to leave London. No, Sir, when a man is tired of London, he is tired of life; for there is in London all that life can afford."

? Samuel Johnson

[benmorg]

the thing to keep an eye on at the moment is mortgage rates. They were coming down, but now they are all over the place due to the collapse of lehman and total panic among lenders. Already major banks have started hiking rates:

http://www.thisislondon.co.uk/standard/article-23560251-details/Double+blow+on+mortgages/article.do

so what next? If the US doesn't somehow manage to sweep all toxic debt in the banking system under an enormous rug, then mortgage rates are going to climb. (In the unlikely event that the US bailout collapses, they will climb very steeply, but thatwould be the least of our worries..)

Meanwhile, the Bank of England will probably start cutting base rates sooner than had been planned. If the US bailout is completely successful and inflation peaks soon, then we'll probably see mortgage rates falling and dropping a lot in the new year. However, it all hangs on the success of Paulson's bailout. My opinion is that the bailout will go ahead, but with a load of conditions added by Congress, and then will start to unravel when it turns out that the dodgy assets paulson want to buy off banks are impossible to value. What that would mean for mortgage rates is very hard to judge at the moment. There is huge uncertainty, and that's part of the reason markets (including the housing market) are freezing up.

[EDOldie]

As I said, totally unpredictable. The base rate set by the Bank of England is becoming increasingly irrelevant as so much money has been lent by and to banks. LIBOR is what matters, but for how long?

All together now,

"Maybe it's because I'm a Londoner,

That I love London so.

Maybe it's because I'm a Londoner

That I think of her wherever I go.

I get a funny feeling inside of me

Just walking up and down.

Maybe it's because I'm a Londoner

That I love London Town."

[lozzyloz]

So what next?

I think the next big wave of bad news could be as a result of banks exposure to bad debt in China which will hit the likes of HSBC.

[lard]

lozzyloz Wrote:

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> So what next?

>

> I think the next big wave of bad news could be as

> a result of banks exposure to bad debt in China

> which will hit the likes of HSBC.

Why do you think that?

[lozzyloz]

There's been take of a lot of lending in China through what is called the 'Underground Market', basically unregulated lending, and with an expected hiccup in the economy due, you can expect to see the equivalent of sub prime lending there caving in and banks running for cover . . . again.

[Siduhe]

lozzyloz Wrote:

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> So what next?

>

> I think the next big wave of bad news could be as

> a result of banks exposure to bad debt in China

> which will hit the likes of HSBC.

China and Russia appear to be in an interesting phase. In Russia, trading in the main stock market has been suspended since last week, and whilst China has huge foreign exchange reserves (increasing amounts of which are being used to buy up US debt), its economic growth is (as a result) dependent to an extent on US and Europeans spending more than they earn - conditions which are less likely to continue with recession conditions. Same with their growth in industrial production which was largely as a result of Western demand. Not clear whether this will simply slow growth (as it has done last two quarters) or actually cause a slump. A number of western banks will have exposure to both of these markets.

edited for spelling

[AcedOut]

Bad debt in China? Explain...

[AcedOut]

I suppose we will import less China, since due to inflation and weakening of the USD and GBP will make these goods more expensive. We'd probably start looking to source more goods locally. This in itself will have a hit on their economy. It's all son intertwined. It's extremely complex to predict exactly what will happen next. I had a beer with a fund manager last night and he was equally clueless as to what exactly will happen in the coming months.

[lozzyloz]

There are already signs that the Chinese economy is slowing down (not quite recession) and also evidence of a slow down in the property market with some provinces seeing property prices falling by 20%. Western banks have been using the "underground market" on a large scale to stoke up lending for types of credit and/or institutions that fall outside the traditional structures of financial supervision. Whilst it might not be devastating for the Chinese economy it will be another sting in the tail for Western Banks and our economy.

[benmorg]

EDOldie Wrote:

-------------------------------------------------------

> Probably said this before, but the property market

> is incredibly unpredictable. Just when you think

> you know where it's going it turns round and bites

> you in the arse. Having already experienced, the

> two worst property recessions since the war, the

> only advice can be extreme caution. Either buying

> or selling. Now is not the time to make a hasty

> decision, but you can still make the right one. So

> this could actually be a very good time to buy, or

> sell.

>

> benmorg, what are you taking about over 30's being

> tired of London??? Thats a bit early.

>

> "Why, Sir, you find no man, at all intellectual,

> who is willing to leave London. No, Sir, when a

> man is tired of London, he is tired of life; for

> there is in London all that life can afford."

> ? Samuel Johnson

i love the samuel johnson quote - one of my favourites. Also like the one about a man's best moments in life being spent lying in bed in the morning. Perhaps shouldn't have said that oldies quit london because they'e "tired" of it - the full explanation is usually that growing families and need for better schools and bigger houses force people out.

I agree there is a lot of uncertainty in the housing market, but I don't agree with the thrust of your argument as you seem to be saying there is so much uncertainty that a rise in prices is as likely as a fall, i.e. the market could swing either way with equal probability. In fact the risks are far greater on the downside. Not just in the UK - the housing bubble was almost global, and the bursting will be too. Unfortunately for us, we happen to be in one of the countries most exposed.

[Cassius]

I agree with Benmorg - I have several friends who moved out of London when they had children, they wanted to bring their kids up in a larger house and garden than they could afford in London, and they also perceived their children would have more freedom in the countryside. Whether or not the majority of EDF-ites agree or not, it is/was a powerful reason for many to move away.

[benmorg]

As the banking crisis seems to be going from bad to worse, I would strongly caution anyone against completing on a house purchase in the next few days. At least wait until end of Monday to make sure the evening standard's apocalyptic prediction does not come true:

http://www.thisislondon.co.uk/standard/article-23560539-details/Stand+by+for+Black+Monday/article.do

it would be a catastrophe if the US can't sort this mess out by monday and somehow prop up the credit the markets. It has now got to the point where none of our banks are safe, let alone the housing market.

[EDOldie]

Does anyone still believe anything in the Daily Mail (Evening Standard being part of the same group I think)???

Just to quote benmorg "the thrust of your argument as you seem to be saying there is so much uncertainty that a rise in prices is as likely as a fall, i.e. the market could swing either way with equal probability." er, yeah, thats what I think. The market could be complete crap, could be a blinder. Hence saying extreme caution is how you go ahead. But, and it really does kill me to say this as I can't stand the centralised bigotry of the bloke, Gordon Brown is right about one thing (and one thing only) the UK property market is very, very different from the US property market and there lies our salvation (hallelujah). We have a very small supply, which will choke very quickly as the number of building starts stops, so to speak, and the number of people prepared to sell drys up. In essence, the market could turn very quickly. But you might be right, the fact is no one know what will happen next.

[????]

errr........EDO...there's no money to borrow as banks won't lend to each other because of toxic debt in the US...that's why the US housing market is fundamental to us...we can have 3 trillion first time buyers with funds but if banks can't borrow the money cheaply on the wholesale market ...they can't lend...and if the housing market keeps going south, Libor going up (meaning rates are now more likely to go up now)and with the 2 million or so who have bought in the recent boom coming to the end of their fixed rate deals coming in for a massive MASSIVE shock as the end of cheap deals means a sudden 2+ percentage point increase in their mortgage rate, we will see a massive increase in reppossessions with resultant less trust among banks to lend to each other and more runds on their shares (a la HBOS) and more of this chaos...this is why people are saying this is like the great crash and unprecedented...this is not a 'correction' in the housing market it's a foooking meltdown unless it turns around soon....

[benmorg]

EDOldie Wrote:

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> Just to quote benmorg "the thrust of your argument

> as you seem to be saying there is so much

> uncertainty that a rise in prices is as likely as

> a fall, i.e. the market could swing either way

> with equal probability." er, yeah, thats what I

> think. The market could be complete crap, could be

> a blinder. Hence saying extreme caution is how you

> go ahead. But, and it really does kill me to say

> this as I can't stand the centralised bigotry of

> the bloke, Gordon Brown is right about one thing

> (and one thing only) the UK property market is

> very, very different from the US property market

> and there lies our salvation (hallelujah). We have

> a very small supply, which will choke very quickly

> as the number of building starts stops, so to

> speak, and the number of people prepared to sell

> drys up. In essence, the market could turn very

> quickly. But you might be right, the fact is no

> one know what will happen next.

I think you're wrong to see the UK and US markets as unrelated. In reality both are part of the same economic system, and our housing downturn was triggered by the one in the US. The same applies to Denmark (where house prices peaked in 2006 and still falling), spain, ireland, new zealand, australia, france...

supply of properties in east dulwicch is certainly not limited - there are about twice as many properties on sale now as there were a year ago. The old argument that limited supply of housing in the UK underpins prices is spurious. If it were true, rents would have risen to giddy heights in parallel with house prices. The truth is that there is a house price bubble, driven by low interest rates and lax lending. that bubble is now bursting.

As for a quick rebound.. I will just remind readers what happened when japan experienced a banking crisis in the early 90s similar to that now unfolding in the US. House prices went into an 18 year decline that continues to this day. There has been no rebound! This is one of the reasons the current banking crisis is so alarming.

[EDOldie]

First law of economics, supply and demand. This is a very small country with a very large population with most of the serious economic activity concentrated in London and the South East.

I could hardly agree more that, at the moment, supply exceeds demand. All I am saying is that this situation could, and is more likely in the UK than almost more than anywhere else in the world at the moment, to change surprisingly quickly.

It may not be the bottom of the market yet, but the fact is that we enjoy some excellent housing stock in ED which in recent years has been improved and restored and, with all the other amenity values of the area, schools, transport restaurants etc etc, should be in high demand when some confidence returns. Even if the septics (not sceptics) bugger up the banking system. As for those bankers, greedy bastards, eh?