Has the housing market in ED reached its bottom yet?

[indiepanda]

I think what will govern prices here is as much to do with emotional reactions to what has happened as the availability of funds for mortgages. If people think there is a good chance prices will fall, at least some will stay out of the market, making such falls inevitable.

We can talk about demand exceeding supply till the cows come home, but the truth is the demand is for somewhere to live - not necessarily somewhere to own. I moved to East Dulwich a couple of months ago. I could afford to buy here, though not yet the kind of place I'd really like to own, but I've no intention of gambling with my deposit and potentially seeing my equity vanish when I could wait a while and buy somewhere nicer later on. So I'm renting for now, and I'm sure I am not the only one who could afford to buy who is doing this.

I think prices have got a way to go before they become reasonable again. The whole economy has been existing on extensive levesl of credit, and the housing market is one of the worst examples. People have been borrowing multiples of salary that are dangerously high meaning as soon as interest rates rise, the mortgages become unaffordable. I don't imagine banks will be willing to behave like that anymore - back to the days of 3 times salary or thereabouts I expect.

[Andyng]

I don't see a problem to mortgages.If you can pay it then why bother waiting?

You have to be prepared to put your money on the line if you want to move up the housing ladder

[benmorg]

EDOldie Wrote:

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> 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.

very similar to japan. It didn't stop house prices there from falling continuously for 18 years. As indiepanda points out, supply and demand also dictates the level of rent, which hasn't risen in parallel with house prices - rents have merely kept pace with wage inflation. We currently have an excess of supply of houses for sale and an shortfall in demand. In economic terms, that tells us that the true equilibrium price for houses is below current asking or completion prices, which will therefore continue to fall until they reach or pass equilibrium. Equilibrium is likely to be near the point where rental yields comfortably exceed mortgage rates.

> 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.

that's not quite correct. The UK's particular balance of supply and demand does not make the housing market move more quickly or with more volatility. It merely sets the level of the floor under house price falls. Limited supply will stop prices falling as much as they would if supply was much looser. As for how restricted supply truly is, again you need to look at rents which reflect demand for accommodation without the distorting infuence of the credit bubble.

> 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?

well the best housing stock in this part of london is in Dulwich village. ED is mostly small workers houses packed closely together - the victorian equivalent of a housing estate, though more desirable after a century thanks to the period charm we now all want. I wouldn't say the housing stock here is especially good (and don't forget the area's widespread subsidence problems), but it's nice that there is a large and almost wholly intact victorian neighbourhood. As for amenities, Lordship Lane is great, but apart from LL what is there to recommend ED apart from the peace and quiet? Transport is definitely a weak point with no tube access. At the moment, canny buyers are more likely to be shopping along the route of the southeast london line extension, particularly in the areas around honor oak, forest hill and crystal palace. I've no doubt the new service will mitigate house price falls in those areas. It may even help ED a little, but not as much.

As for how ED weathers the coming storm, I think we just have to wait and see. In the last crash Dulwich village pulled through well and ED didn't fall as far as peckham or lewisham, but it did suffer. This time round it's a nicer area, which may protect it. On the other hand, the economic crisis could hit london's commuter neighbourhoods especially hard as the city is going to bear the brunt of the downturn.

[benmorg]

indiepanda Wrote:

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> I could afford to buy here, though not yet

> the kind of place I'd really like to own, but I've

> no intention of gambling with my deposit and

> potentially seeing my equity vanish when I could

> wait a while and buy somewhere nicer later on.

that's the predicament facing all first-time buyers at the moment. If house prices carry on falling 1-2% a month, it doesn't take very long for a hard-earned deposit to evaporate and the spectre of negative equity to rear its head. Although many people say negative equity doesn't matter if you can afford the repayments, in fact it causes problems when mortgage rates re-set after discounted or fixed terms expire. The owner is then unable to re-mortgage and forced to accept a painfully high variable rate deal from their current provider.

[Andyng]

okay you buy a ?300k flat put 10%down do you think the property will drop

10% in a year?

So everyone waits but for how long ,interest rates may drop inn a few years

okay those same people who have been waiting all begin to buy,this causes a huge

demand upping prices.In the meantime rents go up .

You cannot wait forever.

[benmorg]

Andyng Wrote:

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> okay you buy a ?300k flat put 10%down do you think

> the property will drop

> 10% in a year?

yes quite possibly. UK house prices are already down more than 10% in a year. Judging by what's happened in other countries currently experiencing a house price crash (e.g. denmark and USA), they could well carry on falling next year at the same rate.

>

> So everyone waits but for how long ,interest rates

> may drop inn a few years

> okay those same people who have been waiting all

> begin to buy,this causes a huge

> demand upping prices.In the meantime rents go up

after the crash in the early 90s, there wasn't a sudden demand surge. The market flatlined for a few years and then started rising slowly.

> You cannot wait forever.

a truism. Waiting a couple of years is probably enough to get the bulk of the price falls under your belt. Any further falls can be taken on the chin as the market is probably going to find its feet again by 2012. Don't quote me on that though.

[????]

I think they'll drop 20% in a year.........

[Andyng]

So 80% in 4 years hmmm

[macroban]

> So 80% in 4 years hmmm

Even the prices of East Dulwich one-bedroom flats are unlikely to drop this much.

[????]

er....20% in a year that's 20% where the f*ck did I say 4 years? Plus, to be pedantic, which you seem to be,- 20% - 20% -20% - 20% isn't 80%....should have spent more time listening to the beardy fella at the front of your maths class at school......

[indiepanda]

benmorg Wrote:

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

> indiepanda Wrote:

> --------------------------------------------------

> -----

> > I could afford to buy here, though not yet

> > the kind of place I'd really like to own, but

> I've

> > no intention of gambling with my deposit and

> > potentially seeing my equity vanish when I

> could

> > wait a while and buy somewhere nicer later on.

>

> that's the predicament facing all first-time

> buyers at the moment. If house prices carry on

> falling 1-2% a month, it doesn't take very long

> for a hard-earned deposit to evaporate and the

> spectre of negative equity to rear its head.

> Although many people say negative equity doesn't

> matter if you can afford the repayments, in fact

> it causes problems when mortgage rates re-set

> after discounted or fixed terms expire. The owner

> is then unable to re-mortgage and forced to accept

> a painfully high variable rate deal from their

> current provider.

it's not just first time buyers - when I next buy it will be my third property. I just happened to sell my last one before moving to London last year, and now I am out of the market it seems a little daft to rush back in when I can get a better deal by waiting. My rent is lower than I'd spend on mortgage (my flat is ok but I want a small house, and renting seems cheaper than repayment mortgage anyway) so I can save while seeing the kind of place I'd like become more affordable.

Plus whilst I like living in London I find the longer hours / higher stress work culture a bit of an adjustment, and till I am sure I want to stay for sometime, it doesn't seem clever to incur the buying costs to get into a falling market and then get stuck having to rent my pad out or crystalize a loss if I decided to move out again.

[Marmora Man]

As a pedantic mathematician and to illustrate quids point:

Year 1: 100 - 20% = 80

Year 2: 80 - 20% = 64

Year 3: 64 - 20% = 51.2

Year 4: 51.2 - 20% = 39.96

Total loss over 4 years at 20% a year decline = 60.04%

[macroban]

A pedantic old woman makes the point that a 60% fall requires a 250% "recovery".

[benmorg]

indiepanda Wrote:

> it's not just first time buyers - when I next buy

> it will be my third property. I just happened to

> sell my last one before moving to London last

> year, and now I am out of the market it seems a

> little daft to rush back in when I can get a

> better deal by waiting. My rent is lower than I'd

> spend on mortgage (my flat is ok but I want a

> small house, and renting seems cheaper than

> repayment mortgage anyway) so I can save while

> seeing the kind of place I'd like become more

> affordable.

if it's a small house you're after, you've come to the right place. ED is full of them. There are even lots of peculiar little "half houses", which are the size of a flat and share a front door with the neighbour but give you a whole freehold house and garden. I think they make a good stepping stone from flat to house, but watch out for ambitious vendors pricing them on a par with whole houses.

[AcedOut]

Or simply...

(0.8^4)*100% = 40.96% down