So, mortgages are more affordable because interest rates are low, right? Pick your chart provider and timespan of choice, but it is a well worn argument in favour of higher house prices: afford bigger mortgage, buy
bigger more expensive house.
Not so fast. There is a case to be made that basing the analysis on the size of the initial payment is a form of mass delusion.
You see, the logic of affordability has its roots in the 1970s, but it is the reverse effect of something most people will have to fish out of the intellectual dustbin where the Taylor Rule and other inflation related analysis now molder: money illusion. Read more
We’ve had a look at the relationship between London houses and their occupants before. But a line from “leading economic forecaster” Harry Dent in a interview with the Guardian made us want to go and check out the stats:
“We’ve had bubbles throughout our time – oil, gold, stocks. But China is the biggest bubble in modern history. It’s 30% overbuilt in everything and has huge over-investment. The housing market is valued at 28 to 35 times income in the major cities. London, by way of contrast, is 15 times”.
That sounds like a lot, and it turns out that Greater London overall isn’t quite that expensive. But if you want to go area by area, what is clear is that some parts of the capital are priced well beyond the incomes of most people who live there. Read more
Congratulations Professor Shiller (and Profs Fama and Hansen)!
Let’s celebrate with a quick return to the property market, where he who would not be bullish made his name, in the popular imagination at least. Read more
Ok, this is from Perels, a consultancy, and it concerns UK property prices across the board, not just London. Click to enlarge…
Breaking pre-market news on Thursday,
- Melrose increases its offer for Charter International to 850p per share — statement and statement. Read more
In a world where hedge funds are using Twitter as a trading strategy… It was only a matter of a time before a central bank started using Google seriously for forecasts.
Or as the Bank of England is quite naffly calling it — ‘nowcasts’. Read more
UK house prices fell for a third month in succession according to figures from Acadametrics Ltd. and LSL Property Services Plc, reports Bloomberg. The news agency reports that a shortage of mortgage finance prevented buyers from making a purchase. The average price of a home in England and Wales fell 0.2 per cent to £222,827 from November, the research companies said in a report issued in London on Thursday. Values rose 2.9 per cent in 2010. October and November had previously shown rises but were revised to declines as more transaction data became available.
Our national pastime of guessing house prices pauses for no cold breath in the run-up to Christmas. The RICS 2011 Housing Forecast released today brings the estimate that house prices will be 2 per cent lower than present levels at the end of 2011. Essentially, the report articulates the view that ropey mortgage availability and fewer properties coming onto the market (interest rates supporting current mortgage-holders) will temper a dramatic plunge in prices. The report also mentions plans afoot, via the New Homes Bonus Scheme, to encourage local authorities (through payments equal to council tax for each property for several years) to boost available housing stock.
Time for the ‘however’: Read more
From the latest Nationwide house price index:
UK house prices fell again last month, a survey showed on Wednesday, suggesting that the downturn in Britain’s property market is increasingly entrenched. Mortgage lender Nationwide said the average property price fell 0.3 per cent in November, slightly above the 0.2 per cent fall forecast by analysts, reports Reuters. The annual rate of growth dropped to 0.4 per cent, its weakest since September 2009. However, the news agency also reports that Nationwide chief economist Martin Gahbauer said supply pressures were beginning to relent. “There are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture,” he said.
The latest Land Registry House Price Index was released today, recording a negative month-on-month house price change in October for properties in England and Wales.
The headline number is -0.8 per cent (bringing the average house price to £165,505). The fall is the biggest recorded by the index since February 2009, and narrows the year-on-year gain to 3.4 per cent. Prices are still higher than they were a year ago – but a slowdown cometh. Read more
Whatever sellers wish to believe about the value of their property, here’s a reality shot ahead of a bleak housing midwinter courtesy of Rightmove’s latest house price index (click to enlarge):
Last month the Rightmove house price index reported that prices were up — yes, up – by 3.1 per cent. However for the period to early November it is a different story, with the property site registering a month-on-month decline of 3.2 per cent, based on the properties advertised on its website, which makes it the largest monthly decline since December 2007. As Miles Shipside, director of Rightmove, observes, the Christmas slowdown may have arrived early this year. Read more
From the latest monthly survey of housing by the Royal Institute of Chartered Surveyors (Rics) — highlighting the direction of change for house prices:
If you’re trying to sell a house anywhere between Berwick-upon-Tweed and St. Ives, you could be waiting a rather long time.
That’s what Hometrack, which analyses the UK housing market, has concluded from their monthly housing survey. After a mid-2009 peak, the average time it takes to sell a property appears to be creeping up again, hitting an average of 9.6 weeks in October — and if you are looking to sell in Wales or the East Midlands, then that rises to the three-month mark (click to enlarge): Read more
More UK double-dip food for thought, this time courtesy of the Bank of England.
The Bank’s lending data for September show net mortgage lending stalling (click to enlarge the chart): Read more
House prices began to fall for the first time in a year in July as sellers rushed to put their properties on the market and buyers became harder to find and more cautious, reports the FT. After a year when the recovery in house prices surprised almost everyone and brought relief to Britain’s stretched banks, the return of a buyers’ market threatens to increase jitters in a fragile economy. The Guardian says some valuers said in the Royal Institution of Chartered Surveyors’ July market survey that they had been “staggered” by the severity of the downturn, and blamed Britain’s new fiscal austerity for the decline.
Breaking pre-market news on Wednesday,
- Standard Chartered to invest $500m in Agbank IPO — statement. Read more
UK house prices climbed 1 per cent in April, according to a closely watched index, and year-on-year, showed the first double-digit rise since prices peaked in October 2007, reports the FT. According to the Nationwide house price index, prices rose by 1 per cent in April from March and recorded a rise of 10.5 per cent from April 2009. See also FT Alphaville for some analyst comment.
Breaking pre-market news on Thursday,
- Nationwide says house price inflation reaches double digits – report. Read more
House prices rose in March, largely offsetting a drop the month before, and remain slightly above their average price in the final three months of 2009, according to a closely-watched measure, the FT reported. The Halifax house price index showed a 1.1 per cent monthly rise in March, against a 1.6 per cent decline in February . In the first three months of 2010, prices stood 0.6 per cent above their levels in the final three months of 2009.
More UK housing data just in and it leaves us wondering — was it the weather?
House prices as tracked by the Halifax fell 1.5 per cent for the month of February, putting an end to seven consecutive months of house price rises. Read more
The Daily Mail moaning about the effects of contango in the oil markets last week got us thinking about how the same market dynamic might translate to UK house prices.
Could it be, as we cheekily suggested, there was genuinely some contango coming through in ‘house price futures’ incentivising owners to “hoard” physical property in the hope of selling it on for a profit in the future? Read more
John Charcol mortgage expert Ray Boulger has written up his thoughts on the Treasury Select Committee’s brief on the housing market, Mortgage Arrears and Access to Mortgage Finance.
He makes some very lucid, if disconcerting observations. First, Boulger says the report focuses far too much on first time buyers, the subprime sector and remortgaging. In that way, he notes, it fails to acknowledge the fact that problems go well beyond these sectors. Read more
For anyone possibly thinking about getting back into the property market here’s a scary prediction from Dominic Frisby over at MoneyWeek on just how much further houses prices have to fall. To illustrate his point Frisby throws up two charts.
Firstly there’s ‘Manias and Bubbles’ as devised by Dr Jean-Paul Rodrigue’s, economist at Hofstra University: Read more