Housing market slowdowns share certain common features, but the downturn of
2008 is producing some new phenomena. To date, the most marked of these is
bizarre fury generated in some quarters at statistics showing that prices
are stagnating rather than slumping.
This week Halifax reported that prices were unchanged in January; these
statistics followed Nationwide data which revealed a decline of 0.1 per
cent.
Both surveys provoked vitriol from the vocal minority that has been wrongly
forecasting a crash for the past few years and now denounces any research
that might thwart their hope that their dream is about to come true.
This pro-crash lobby accuses the economists at Nationwide and Halifax of
publishing figures that give a falsely optimistic view. Journalists who
report these numbers are deemed to be either mouthpieces for lenders or
determined to support the value of their own property investments. The
motives of this online fraternity that longs for the human misery produced
by a market collapse are a mystery. Perhaps they hope that if they spread
sufficient gloom, their rantings will become a self-fulfilling prophecy?
But some things are certain - one being that their outpourings will continue.
There is, for example, very little similarity between the economic
conditions today and the sorry situation that precipitated the housing crash
of the early Nineties.
If the economists at mortgage lenders were only cheerleaders driven by the
desire to boost the sales of home loans, they would not have voiced their
concerns early in 2007 that the sector was set to weaken. These commentators
can also claim that their past forecasts have been accurate - unlike those
of their online detractors.
Another surprise development of the slowdown of 2008 is the sudden improvement
in the image of the buy-to-let investor, previously the villain, blamed from
excluding first-time buyers from homeownership. A study from the National
Housing and Planning Advice Unit (NHPAU) indicates that first-time buyers
have been more disadvantaged by their own lack of purchasing power.
Indeed, the NHPAU, like Capital Economics, points out that buy-to-let has
boosted the supply of private rented accommodation (although there is still
a shortage, a problem highlighted this week by Shelter, the housing
charity).This defence of buy-to-let is bound to spark yet more debate,
proving that - in the bad times and the good - very little gets the British
more excited than property.
BLOG CABINS
Rupert Everett, the star of St Trinian's is selling his condo in Miami Beach
for $1.15 million (the building has pet restriction rules). Jennifer Garner,
one of the leads in the Oscar-nominated Juno, and Ben Affleck, her husband,
an Oscar winner in 1998, are viewing $20 million homes in Los Angeles,
including a 15,000 sq ft “sprawler” whose comforts include a mud room (for
pets who have got mucky on a walk). These are just two of the latest reports
on realestalker.blogspot.com and bergproperties.com/blog, the celebrity
blogs currently diverting Americans from their falling housing market.
More displacement activity is on offer at archinect.com, usually a high-minded
information space for architects but the source this week of the story that
a group of designers of computer generated images of homes have been
producing weird pictures based on song lyrics, such as House With No Door.
This was a Seventies hit from Van der Graaf Generator, the British prog rock
band.
There could be no greater contrast between the glossy snaps of luxury real
estate displayed on the homes of the stars' sites and the reality of
vandalised repossessed properties in American cities, sometimes without
doors and roofs. But, after all, the business of Hollywood has always been
all about escapism.
DREAMS AND REALITY
City bonus money - which affected the direction of the market in London, the
South East and in second-home locations everywhere - continues to have an
impact, although the sums “trousered” this year will be lower. In
Kensington, the hope that loaded bankers will be shopping for homes in the
spring has caused a 10.7 per cent decline in the number of houses now for
sale, according to Primelocation.com.
In contrast, owners in Streatham - where a one-bedroom flat can be had for
£190,000 - know that their neighbourhood - although up and coming - will not
be the first stop on the banker's itinerary. As a result, they are
displaying an admirable realism about the level of prices and the time it
will take a property to sell - between six and eight weeks, according to
Kinleigh Folkard & Hayward, the estate agents. The Kensington owners'
confidence could well be repaid, but they should be under no illusions that
today's buyers - whatever their resources - will be looking for a good deal.
You seem to forget that there will always be a rental market for people who do not want to buy or people who want a short term let.
People who BTL provide a service.
Rob Young, crawley, West Sussex
Lee Harrison.
Glad you have decided all FTBs are unemployed or doing rubbish jobs. When you started I think the income multiple was much much lower. Salaries used to rise in line with the cost of living rather than stagnate while everything went up.
I am sure there are plenty of FTBs who don't won because they spend too much, but not sure where the rest of your comments are coming from.
After 30 minsI found that a couple earning £46,000 wanting a family in London will be able to get nowhere decent to bring up their family, unless they live on a council estate...
...which is precisely the place lots of people work so hard to avoid. So they should better themselves by living with people who you say do not better themselves.
BTL accounts for the 10% that FTB compete in!!!!
You should try and know what is going on before you dare to insult people. Most of the people you dare to undermine would have been able to afford houses 10 years ago, so get over yourself.
Trevor, UK,
why do people who don't own property or have a second property always blame Buy to let?????? i was raised on a council estate did 15 years in the army from the age of 16 i have several houses i rent to good people and am proud of it, if you want to make better of yourself in life don't stand around telling people what you think do what you think! in my case i worked and studied to own what i do, there is more then one way to get on the housing market if you sit down and study mortgages and lending just for half an hour , people spend more time shopping on a weekend with a credit card then thinking about a house purchase hence these people claim they cannot get on the ladder absolute rubbish! its an excuse for not bettering yourself in employment and sitting down and looking at your options ... i simply will not have people using buy to let as an excuse .. it accounts for about 6-8% of the uk stop making excuses and get on in life !
lee harrison, leeds,
Personally, I'd say that making money from buy to let properties is 'the human misery produced by a market'. Houses for homes, not for profit!
Jim, Chelmsford,
BTL are providing a service to FTB via housing ONLY because they have priced out FTBs in the first place.
The research on BTL not pricing out FTB? From what I can tell it looks at what BTL has done to average house prices and says FTB have not suffered much. They do not actually look at the specific segment that FTBs compete in i.e. flats and small houses. The research should have concentrated on what BTL has done to these parts of the housing market.
As to the different conditions. We were less vulnerable in 1989, witness the sharp rise in rates before true hardship set in then...now we whinge about 5.5% v 5%.. We are very indebted (housing AND credit cards) at the margin. We should look at payment capacity, not the rate level. Our debts are three times higher and rates are 6% v 15% then. Do the math on repayments.
Crashes occur because of the margin, not because all of society suddenly crashes.
The new triggers? Unemployment, reverse immigration and BTL getting out.
Raj, London,
At the end of the day, would you rather listen to a silly bricks chick like Anne Ashworth or Kirsty Allsop, or an economics professor like Willem Buiter of the London School of Economics.
Anne says that conditions are different from the 1992 crash because unemployment and inflation are relatively low. Inflatin is now rising and unemployment is a lagging indicator.
In any event, 6% on 300k, now, is the same as 15% on 100k in 1990. There is an investor class (BTL) who will sell much faster than people losing homes last time, and we have no stimulus weapons left.
Japan had a credit crunch back in 1990 and it still hasn't recovered. It also has less land, per head of population than the UK. In 1990, Japan had the most inflated real estate in the world. As for the Halifax and other B/S, what does Anne expect them to say, that property prices could fall off a cliff? If they do, I suspect it will be a long and protracted affair, which has now started. Let's wait and see who's right.
keith, london, UK
"The motives of this online fraternity that longs for the human misery produced by a market collapse are a mystery". It could be that these awful people might just want housing to be cheaper so that they could own their own home. The motives aren't all that complex, are they?
Rob, London,
housepricecrash website - set up by speculators who had sold their houses to rent in 2002 expecting a crash then. gamblers who have tried to buck the system and have failed, lost a fortune and are bitter. their spokespeople never tell you this when you see them in the media .
James , LONDON , UK
Buy to Let Landlords are still the overlords in or new labour feudalism. As for first-time buyers lack of purchasing power well that is set against those with more purchasing power! Wake up Anne Buy to let is a threat!
Foxton, London,
How is hoping to one day be able to own your own home at an affordable price akin to being a 'merchant of doom'. What utter rubbish, many people are praying for a price crash so that they can stop living an almost nomad existence and get on with their lives. Perhaps one day these people may even want to *shock horror* be able to start a family. The house price boom coupled with huge student debt has effectively enslaved a generation
Chefdve, Guildford,
Anne
Ideas spread if people think that there is an element of truth in them. To date these blogs have barely registered on the media radar, however now we see a broadsheet newspaper stepping forward to dismiss their ideas as idiotic rantings. Why now. The answer is that the financial world is waking up to the mismanagement of the last few years and that there is a real risk that panic will start to set in. I fully understand your motivation for trying to protect the housing market however I also believe that articles like this very often backfire. You have increased public awareness of these blogs. Your readers will naturally now be more curious and you might even find some of them reading these blogs and agreeing with them.
As for me, you don't have to be an actuary to realise that 5 times salary multiples when compared to the long term average of 3.5 is financial madness. The banks have had their fingers burnt and the money tap has been turned off. House prices can only go down
Ben, London,
Anne, two points. 1. The Halifax data is seasonally adjusted , the actual price paid for a house dropped by more than 2% in January. The SA the Halifax applied was also significantly larger than usual for January - wonder why ?
2, People who expect / want houses to become cheaper are not doom mongers nor should our motives be a mystery. We want housing to be cheaper for all. That way young people will be able to afford a place of their own and get out of the parental nest. For all those who wish to trade up it will become more affordable.
The real doom mongers are people like yourself who believe houses will become more and more unaffordable. Excluding the young from ever owning a home and families from trading up. House Price Inflation causes real misery to both these categories. House price deflation will only hit speculators, reckless borrowers and those hoping to trade down oh and a few EAs and property journalists too!
robert Ball, Hythe , Kent
"the majority of people in this country need to buy property", Darren, Plymouth.
No one 'needs to buy property', owning your own property rather than renting is a choice you can make if you can afford it. There is no right to own a house.
Tim, London,
"Why cannot your children rent rather than buy, its a bit like me lamenting that my kids cannot go to fee paying school ...." Hughes, London.
One small point Hughes, the majority of people in this country need to buy property (and some foolishly do at any cost); they DON'T need to send kids to 'fee paying' schools. A house is essential, a toff education isn't.
Darren, Plymouth, Devon
The merchants of doom aren't above using underhand methods to further their aims. Witness this blatant attempt to influence a GMTV house price poll...
http://www.housepricecrash.co.uk/forum/index.php?showtopic=67862
Play Fair, Belfast,
Mike, I have seen this type of ranting on the Globalhousepricecrash.com. site and it offends me. Why cannot your children rent rather than buy, its a bit like me lamenting that my kids cannot go to fee paying school - if I feel that strongly about it I need to get up and get motivated and earn enough to see them alright. Otherwise it is bile for the sake of it..
Hughes, London, UK
I decided not to buy into the property market again in the UK, because all of it is overpriced by 50%. Who in their right mind would pay at least 350K for a two up two down. I've just bought some land with house and stables abroad and am setting up an animal sanctuary for a lot less than the two up two down. I can live the life I want and not be bogged down by a crippling mortgage for a mediocre box.
I really feel sorry for first time buyers. The best thing for them to do is emigrate.
Lara, Brighton,
In the end it was always going to be difficult for a large demographic cohort to be succeeded by a smaller one. The nature of debt money and fractional reserve banking requiring continuous expansionary growth to function. It was always going to fall down. Could have been less of a problem if the immorality of deliberately causing rapid housing inflation had been killed in the bud. As it is, I fear that a large number of the 'boomer' generation are either going to be subject to massive erosion of savings by wage and subsequent general inflation, or the path of deflation of housing assets will produce bankruptcies.
I'll just stick with being disadvantaged by my own lack of purchasing power. I think those in a similar position can afford to wait. I fear Anne may be slightly more disadvantaged by time.
Matt Brook, Dorchester, Dorset
Its seems pretty clear that the lenders are putting out a diet of spin.
After all, when the housing market "stagnates" as they put it, they are all demanding instant interest rate cuts.
Do you recall them asking for interest rate rises when the market was going up 20%+ per year? Of course not!
Their entire model is based on ever rising house prices, and the public perception that you can't go wrong with buying a house, whatever price you pay. As we've seen in the 90s, and again in the USA now, if something goes up way above fundamentals, its as sure to come down again. Its just a matter of how long it takes. Sharp crash, or years of decline. Take your pick.
Marcus, London, UK
and so are government inflation figures also to be believed right to the letter also?
food prices up, oil prices up, mortgages costs up, but apparently inflation is only 2%.
the costs of around two thirds of household expenditure are rising rapidly by over 10% yet the government omits these figures from their calculations.
can anyone honestly say that costs are rising at just 2% per year?
brian, london,
"This is approaching Banana Republic status," said Albert Edwards, global strategist for Société Générale....Years of macro-mismanagement, mirroring the errors we saw in Asia a decade ago, may have dragged the UK economy to the edge of a deep precipice...."
Who do I believe - Anne Ashworth or the global strategist for SG? You pays your money (lots of it if you want a property!) and you takes your choice!
Rob, Isle of Wight,
I'm one of those both predicting a crash and who also believes the property indices are 'lies' peddled by vested interests.
The banking sector has taken a huge one way bet on property by lending ever higher multiples against ever higher property prices.
In my area of the South East we had a considerable slow-down in the market in 2004/5 as the 5 interest rate rises from 3.5% to 4.75% started to bite.
Property sat on the market for months - more than a year in some cases - and asking prices dropped. A detached house for sale near me went on the market in Jan 2004 for £580k. It sold, in Jan 2005, for 475k. New flats on the market for 230k changed hands for 185k according to the Land Registry.
Was any of this reflected in the various house price indices? No! On the contrary. Prices were still rising according to the Nationwide and Halifax etc.
I want a house price crash for one reason only:
I don't want my children to spend their whole lives paying a huge mortgage - just for a house
Mike Wilson, Winchester,
It should be remembered that 86% of statistics are made up on the spur of the moment!
David Leslie, Perth, Scotland
Anne you seem rather flustered. Remember a stopped clock is right twice a day. Just because the "vocal minority" have so far been wrong does not mean to say that they will always be wrong. In fact the longer it continues that they are wrong the sooner they will be right.
Steven, Sevenoaks, Kent
Buy to Let Landlords are our saviors because they can rent to first time buyers that can't afford a property? I wonder who has been buying the properties to inflate FTB's out of the market. It's a bit like me buying all the cars in the UK and being lauded a hero for opening a car hire business...
Stu, Leeds, England
An entire generation is being forced aside, huge amount of debt racked up,while having no chance of getting on the property ladder. Is this the miracle economy, forcing this generation and others behind them into rented accomodation having no place called home, while others have taken advantage and talked up the market to live of the backs of all the generations behind them.
mat, london,
The bullish rhetoric of this article on the property market is just as partisan and myopic as anything it accuses us bears of.
No-one really doubts that prices were flat LAST MONTH which is what the bank surveys showed. We just need more than ONE MONTH'S worth of data to herald the arrival of a 'soft landing'. Especially after the carnage at the bernard Marcus property auction yesterday- many repossesed BTL properties going at 20-40% discount of previous sales price, in some cases below 2003 prices.
However im sure this is just a storm in a teacup and the spring bounce will sort evrything out. Anyone see panorama this week BTW....
offended bear, Norwhich,
You sound scared about house price falls... must be all those vested interests you have eh?
deerman, nottingham,