House Prices, are we going to see another drop?

[TheAnimus]

http://news.bbc.co.uk/2/hi/business/8434534.stm

House prices in England and Wales rose for the sixth month in a row in November, the Land Registry says.
Prices rose another 0.9% last month, which means that prices were just 0.3% lower than a year ago.
The average home in England and Wales now costs £161,554 - £8,800 higher than at its recent low point in April.
Prices in London have been rising the fastest and are now 3.5% higher than year ago, although prices in Yorkshire and the Humber still 4.7% lower.

So house prices have climbed back up in London, the question is, are we going to see a double dip recession?

The FTSE is certainly very buoyant, this time last year it was clearly too low, but now... well some of you know I already chickened out with my index shares a while back and went back to cash.

What is funny, is how risk adverse I am in life, yet I've a large portion of my money in my zone 3 London flat, un-hedgeable (for plebs like me) and illiquid, its not a good investment when times are turbulent.

But prices are back up, London rental prices for most types of accommodation are up too, the only 'adjustment' seams to be in dingy places like East London, where people have woken up to the concept of edgy simply meaning blood + vom on the street.

Round where I live, and some of my friends in the commuter belt, prices have been rising steadily, after not dropping that much to begin with.

So what do you guys think? (Rave excluded, because we know what that harbinger of doom will be saying )

[abaxas]

The current issue is that we are in a worst state then when the recession started. All we've done is printed money to fill the gap.

As per usual, the Labour party has f'eck'ed us up the arse.

[Barrichello]

I went for stay the same option (at least in London) maybe even increase slightly. Also live in Zone 3, and prices seem to be back to crazy pre "crash" levels around here.

I do feel property is over valued, but i just do not see it changing with the supply and demand issues we have. Certainly feel for people who really want to buy at present. Was chatting to my folks the other day and even inflation adjusted really made me think when they said their house (also in London zone 3) cost all of £10k over 30 years ago

[TheAnimus]

Yes, I think what the government needs to do is make living outside London actually palatable.

That way the demand would be eased, without resorting to building on the green belt / very expensive commuter public transport infrastructure.

Address the reason why the square meterage of my bathroom is worth bathroom, is worth more than my mates entire flat in mankychester. Improve social mobility, and it might not be such a problem.

[malfunction]

I think they're likely to drop but I'm not convinced it will be anything dramatic. Can't see interest rates rising any time soon so I'd say it depends more on unemployment levels and confidence. Anyone else think it all sounds like a house of cards when it boils down to confidence?

(and yes, I am a pessimist)

[Lee H]

Nope I cannot see them dropping.

We're getting more and more people coming into the UK, especially London as they see it as a special magical place and our governments are not exactly building more and more housing are they?

As such it's a simple case of supply and demand. In areas like London your seeing a high price because it's seen as the place to live, yet in places outside the M25 you'll probably see pricing as it should be

It's the price you pay for wanting to live in the smog filled town called London

You can sit there all you want with your rose coloured glasses going on about how you broom cupboard is worth more than your mates, but I'd rather live up north where we all actually chat to our neighbours

[Phage]

Nope I cannot see them dropping.

We're getting more and more people coming into the UK, especially London as they see it as a special magical place and our governments are not exactly building more and more housing are they?

As such it's a simple case of supply and demand. In areas like London your seeing a high price because it's seen as the place to live, yet in places outside the M25 you'll probably see pricing as it should be

It's the price you pay for wanting to live in the smog filled town called London

You can sit there all you want with your rose coloured glasses going on about how you broom cupboard is worth more than your mates, but I'd rather live up north where we all actually chat to our neighbours

^^This. Although anywhere in commuting distance if London should be included.
Chat to the neighbours ? A retired paranoid and a chartered accountant pushing hard for partner...No thanks.

[Clunk]

You can sit there all you want with your rose coloured glasses going on about how you broom cupboard is worth more than your mates, but I'd rather live up north where we all actually chat to our neighbours

Yep, no shortage of pies and Whippets either, tha knows.

[pinocchio]

http://news.bbc.co.uk/2/hi/business/8434534.stm

So house prices have climbed back up in London, the question is, are we going to see a double dip recession?

The FTSE is certainly very buoyant, this time last year it was clearly too low, but now... well some of you know I already chickened out with my index shares a while back and went back to cash.

What is funny, is how risk adverse I am in life, yet I've a large portion of my money in my zone 3 London flat, un-hedgeable (for plebs like me) and illiquid, its not a good investment when times are turbulent.

But prices are back up, London rental prices for most types of accommodation are up too, the only 'adjustment' seams to be in dingy places like East London, where people have woken up to the concept of edgy simply meaning blood + vom on the street.

Round where I live, and some of my friends in the commuter belt, prices have been rising steadily, after not dropping that much to begin with.

So what do you guys think? (Rave excluded, because we know what that harbinger of doom will be saying )

Animus

There are two issues at play here driving both the Stock Market and Property Prices....

Interest Rates are currently at an artificially low level and while they continue to be prices will not fall substantially.

From June of next year the political landscape may be very different and the new Government will have to start dealing with the ridiculous debt that's been built up in the system. This will be by the triple whammy of increasing taxes, freezing pay and services for Government workers and slashing capital spending.

If (as seems likely IMHO) there's a hung parliament then the likelyhood of Britains Debt Rating being cut is increased.

As interest rates inevitably increase you'll see Buy to Let landlords who get their mortgages reset every 3-5 years struggling to either renew their existing mortgage or be able to move it to a new lender, this should increase the availability of properties and either keep prices static or lead to a further decrease.

The brooding problem in the commercial property sector will likely come to a head in 2011/2012.

I think there's a high probability of a double dip recession both here and in the States (where it seems to me that a large part of the population are living in denial). What's interesting in the States is in many States if someone walks away from their mortgage the lender CANNOT come after them for any shortfall when the property is sold, so banks instead are sitting on properties waiting for the market to recover rather then moving them through. New Starts (new builds) in the States are also very low.

While the artificially low interest rates continue it'll stave off dealing with the problem(s), however at some point interest rates will have to rise and the problems will actually have to be dealt with rather then put off.

Let's not forget it's only 30 years since Healey went to the IMF for £50m (yep it was only £50m), however if the Markets decide they don't want anymore UK Gilts the UK will be in a load of problems.

[abaxas]

As we are no longer self sufficient, our economy is controlled by other countries. If they come out of recession before us, they can choose to export inflation/deflation to us.

Ie. we are fine if others are fecked, fecked if not.

[TheAnimus]

I didn't bring the rates into it, because I just can't understand how we are keeping them so low, I think they need to go up sharply, as its unrealistically low rates (greenspan puts) which seam to be widely accepted as the dinner party answer to why we are in this mess.

But with the 9-0 vote last week, it just doesn't seam likely to change. Damnit, when should I fix?!

The problem we might find is that no one is willing to finance our debts that low, and the consequences for many swing voters of them rising could be drastic.

It would be interesting to see a pie chart style simplification of the factors effecting the decession for the BoE, because and I'm sure i'm not alone in this, i'm enjoying the low mortgage repayments right now. But what is going to happen with changing commodities such as oil? Refineries and the like haven't cleared the backlog of heavy apparently and are still mostly processing sweet lite for most things. I don't have a BBG any more so I really feal out of the loop on this things

[Perfectionist]

Treating homes as "investments" is totally the wrong way to go around things in the first place really anyway. Low house prices are a good thing for society, just not for bankers and property moguls - who are the leeches of humanity anyway.

http://facebook.com/group.php?v=info...d=224779294460

http://pricedout.org.uk

[TooNice]

There thing is that there are many wealthy people (cash buyers) in the world, and London remains an attractive place for many of those. So in prime areas in London, I do not think that drops will be lasting. Elsewhere, I am not sure, I'd expect that prices to adjust according to local supply/demand.

[TheAnimus]

Treating homes as "investments" is totally the wrong way to go around things in the first place really anyway. Low house prices are a good thing for society, just not for bankers and property moguls - who are the leeches of humanity anyway.

Ok, this is an interesting idea to me.

We have seen in capitalist countries, people starve less and are generally better housed.

We have also seen that it is governments social housing in the UK which has failed so badly to meet the needs and demands of the tenants compared to the private sector kind.

If we assume for a moment that property is not theft, we need the property moguls to provide rental properties, otherwise we rely on the government and we have seen since the second world war mass building that they often get those badly wrong, with few who have the choice opting to live in it.

Now if we think that they are leeches, we pretend they give nothing back, property owners who rent them i've found really do help, I for one am very greatful for the loverly lady who owned the flat I lived in previously, she was very good at letting me hang pictures, and fixed every serious issue promptly and quickly, compared to my last landlord, however she did cost more. (ah Market Forces at work!)

I have no complaints in giving her the money, because I received a great service in return.

Now its all very good and well to say they should be lower, but what do you do to enforce that?

The easiest solution, and most environmentally friendly one I've come up with, is mass execution, if we killed everyone who is under 6 foot in London, we should have a glut of property on the market, and no one would dare complain about their property value slumping, because they know they would be next against the wall. Also because of the correlation between height and IQ this is delightfully elitist.

Or we could have a little discussion like adults, rather than thinking like children, which I'm sorry to say is the logic demonstrated on those sites linked above.

Property is valuable, location, location, location n all often means its the biggest outlay in anyone's life, normally outstripping 'good' pension contributions. As such it is quite right to treat it as an investment so that someone knows they will have a good retirement. Plenty of people will rent their entire life, some very wealthy german friends of mine have their financial plans set to do just that, however you have to have expsoure to the property prices for that to be certain.

So, how should this be done? If we had the idea of property indexes as put forward by Shiller (who has a vested interest, but makes some very sound points) we would allow everday folk to have a few puts if they where worried about their place dropping in value, this would be a good idea for someone who lacks savings to prevent NE if they lost their income and could face foreclosure. Mortgages of 90% and the like, which are in some ways able to promote socail mobility could have these factored in transparently to the consumer.

This would help prevent bubbles, but also allow the everyday joe to have a simple saving account linked to house prices, if you could open an NW6 saver say, then you could make sure you are not going to be priced out completely. But remember the pricing is just an application of supply and demand, and in places like London its hard to increase the supply, all this would do is help people who are willing to dedicate more of their income than their peers have some social mobility, which I think is about as good solution as you can realistically get.

[12GaugeShotty]

Home loans seem to be up in the US now, at least from 1 year ago. Not sure if those are legit home purchases or just real estate companies buying up.

[SiM]

I believe this recession is over... on to the next bubble. The question is what will be then next ones to burst - distressed/high yield investments (possibly overvalued as huge amount of money has gone in over the last year - will only affect the wealthy people though), pension deficit, huge public debts, EM, energy/oil (not likely for a long time imo)... and when will it burst?

I reckon we will see something happen with EM (probably China) first and it will have an effect on the dollar