House prices go up – or down, say conflicting surveys

@Pee Bee

Thanks for the chance to exchange opinions on a level somewhat above that which normally takes place! One of the drawbacks of forums like this and many others is that people can hide behind their anonymous identities and make comments they never would face to face. All too often differing views degenerate into handbags at dawn.

For what it's worth, I am married, no kids and in my 30s. I work in the international NGO sector, so spent most of the last decade overseas. Many of my peers who stayed in the UK bought a house during this period while I did not due to being abroad.

I returned to the UK with a very significant pot of savings (one of the consequences of being in places where there is little to splash out on or tempt you to part with your cash!). My company organised some rental accommodation for our return, since I wasn't around to arrange that. Our initial plan was to get a feel for the area we are in (West Mids) and then buy.

At that time Q1 2008, every third house on our street was for sale. I knew prices in the UK had gone crazy, but seeing EA windows firsthand brought home that reality.

Seeing how little dent our (substantial) savings would make in the amount we would need to borrow to buy a two-bed terrace lead me to the conclusion that prices were in a bubble and would have to come down. To a certain extent that came to pass just six months later. However, 300 year low interest rates put a temporary halt in the decline and we've just pushed the decision to buy into the future.

Yes, people can say 'renting is dead money' but I'm still adding to my savings each month and house prices are trending down again. I am not in negative equity, like a lot of my peers I keep up with. Furthermore, I am not an accidental landlord like others I know who are discovering this is more of a commitment than they ever imagined and not a one way ticket to riches. We've also had the plumber out several times to fix things in the house at no extra cost to myself.

If house prices return to the formula they followed in the second half of the last century, we could soon buy with cash outright. To those who say 'small island' etc, then I'll point to the experiences in Japan. Another common point is all the pent up demand propping up prices. Well, how much pent-up supply is there from people holding out for higher prices that look less and less likely to materialise?

There's a lot of talk at the moment about banks not lending and this causing prices to weaken too. In my opinion banks have burnt their fingers lending more than three and a half times salary and are keen to return to that level. Things are just reverting to where they have been in the past - to a system as you say of small year on year rises. I would welcome this and I think in the long-run it would be very good for this country and society.

• 13 December 2010 14:50 PM

rantnrave: I appreciate your taking time out to discuss this further. You offer very well thought-out reasoning behind your opposition to current house prices. What is not clear, of course, is where you stand personally; whether you are one of many thousands who dearly want to own the roof over your own head; a concerned parent (like myself...) who simply wants this and future generations to be able to afford the same luxury that we enjoy; or one of those with 'other' agendas. Perhaps you would be good enough to enlighten me? I suppose it makes no real difference to the majority - I just like to be clear so that we are not talking at crioss purposes in future.

As someone who has been involved in property sales and acquisitions for over 30 years (thousands for others; only a four for myself - and only one at a time for personal use I hasten to add before I am hailed a BTL tyrant... ;0) ) I would have to say that the great majority of those involved in the industry would much prefer to see slow and steady, sustainable, house price growth rather than the boom:bust:stagnation cycles. The only ones who enjoy these periods are the chancers who set up in the halcyon days; reap the obvious benefits, and then disappear as soon as property sales start to stutter. Believe me - being an Estate Agent is not a pleasant occupation; and, for the great majority of those employed, not a lucrative one either!

Regular small increases would make life easier for everyone - unfortunately it will never happen, as homes are (wrongly) seen as savings accounts by the majority (who own them...) and this helps fuel the dramatic ups and downs. Then, of course, Agents become once more the bad boys, as they are first and foremost empowered work in the best interests of the vendor and to attain the best possible price in the marketplace for the owner's commodity. This leads to acrimony with those who have to pay through the nose for what they want - or those who are simply priced out of the market. The Agents - well they are simply doing their job!

Individuals from the likes of HPC coming onto this site making the comments they do are bound to receive responses - and then it starts to get personal and nasty. It is a pleasure to engage in real discussion and not simply engaging in handbags at 20 paces. Thank you. If more behaved like you, then there would be less acrimony I am sure.

• 13 December 2010 11:44 AM

I don't object to HPC, it's just their myopic Scot's accent that hacks me off.

Did you hear...the story about the...old...empty...barn? Well, there was nothing in it.

• 11 December 2010 10:21 AM

@PeeBee

There are undoubtedly BTL folk looking for opportunities in a falling market. However, I think a period of gradual but not spectacular price falls will deter some. Also, the previous BTL boom owes a lot to people releasing equity from rising prices. That will be less of a factor this time.

Amongst others who are calling for lower prices are parents (aka Bank of Mum and Dad) who are less willing to help their offspring with deposits. A significant amount of BOMAD help is a loan to the children, not a gift. As the economic situation remains unstable and affects their finances, they would rather see their children be able to get on the property ladder without help.

There are also some smart upsizers who realise if all property comes down by 20%, the nominal amount they would need to borrow to move to a bigger place would be less.

I honestly believe that price levels have been so high beyond all historical norms that it is now doing long-term damage to this country and society. Parents are frustrated to have their grown-up kids move back in with them. Married couples are delaying plans to start families. British firms are having to pay their workers extra to meet the high cost of living, which ultimately leads to outsourcing. Meanwhile money that banks could be lending to businesses is locked in economically unproductive bricks and mortar.

These are issues I feel passionate about and find that HPC is one of the only places where they get discussed.

I also think that if they are honest a lot of experienced EAs would like to see prices come down so transactions pick up.

With that point in mind, why the HPC and EAT sites are seen to confront each other mystifies me.

• 10 December 2010 21:55 PM

rantnrave: Why stop at four years? My understanding of the whole HPC movement is to bring down prices to 1936 levels... ;0)

Seriously - you seem to be one of the saner representatives of the movement. You must admit that there are a large proportion of militants that frequent your site who could have an argument in an empty room, and are just up for a row with someone?

Mores to the point - you surely realise that a fair proportion of those now shouting down prices are NOT strapped FTBs who desperately want to make their parents proud of their achievements and own the roof over their heads; but a set of cash-rich BTL individuals who will immediately snap up all of the cheaper homes to rent out to those who miss out on the short-term reductions.

You can tell 'em a mile off by what they say and how they say it...

• 10 December 2010 16:35 PM

Why separate out the HPC lot here? Why not extend it to include, say, all those who have bought a house in the last four years?

• 10 December 2010 14:40 PM

HPC people - I have made a profit of over £200k from my one office this year - I shall be having a glass of champagne with my turkey this year.

How did you do HPC mob? Or are you still at Uni?

• 10 December 2010 13:45 PM

House prices are clearly set to fall next year. You only have to look at the increasing poor state of international economics. Uncertainty is high, house prices overvalued, demand dead and family disposable income being depleted. Not looking good, house prices look like they will fall in 2011.

• 10 December 2010 13:08 PM

Pee Bee - you are of course right. All of us at HPC really don't have a clue what we are talking about.

The forecast for the housing market is looking great, never better in fact. People are enjoying above inflation pay rises on the back of solid economic growth and the banks are now lending at 150% LTV. Of course, the recent declines in energy prices and imminent cut in VAT will free up more disposable income that will help people get on or move up the property ladder. Students too are overjoyed at the boost they got from the government yesterday that will make it much easier to save up a deposit - if the banks even want one that is!

As sales transactions keep improving, all the HP indices are showing a positive trend in prices. Of course, these are real gains, because inflation is currently so low.

As Christmas approaches, I am sure the pubs will be full of partying EAs, enjoying the large bonuses they've had as a result of the increasing transaction levels they are seeing...

In short - planet, which one, are you on?

• 10 December 2010 11:46 AM

Yup - it's that time of the month again when all the HPC brigade get all agitated. Just like little wisened old witches, stirring their cauldrons and cackling "Doom...DOOM..." Just had a scan of their brilliant web forum (seeing as they'll all be doing exactly the same on here...) and I see that a thread posted yesterday about the cataclysmic ZERO POINT ONE PERCENT fall in houseprices sold during November (well, best part of eight percent of them in the country anyways...) has had an amazing 161 posts already! Now we have to give kudos where kudos is due here - they are, you must admit, 100% behind their cause. Their passion is admirable. If only we could stir up similar passion in the HUGE MAJORITY of the population who DON'T subscribe to the HPC rationale, then we'd all be happy bunnies wouldn't we?

Of course, not EVERY poster on HPC is a slavering militant, hell-bent on singlehandedly bringing house prices down by seven thousand percent in a week. Take this chappie, for example - his contribution to the forum was "So we end 2010. I'll soon have been on this site for three, very long, years. And STILL no effing crash! Yet people still keep telling me it will happen." Bless him/her/prefer-not-to-disclose. Obiously got caught up in the hype and now regrets not buyng a property in 2007, and being one eighth of the way through paying for it! Liked the idea at first - now rueing the very day he heard of HPC.

Don't we all... ;0)

• 10 December 2010 10:17 AM