There was a sharp fall in transactions last month, the LSL Acadametrics house price survey reported this morning.
It said property transactions fell almost 6% in October, and that market activity was seizing up.
Meanwhile, Savills yesterday halved its forecasts for the UK housing market and described it as ‘only partially functioning’.
It forecast that transactions this year will end up on around 850,000, or just over half the normal pre-credit crunch annual level. It warned that transaction levels over the ten years to the end of 2016 could be seven million fewer than in the preceding ten years.
The firm’s director of residential research, Lucian Cook, said: “The Government’s austerity measures have affected household finances and home buyer confidence, so the real casualty of this housing market downturn has been transaction levels.
“The combination of historically low transaction levels and interest rates continue to protect nominal house prices – particularly as measured by the transactions-based indices.”
The firm yesterday cut its forecasts for the UK housing, as a result of the worsening economic outlook. It now believes that weak economic growth and constrained mortgage funding will ‘conspire against price growth’ over the next five years. It said that inflation, not sharp price falls, would suppress house prices.
While forecasting a 6% rise in UK house prices between 2012 and 2016, it said that with inflation, that equates to a loss of 11% in real terms.
Today’s Acadametrics report, which puts the average house price at £220,056 – far higher than the Land Registry, Halifax and Nationwide – said housing transactions had picked up in August and September, but slumped 5.7% last month on September’s levels.
It estimates that there were 56,000 property sales, 6% below last year’s levels, and representing 60% of the long-term average.
Acadametrics said it would normally have estimated sales levels to have picked up around 2.5% on September’s levels.
Comments
Puzzled..: You can't blame people for taking advantage of circumstances that, while they do not control, benefit them. You have no doubt in the past received benefit from the same or similar set of circumstances.
We disagree on much. Where we DO agree is that I wholeheartedly concur that the 'pricing out' of what could turn out to be an entire generation (of which I have two currently adrift in that particular boat without big enough paddles to touch the water...) is less than ideal. It is, frankly, wrong - but it was not caused by one person; or one group of people, but by a continually moving tide of economic circumstances which come and go. When that tide was coming in, buyers and vendors alike splashed around in it - no blame sitting on the shoulders of one camp in that respect. Now, the tide has turned. There are those who will do their damnest to push people under the surface; there are others who will do their best to keep them afloat. I just happen to be one of the latter, as everyone deserves representation, don't they?
So - as far as me being 'happy' with the current situation, no - I am far from it. But as I have said, my personal needs or feelings cannot get in the way of what I do. A defence lawyer may feel aggrieved if required to provide a service to a serial killer - but nevertheless they will provide that service to the best of their abilities and with conviction (excuse the pun...).
"(and, again, stuff renting and paying someone else's mortgage)" I dunno about you, but I was born and brought up in a council house. As was many of the people we grew up with, including my wife. The first thing I did was to aim higher than my parents. Sometimes I wonder why. It hasn't made me a "better person" - and CERTAINLY not a better person than they were. In many ways, I would have been substantially better off than I am today if I had followed in their footsteps - but I made my decision and now lay in my bed comfortable with that decision.
Going back to my "first and foremost a home; roof over ones head" remark, I stand 100% behind that. Both my lads have a roof over each of their (and their families') heads - it just so happens that they do not and may never own those roofs. I don't think any less of them, although I would give anything to change that because I simply believe in property ownership (which is why I work in the property industry, surprisingly not...). But it is the roof that matters when all comes down to all, Puzzled. Who owns it really does not matter one jot.
And of course, another thing we agree upon - that the economic woes of the nation and the world will outlive us all...
Sermon endeth! ;o)
@ Rick Deckard
You are wrong. The average LTV of mortgages written over that period was 57% according to the CML.
@PeeBee
Please arrange for a cheque for £1.25million to be sent to me - and "I will distribute the wealth" to the other owners
; )
PeeBee: "I have said on this site countless times that a house is, first and foremost, a home; a roof over ones head;"
Shame then that because a lot of people idiotically thought that low interest rates were here forever and that house prices would go up forever (why would anyone have ever taken on a Northern Rock 125% loan otherwise) - a whole generation is priced out of being able to own their own home. And, before you say it, stuff renting and paying someone else's mortgage for them.
PeeBee: "That doesn't mean though that I have to lie down and accept the demands of those who cannot now afford to buy as the only way forward and that everyone who IS fortunate enough to own a property must dance to their tune."
As long as you are happy with the current situation - and things are going to get slowly worse. Where will we be in 10 years if house prices do not fall and wages do not rise? Stagnation - low transactions? You ain't seen nothing yet.
Where will we be in 20 years? Because there is no easy answer to this. Men of 35 years of age who cannot afford to buy now - (and, again, stuff renting and paying someone else's mortgage) will be 55 years old. The chance to have their own home - their own refuge - a place where they can paint the walls black and pink if they fancy it - will have passed them by.
All because the bankers lent so much money into housing that people thought there was an eternal fountain of cheap debt to be had.
Something is going to have to give - or we are going to end up with a population where the half that want to give their kids a decent life won't have kids.
Who is going to pay our pensions then?
As it is by the time we get back into budget surplus - i.e. able to start repaying government debt (which is looking less likely by the day) - and is now likely to a minimum of 10 years away - the next generation, and the one after, will be paying the 1 trillion - maybe 2 (who's counting? no-one it seems) back all their lives - so their money will be paying tax to repay the debt - not paying out on huge mortgages.
As I said, things are not going back to normal any time soon. In fact I don't think I'll live to see that day.
"Not really I dont think and in addition if every homeowner was compensated for these lossesin what has been an utter sham in how both the banking and insurance companies have conducted themselves since 1999 as well as the labour government, it would pale into insignificance in the BILLIONS that have been poured into keep this country to keep it afloat"
Okay, Rick - I'll have a slice of that. Let's say I've 'lost' fifty grand on my house value from the top of the market - as, therefore, have the other 24 people in my street.
Please arrange for a cheque for £1.25million to be sent to me - and I will distribute the wealth to the other owners.
No - hang on - just wait until the total rises, as in your scheme of things values are going to continue to fall, are they not...?
@PB
"Virtually EVERY property bought since around 2003 would be in negative equity - and as a high proportion of these owners would have bought with high LTV mortgages, you are therefore wiping MILLIONS of properties - and therefore MILLIONS of would-be buyers for the next rung of the ladder - out of your equation in one fell swoop."
Not really I dont think and in addition if every homeowner was compensated for these lossesin what has been an utter sham in how both the banking and insurance companies have conducted themselves since 1999 as well as the labour government, it would pale into insignificance in the BILLIONS that have been poured into keep this country to keep it afloat. (aren't we at 2003 prices yet in some areas already? I think so)
Seriously the sooner people realise that someone has let the bath water out and.......the plug has been...... hmmm....lost the sooner you will understand that you are merely trying to keep the bath topped up with a tea spoon from the sink.
By the way you won't have to lie down and accept it - it will just happen - it is happening already and buyers are well aware of this and sitting tight - as I said the smart money exited well before its started to slip and have been hoovering up auctions props.
If you are over geared then you are just in the same boat as other people that have been misold pensions, endowments and every other bullsh** financial product in this country.
A small fall will be good long term - trust me it will happen :)
Puzzled, Rick, etc...
Back once again to point 'a)'. Both your responses revolve around the families you refer to having some equity in their present property, do they not? A 20%; 30% 'crash' will, in the great majority of cases, wipe out ANY equity that would have been gained if a property was bought at any time since the very early 2000s. Virtually EVERY property bought since around 2003 would be in negative equity - and as a high proportion of these owners would have bought with high LTV mortgages, you are therefore wiping MILLIONS of properties - and therefore MILLIONS of would-be buyers for the next rung of the ladder - out of your equation in one fell swoop.
Puzzled - I am under no misapprehension whatsoever of what the future may bring. Taxes and death - the only two absolute certs.
You say that my "...viewpoint is formed by the belief that what has happened over the last few years is a blip and normal service will be resumed shortly". Sorry - in the housing market there is NO 'normal'. It is a constant series of 'blips' as you refer to them. up; down; stagnant. Give me a 'normal' market - prices rising a couple of percent every year in line with wage inflation; properties selling in four weeks; buyer and seller both being happy with the outcome time after time - and beleive me, you will have not just one happy camper here, you will have MILLIONS of them!!
We all just ain't gonna live to see that day...
I am also the last person you need to pull off the back of the 'theres money in property' pony. I have said on this site countless times that a house is, first and foremost, a home; a roof over ones head; and should never be considered (or relied upon...) as anything else. That doesn't mean though that I have to lie down and accept the demands of those who cannot now afford to buy as the only way forward and that everyone who IS fortunate enough to own a property must dance to their tune.
I would suggest that I have more - and better - personal reasons than either of you for wanting property values to halve overnight. But MY personal wishes and circumstances do not come into this.
PeeBee: "a) The families that you say will benefit from price reductions would actually do exactly that - IF they did not lose value on their own properties thereby dramatically reducing/wiping out any equity they may have had to put towards a new, more expensive, purchase."
As someone else pointed out - as long as you don't go into negative equity - lower house prices benefit you - particularly in the important years when you are trying to raise a family and maybe need to move to a bigger house once or twice. The lower the prices, the less extra mortgage you have to take on.
Your, and to be fair nearly everyone else's, viewpoint is formed by the belief that what has happened over the last few years is a blip and normal service will be resumed shortly. This is incorrect. We are now at the end of a 50 year failed experiment of debt expansion. When the States came off the gold standard in 1971 the seeds, already planted, grew and grew - into the biggest mountain of debt the world has ever seen. We're at the end game now - quite what form this will take - who knows? One thing I do know is - taking on a massive extra mortgage now in the belief that in 25 year's time you will get it all back and more in the form of equity is, I am afraid, just wrong.
The world has changed - if you listen carefully you can hear some very clever people - bankers and economists - gently pointing this out. But, of course, the politicians with their pathetic 5 year horizon are keeping things low key.
Ireland, Greece, Spain, Italy, UK and the USA have massive debts - the only reason the whole deck of cards hasn't come tumbling down yet is the fact the US dollar is the world's reserve currency.
@PeeBee
Okay in response then to your answers
a) Families would benefit as it would bring down the gap between selling and buying i.e.
Sell at £250k buy at £400k means more borrowing or £150k -
(with a 20% reduction)
Sell at £200k buy at £320 means £130k additional borrowing - that saves £20k straight away - in effect the gap reduces as you are well aware
b) FTB's have the opportunity to buy ...... first time buyer properties.... traditional victorian terrace stock for a start - not over crowded substandard dry lined rubbish. This is now starting to happen in provincial towns with victorian stock comin onto the market at way below modern flats are listed at. FTO's who have bought at the hieght of the market are likely to be in negative equity if they have a high LTV mortgage. This however is a miniscule proportion of what makes up the UK housing market and is one part of the mechanism that is locked at present. In response to your comments that they simpy may not buy at all? Hasn't that already happened based on the level of transactions, glut of empty flats that are still available? My reckoning is that if you had bought a trad 2 up 2 down victorian terrace for £69k 9 months ago you could get the same house for £49k or less now. You only have to track RMV and Zoopla to see this happening and interests rates are at an all time low?
c) Most people reading this will know that its just simply not true. There is a marekt for lettings due to a migrant workforce and a shift in the perception of values in homeownership. Rents are higher now than borrowing the money however they simply cannot buy do to mortgage criteria set. BTL market would work again with correct yields as well as paying back the capital and interest.
d) Transaction levels need to increase. I dont care if the market crashes or goes up it makes no difference to me at all. However the mechanisms in place that control the market and allow for movement are locked at present. Thier are various contributing factors that make a market go up and down and I believe that they can be altered and controlled. Transactions are unhealthily low. If you think I am clutching at a straw then think of this. Think of all the business's that revolve and are reliant on the UK's housing market both directly and indirectly. This was the same in the early 90's (in fact if anything its worse now)
Most home owners are aware that the market is very very difficult and likely to get more so over the next year. Its up to a professional agent to educate the vendor that the property will sell for what it is worth in a given climate. Transactions levels are based on simple factors like affordability, availablity and market confidence. These do not seem to be buzz words in the current climate.
My reason is that I do not have a reason simpy that we need to stabilise the market and that it needs correction.
This will occur once the true corrections have occured in the eurozone and whilst the UK will feel a bit of pain, more to come, in the long term we will come out stronger. The top end of the market will slowly start to lose traction over the coming months, which will lead to price corrections in all areas not just pockets of wealth.
PS can you give a reason why prices should or will stay high that benefits the majority and not just those encumbered with huge interest only overgeared debt?
Rick Deckard:
In response to your list of 'benefits' that make up the gift you would like to bestow upon Estate agents and the public at large:
a) The families that you say will benefit from price reductions would actually do exactly that - IF they did not lose value on their own properties thereby dramatically reducing/wiping out any equity they may have had to put towards a new, more expensive, purchase.
b) Two part answer - Firstly, what properties are you suggesting there would be for FTBs to choose from? The vast majority of FTB properties are, rather surprisingly, occupied by FTOs who were once FTBs themselves, who would be unable to sell to the next intake of FTBs due to the reason explained above in point 'a)';
Secondly, due to the consequential reduction of availability, prices will be forced quickly upward as demand massively outstrips supply.
I feel compelled to ask the following question (two, actually...) related to your point 'b)'. Why, by the way, will FTBs suddenly stop "having to worry that they could lose 10% equity within 18 months"? Will they not simply think that what happened may well continue, and simply not buy at all?
c) If properties are affordable to all surely there will be no market for BTL? Why would anyone want to buy a property that no-one will rent as they can afford to buy instead?
d) Oh, come on - you CANNOT be serious!!
THERE is the sh!t and the Christmas paper, folks!
How can you possibly suggest that the need to keep an estate Agent in business is a valid reason for justifying a house price crash?? Improving transaction levels is not a valid issue and the mere suggestion of it is a desperate clutch at a straw.
It is the Agents problem to produce enough revenue to run their businesses profitably, not the vendor's. The vendor is simply the provider of a proportion of said revenue. Give a vendor a choice between a 20+% drop in the sale price of their home or a 5%, 6% - ten percent even sale fee - and I wager they will vote for the option that gives them the most money on completion.
So... come on, Rick - out with it. What is YOUR reason for wanting prices down?
Hi PeeBee I often read your post on here and find them usually very accurate.
However a price correction needs to take place infact it is now already in many places that aren't propped up by London "money" relocating to leafier suburbs.
The current situation is untenable for the majority of people in the UK.
1) FTB' s that buy now will soon find themselves in negative equity as 15% is not enough "cushion" to asborb what will be a crash of epic proportions once the "foreign" investment drys up, lots of shrewed people cashed in in the last part of the bubble and made an exit.
2) Average earnings is still unrealistic for many would be buyers to even enter the market ie they simply cannot obtain borrowing at the amount required to purchase
3) Many would be second time / third time purchasers are trapped from moving as they a) cannot justify spending another £100/150k for another bedroom b) are unsure about their job security c) cannot obtain the required borrowing due to being self employed
4) Some New Homes developments are being off loaded at substantial not advertised reductions for cash and quick exchange
5) Property is selling at auction readily and that is where the true wealth is ie liquidated cash and not borrowings
6) BTL does not work as the margins are not there for capital growth and the yields are unattractive for "true" investors
7) Repo's are not coming on as quick as last time due to extra ordinary low interest rates - this will not last forever
The slow reduction of house prices has allowed many to exit the market accurately prior to the crash. Prices are coming down where there is competing similar housing stock.
This is not "shit" wrapped in Christmas paper it is in fact a gift with much belated correction it would
a) Reduce the price difference from trading up which so many families have had to put off
b) Allow FTBS entry to the market without them having to worry that they could lose 10% equity within 18 months - not nice if you want to have a child or need to move for work or you have split up from your ex?
c) Allow BTL to work as it should of done and not by the persistant re-mortaging to keep re-financing more and more and more purchase's
d)Improve transaction levels for bricks and mortar EA business's in the UK (out of interest how many record and book shops do you see nowadays?) the turnover figures on some of the EA's on business for sale.com are unsustainable as a business
The only sector of the UK that would not benefit from the market correcting would be a BTL Landord (they don't call them investors anymore) who is over geared on interest only lending isn't it?
PS apologies if I dont reply on this thread I love this site but dont come on as much as I would like to
Peebee.
By balancing i meant between rentals and sales revenues.
Yes i am for restructuring (not always the same as reducing fees).... I did not say i am for reducing revenue for the agent the opposite in fact I want good agents to stay in business.
Re - Cutting costs - You know more about what it costs to run an agency than i do completely...but i do know how to establish which costs add value to the customer its called value mapping....look around any office (not just estate agents you will see lots of waste that can be eliminated or reduced).
Ok forgive my BULLS*** BINGO phrase
Lets look at yoyur more down to earth process
Lets call it the no shit sherlock process Dr Watson.
"Do the job...
Keep people happy...
Reap the benefits."
How do you demonstrate to the new first time vendor who walks into your office that you do just that....how do you demonstrate better value than A.Nother agent who charges the same or lower fee.??
Unhappy Chappy: "In my post i did not mention fees once
I did mention
1.Balancing income streams..."
Okay - so this thick Geordie reckons that:
in order to balance an income stream - then INCOME has to be taken into account. With me so far?
That INCOME is, I would suggest, comprised of various component parts dependent upon the range of disciplines the Agency is involved with. We still together on this?
And as we are talking about Residential Estate Agency here, then FEE INCOME is arguably one of the major contributors to the INCOME you refer to?
But, of course, you never mentioned it once - did you...?
"2. Cutting costs -If an agent pays me a consultancy fee i will tell him how to cut costs..... :0)
They should start with costs which do not add value to the client."
Hmmm. You apparently know more about managing the costs involved in running a successful Estate Agency branch or chain than I do. Because in sixteen years I never spent ONE PENNY that did not benefit the client in some way, shape or form.
And I've still got the scars from the budget meeting beatings to prove it...
"3. Out of the box thinking - What makes an agent different, better or worth more to the potential vendors".
Okay - yesterday's "No Sh!t, Sherlock" award went to Pbro Agent - you can have todays! ;oP
'Differentiation'... 'helicopter view'... 'blue sky thinking'... these 'MBA-speak' phrases and the countless hundreds of others - some of which I am ashamed to say I have brought to the table (LOOK - you made me do another one... grrrrr...! ) that the smart-@rSes spout day in:day out should be buried never to be seen or heard again.
Do the job...
Keep people happy...
Reap the benefits.
These may well be examples of thinking well and truly INSIDE the box - BUT THEY WORK FOR ME.
Now - over to you...
Peebee....
I agree with much of what you have said.in your post to Chris. Now on to what you have said to me.
In my post i did not mention fees once
I did mention
1.Balancing income streams - the reasons are fairly logical I would have thought.
2. Cutting costs -If an agent pays me a consultancy fee i will tell him how to cut costs..... :0)
They should start with costs which do not add value to the client.
3. Out of the box thinking - What makes an agent different, better or worth more to the potential vendors
I did not mention fees and our opinions on the subject are polarised.....although i understand where you are coming from and why. I doubt we will ever agree on this point but there are many available options......a different fee structure is one way but not the only way to differentiate.
Unhappy Chappy "if you are an agent balance your income streams cut your costs and think out of the box."
Come on then - where do you want this to go?
You want Agents to charge less (it is your aim to reduce fees), for the same (or higher, even...) standard of service. I am at a loss, therefore, as to where are the savings to be made.
Using YOUR desired business model: -
Income per property = less;
Cost to service property = static/increase;
Result = .....?
Looks like you need to enlighten me, Sir. Remember I am but a thick Geordie, so make it bite-size chunks, please... ;o)
Chris Clarke: "I am an agent and a member of the general public."
We are ALL members of the second club, of course. I was ALSO a member of the first - but not for the last four or so years. I believe I can still talk the talk, however...
"20years behind a desk has proved to me that the average man in the street is as near to being an idiot as makes no difference."
Hmmm... Chris - that is a phrase that Mr Gerald Ratner would be proud of you for, no doubt...
What continues to astonish me on this site is how little thought certain individuals give to what they say and who may be reading their words. You have just questioned the intelligence of the bulk of your customer base, have you not - and then told them what your name is (...although of course you could be posting with an alias...) and which area you work in!
If, however, they are, as you suggest, less than bright, then maybe they won't put two and two together. I only hope for your sake that this is the case and your post does not cost you business, Sir.
I would also question your meaning. Please expand on 'the average' person and why he/she is, in your opinion, a rung or two down the evolutionary ladder from, say, yourself?
Whether I am "100% right" (which I doubt very much...) or not is of no issue here - it is simply my opinion and therefore fodder for discussion, as are your comments and opinions.
For which, I would respectfully suggest, you have some explaining to do...
So what this points to (as i have said many times) at the moment there is and has been very little evidence to suggest house prices will rise and very little to suggest they will fall.
The key at the moment is affordability and availbility of credit. These do not look set to improve.
As RPI/CPI Inflation is above wage Inflation and less credit is available less people will be able to become first time buyers. This is because there ability to save for a deposit is diminished. If interest rates increase this will only push more vendors into distressed sales adding more downward pressure on prices.
There will be a short term to mid term increase in rental prices but this will level off when the affordability levels are again breached....net result low volume in house sales....if you are an agent balance your income streams cut your costs and think out of the box.
I'm not convinced that the HPCers will have the last laugh here. There's little sign of a pick up in wage inflation - numerous UK workers are in competition with their counterparts in China as never before. This country's wages would need to fall, not rise, for us to compete with China (wages in China may catch-up with those in the UK, and/or or they'll allow their currency to appreciate - neither seems likely in the immediate future though).
The Bank of England has however said that if wage rises do pick up above RPI inflation, then interest rates would rise. Big if though in my opinion.
Good to see the effect RPI is having on house prices being raised in an article and by another poster though. I've mentioned it a few times in the past and it has been met even more scorn and derision than usual...
Hey PeeBee
Of course, you are 100% right.
I am an agent and a member of the general public.
20years behind a desk has proved to me that the average man in the street is as near to being an idiot as makes no difference.
That's why gambling is big business and their is a national lottery.
You have more chance of being struck by lightning twice than winning, but people spend small fortunes playing every week.
That said, all I was trying to point out is that VALUES are falling, even if prices are just about stable (in the South East at least).
I have not seen one of Mr Deckard's posts before, so forgive me for supporting the "dark side".
£44K loss when adjusted for inflation ; )
Chris Clarke: "Rick Deckard has a good point"
Rick Deckard has an agenda. He wraps sh!t up in Christmas paper by saying that an almighty crash will give Agents something to sell and you all start thanking him for the lovely present...
From another perspective...
Jo Public buys a house in 2007. Pays £200k. Sells it in 2011 @ £160k. Result - £40k loss.
Same scenario - this time Jo Public decides not to lose money on the property by selling in 2011, but waits until 2015 (...just for example - feel free to stick your own year in if it floats your boat...), when prices have returned to levels comparable to when Jo bought in 2007. Sells in 2015 for £200k. Result - NO LOSS. Not to Jo Public there ain't...
'Real'...'nominal'... 'seasonally adjusted...' (there you go, rant! ;o) ) - NONE of these economic buzz-words matter to Jo Public.
And just a reminder that it is people like JO PUBLIC who keep Estate Agents in jobs - not Rick Deckard and a few HPCers...
Blimey, forgive my stream of consciousness there, that was a bit of a ramble.
That said, it is a repeat of the early 70's where inflation was (for a year) the best part of 20%.
House prices were rock steady.
Oh for a return of the Mars Bar Index...
GUYS - Rick Deckard has a good point, and it one that I have raised a couple of times, but it gets missed because the maths is too complicated.
INFLATION is bring the wishes of the HPCers true.
Prices are crashing, you just can't see it.
When wages begin to rise again, property prices will be more or less the same, but lending criteria will still be hard.
In the end, an inflation rate of 5-6% gives a REAL TERMS price reduction of 25% in about 4 years.
We have already watched some of this happen.
VALUES are crashing, RIGHT NOW, but prices are completely stable.
How weird is that?
Unlike at the present time, there was a fair bit of wage inflation that assisted those who bought a house in previous decades. That eased the debt burden they were carrying (which would have been a far lower multiple of their salary than today's FTBers are facing, but that's a separate point)
If I won the lottery tonight (unlikely, since I don't buy a ticket), I would not invest a single penny of it in the current UK housing market. In the future, I would use it to buy a decent gaff, for sure. Not now though.
rant: "In such a scenario, that ordinary person would have been gifted significant quantities of unearned equity courtesy of a credit bubble that most certainly did not come about through their hard work."
Mate - TWO things happened to create this 'unearned equity' you describe.
First (and in most instances, foremost...) - they provided a roof over their and their family's heads. In order to do so, they paid through the nose for a period of usually 25 years - maybe more, at a cost of well over twice the original amount involved. They will no doubt also carry out significant improvements to the property during this timescale which will add to its end value, but nevertheless have required the initial capital outlay and future upkeep or renewal costs to be met.
I trust you don't disagree at this point?
They also took what I suppose you couls call "a gamble" that the property would not be worth tuppence at the end of the term. In the great majority of cases that I have ever come across, the gamble paid off (as it will continue to do so in the future, no doubt).
Still with me?
So - lets look at the facts again.
In order to 'win' what you describe as "unearned equity", you need to pay a good deal of it into the scheme over the course of the scheme's lifetime - WITHOUT GUARANTEE OF A RETURN.
Someone can nip into ASDA this afternoon, give two quid to the nice person doling out Lottery tickets, and theoretically be var nigh sixty million better off tomorrow. But THAT seemingly doesn't cause you a problem you feel compelled to spend hours of your free time trying to turn the situation on it's @r$e...
I've gotta say, although I enjoy our chats I really feel like giving you a fatherly shake to see if you can look at things from a different perspective.
The trouble with that, of course, is that no other perspective will suit your argument.
We will simply have to continue as we are... ;o)
Last point - a question if I may. Suppose YOU were the lucky 8ugg£r who dropped the 'big one' tonight.
Which house would you have bought by this time tomorrow, matey...?
"And the ordinary person who has worked and saved for years & years to be able to buy and eventually own their own house to help provide for their life when they are older are cast aside in your brave new world?"
Why would they be cast aside.....Please explain?
In such a scenario, that ordinary person would have been gifted significant quantities of unearned equity courtesy of a credit bubble that most certainly did not come about through their hard work.
"The sooner this market is allowed to collapse properly and re-cycle the better for everyone. FTB's will be able to buy, BTL will then be a viable investment with a valid return and EA's will see transactions return to sustainable levels across the country".
And the ordinary person who has worked and saved for years & years to be able to buy and eventually own their own house to help provide for their life when they are older are cast aside in your brave new world?
P.S. House price inflation does not have to enter into it)
Someone called Ed Mead of ARLA is quoted as saying: "Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision."
What a load of bolleaux. Someone remortgages their house to get at the bit of equity in it and takes out a BTL mortgage to buy another property. House prices go up a bit so they remortgage their property again and the BTL property and buy 2 more properties. House prices go up again so they remortgage all 4 properties and buy 4 more.
And people like Inside Track used to promote this nonsense - everyone should have a 50 property portfolio. Of course it escaped their little brains that, if that were true, only 1 person in 50 could own property.
In the meantime all this remortgaging makes banks come up with more and more imaginative ways of lending the same money over and over again (Mortgage Backed Securities and Collateralized Debt Obligations to name but two) and, before you know it, the westerd world has taken on enough debt that it will be paid off by our grandchildren and a whole generation has been priced out of housing.
This nonsense needs to stop.
An EA comments "“Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision."
Seriously the modern day BTL landlord with equity erosion on an interest only mortgage is simply doing the job of a local council. This not an investment.
Their is a two tier market in this country one is in Central London working as a foreign money wealth extraction mechanism and bears absolutley no resemblence to the rest of the UK. The other part is the rest of the UK where average wages still fall way off ave house prices.
No one in thier right mind would buy in this market as they will lose their paltry hard earned, borrowed, begged (I cant say stolen can I? deposit as soon as they walk in the door.
The sooner this market is allowed to collapse properly and re-cycle the better for everyone. FTB's will be able to buy, BTL will then be a viable investment with a valid return and EA's will see transactions return to sustainable levels across the country.
So called industry experts fail time and time again to understand the contributing factors and intricacies in this countries property driven economy as well as the different agendas on the table. This market is log overdue a substantial correction to enable any form or normality and confidence to return.
"......so the real casualty of this housing market downturn has been transaction levels".
Understandably this is also the real gripe that EA's have not necessarilly prices because the difference in commission on between (say) £190,000 and (say) £210,000 is managable?
Ah Ha.... No, No, No, No, - Yes! ;>)
Doomed I tell ye! Dooooomed!
BTW, do you like me in contact lenses? They're domed.
European Union (EU) plans to regulate Britain’s booming buy-to-let sector could restrict mortgage availability, force landlords to sell and cause house prices to fall.
Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.
Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.
That could prevent lenders and borrowers – including existing BTL landlords seeking to remortgage at the end of fixed deals – from taking anticipated rental income into account when assessing how much mortgage is affordable.
Instead, EU proposals would bring Britain into line with Continental practice and force lenders to assess BTL in the same way as mortgage applications by owner occupiers on their prime residence; that is, the main criterion would be the borrower’s earnings.
Paul Broadhead, head of mortgage policy at the BSA, said: “If rental income is excluded from consideration when underwriting BTL then the availability of new borrowing could cease fairly rapidly. In addition, those with existing BTL loans may well be unable to refinance.
“Over time this could lead to a reduction in private rented sector properties. At the extreme, current BTL borrowers may be forced to sell their property portfolios which would have obvious implications for existing tenants and the housing market as a whole.”
That’s no exaggeration, given the growing importance of private rented accommodation in Britain’s housing market. While the proportion of home ownership is falling, the number of properties offered for rent has increased by more than 1m since 2005.
BTL has delivered income and capital gains despite dismal returns from bank and building society deposits and shocking stock market setbacks. About three quarters of privately rented homes are owned by husbands and wives or individual landlords – as opposed to institutional investors – and BTL mortgages back more than a third of these properties.
Mr Broadhead said: “It would be totally inappropriate to bring this lending under the auspices of a proposed residential mortgage regulatory regime. Any attempt to do so could have a detrimental impact on the ability of lenders to provide BTL products, and the consequent ability of investors to provide properties for rent.”
David Hollingworth of London & Country Mortgages agreed: “The EU proposals could extend to BTL a similar regime as owner occupier mortgages and lead to tighter criteria which mean landlords face a very different process when they come to the end of their deal.”
Ed Mead of the Association of Residential Letting Agents (ARLA) and Douglas & Gordon estate agents, pointed out: “Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision.
“This must be viewed with caution. Our Government ought to be wary of taking a lead from the EU here and actually encourage informed investment into this sector with tax breaks, not lumping BTL in with those residential purchasers who need all the protection they can get.”
Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”
http://blogs.telegraph.co.uk/finance/ianmcowie/100013206/new-eu-mortgage-rules-could-hit-house-prices/