Has the ED housing market reached the bottom yet ( II )

[Jeremy]

Let's please stop posting low quality tabloid articles in the pretence that they have any value...

[benmorg]

Jeremy Wrote:

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> Let's please stop posting low quality tabloid

> articles in the pretence that they have any

> value...

FT? It might be boring as heck to read, but it isn't a tabloid.

[Jeremy]

>FT?

Cross-posting... was referring to the evening standard!

>but first-time buyers are now borrowing only about three times their salary

HSBC still willing to offer over 4 times when I checked last week.

[AcedOut]

Plenty still offering 4x+ multiples.

Rates will be exponentially higher for higher LTV's, since the lender has to cover the increased risk of the property value decreasing in the current market and the increased risk of default due to job losses, lower future income etc. A 75% LTV will hedge the lender against a 25% fall in the property price at purchase if the borrower defaults and repossession is required (less time to sell, fees, legal costs etc). In the current market, a 25% fall is still feasible, so any LTV loan above this must be able to protect against this -- the only other way is to increase the rate (or to lower the loan expiry, but this is less likely). This has always been the case, but in the current market, I'd expect a similar 75% and 90% LTV mortgage to have a fairly wide rate spread. So if the 75% LTV is offering a rate of 5.5%, I'd expect the 90% to have a rate of at least 7%.

[karter]

Hey Acedout,Jeremy,Ben

Northern Rock are offering expensive mortgages as they want their customers to go to other lenders so that NR can get money from that lender and pay back the govt. So far they have repaid 15billion out of a 26billions which is encouraging,in a way.

How long though until they get de-nationalised?

Any thoughts?

[benmorg]

karter Wrote:

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> How long though until they get de-nationalised?

>

> Any thoughts?

no idea, I'm afraid. NR have been extremely aggressive in pursuing repossessions since nationalization. Like rotweilers in fact, but then they've been under great pressure from the government to recapitalize and restore their balance sheets. The worry is that the newly nationalized banks could become equally merciless, but the government seems to be trying to pressure them into lending at 2007 levels again. very odd.

re 4x salary multiples still being available - that's not really significant. The average first-time buyer is only borrowing 3.2x salary (and that ratio is falling), so house prices are still falling.

In any case, mortgage availability is now old news. Recession and fear of unemployment are likely to soon become more significant drivers of house prices than mortgage rates.

[jayes]

A very prominent mortgage broker was telling me at the weekend that he has numerous NR clients saying they are not being offered a replacement mortgage at all....at the same time NR are contacting him telling him they are accepting NEW clients, no income details required at all, just as long as the client has a 30% deposit.

[AcedOut]

Job losses and lower incomes I agree will be the biggest factor in the near-medium term. Already today the job figures have been released, showing a large increase in unemployment.

I have a lot of friends that are in jobs that a year ago were seen as good, well paid positions. Right now, they are all fearing the worst.

It's very important that the Government's plan works. I am personally feeling rather positive out it, but it will have side-effects also, such as the weakening of the GBP against non-EU/USD currencies. This in turn will increase import costs quite considerably. As interest rates continue to get cut (which I believe is both required and expected), this will magnify the issue (although will improve native loan-paying affordability, such as mortgages). I predict the BoE rate will be 4% by year end.

If you've been following the second hand car market, you'll have noticed that prices have fallen significantly! Some of the top marques are now selling at crazy low prices. You can pick up a second hand Bentley Continental GT now for close to ?40k! There are a lot of people offloading their high-worth assets now. Fear is out there and even fear alone will drive down prices, regardless of the true state of the economy. Unfortunately this time around, fear is there for good reason and is only one of the factors.

Personally, being a first time property owner on a lifetime tracker mortgage, I'm not particularly concerned about house prices going lower. Assuming I can keep my job and maintain a similar income (a big assumption at the moment), my next property will be a trade-up. If prices come down uniformly over stock, then I'll be in a better position and it will actually cost me less in absolute terms.

The best thing people can do in a similar position is to hold on.

Oh and all the Government talk of there not being enough housing stock is absolute twaddle! The truth is that there are plenty of properties out there, but not necessarily enough for everyone to become an owner. Rental property is in abundance. It's wrong to think that everyone has a right to own their own property. It's these views that caused the problem over in the US in the first place! These people would never have been able to own their own property had the mortgage repayment not been made artificially cheap in the first few years.

In my view, a home doesn't necessarily mean ownership. Harsh perhaps, but that's my view.

(Disclaimer - these are all personal views and I may be completely wrong about all of them!)

[BARA]

i have a 5 year fixed rate mortgage with NR which expires in 2 years time (dec 2010) but I notice theat the early payback excesses carry over to 2011 so if 1 change mortgage provider - I will have to pay back over ?3000. Anyone else had this experience? the whole mortgage is for 25 years.

[AcedOut]

BARA - Why would you want to get out early if it's a 25y term mortgage? Are you looking to get on a lower rate?

[danrees]

No question prices are going down further. Two bed garden flat on my road is on the market for ?310k (down from about ?335k), and is smaller than the one I am currently renting for ?1250pm.

At that price, the rental yield would be 4.8%. I am either not paying enough rent (highly doubtful!!) or the flat is still overvalued as I think you are looking at about 6% interest on a first time buyer mortgage (if you can get one). Not to mention 10% deposit, i.e. ?30k in hard cash at that price.

I reckon we should be looking at prices of flats falling to about a 6.5% rental yield at least. This would imply a 2 bed garden flat to be about ?230k - on 3.5x multiplier of joint income, this implies joint income of ?65k.

Too bearish? Who knows...

[Jeremy]

Macroban also uses the rental yield method to deduce the value for a property... I'm not sure if it's that simple though.

[macroban]

It's certainly uncharted territory for borrow-to-let landlords.

(1) Negative real yields

(2) Subsidising tenants' rents

(3) Carrying forward debt on a depreciating asset

I have wondered how many of the East Dulwich borrow-to-let properties are "owned" by people who do not live in East Dulwich.

[Huguenot]

Couldn't agree more Macroban.

I hope Alan Dale's reading this after our spat a year ago?

[blinder999]

Huguenot Wrote:

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> Couldn't agree more Macroban.

>

> I hope Alan Dale's reading this after our spat a

> year ago?

ah happy days... oh, Alan's messages have been edited!

http://www.eastdulwichforum.co.uk/forum/read.php?5,9773,9863#msg-9863

[Keef]

LOL! Excellent work Alan, going back to a thread from March '07 on September 9th 2008 to save any possible come back. Like your style!

[Huguenot]

Oh my bl**dy good heavens jayzuz!!!

That was for real? Alan you really deleted all your posts?

Outrageous.

Just as well they're cached on Google. Anyone want me to copy and paste? ;-)

[jayes]

I don't recall what Alan Dale had written and would be interested Huguenot.

Please post.

[Huguenot]

I was only teasing Alan, jayes, far be it for me to expose a man's past misdeeds when he's already recanted.

Still, you wouldn't want him on your side in a scrap eh?

[ibilly99]

Some guide prices to auctions here.

http://www.auction.co.uk/residential/onlineCatalogue.asp?S=C&O=A&P=6

Real shocker is 479 Lordship Lane the modern wood decked apartments up near the BeefEater - ?90k !

Click on the online catalogue to view.

[EDOldie]

There are quite a few ED properties in there, some nicer than others, you shouldn't take too much notice of any guide prices they are always much lower than the reserves and there to whet the appetite. Although it could be different this time. I hope to go on Thursday and will report back on any ED lots if I get there.

[macroban]

I never could understand having a 125 year lease (479) on a 30-year design-life build.

[benmorg]

ibilly99 Wrote:

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> Some guide prices to auctions here.

>

> http://www.auction.co.uk/residential/onlineCatalog

> ue.asp?S=C&O=A&P=6

>

> Real shocker is 479 Lordship Lane the modern wood

> decked apartments up near the BeefEater - ?90k !

>

> Click on the online catalogue to view.

most recent comparable sales in that development were flat 2 (?235,000 in dec 2007) and flat 5 (?250,000 in dec 2007). The auction listing says 'by order of mortgagees', which means it's a repossession.

the moral of the story is never buy new build.

[benmorg]

EDOldie Wrote:

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> There are quite a few ED properties in there, some

> nicer than others, you shouldn't take too much

> notice of any guide prices they are always much

> lower than the reserves and there to whet the

> appetite. Although it could be different this

> time. I hope to go on Thursday and will report

> back on any ED lots if I get there.

.. though one of the houses on Colwell Road sold for well below the guide price at the last auction:

http://www.auction.co.uk/residential/LotDetails.asp?A=544&RQ=SR&MP=85&ID=544000120&S=L&O=A

some of these lots are clearly underpriced, e.g. lot 222, the 3-bed house on landcroft road with guide price of ?230,000. There have been queues of people waiting to view this house at weekends, all no doubt hoping to get a bargain. Chances are it will get bidded up a lot.

Am going to the auction myself, as I suspect will many other members of this forum. Though the bargains are likely to be a lot more tempting next year.

[EDOldie]

Well perhaps we could make a social occasion of it (the auction)? Quick forum drinks in the West End, drown our sorrows.