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

[Josh]

I'm not convinced the top end of the market will bounce back first this time. The banking industry and the city have been hit really hard in the current recession. We also have a crash in oil prices, which has undermined the market in uber-prime central London, where most of the purchases are funded by petrodollars.

Also, if you look at rental yields as a guide to value, they tend to be better in cheaper parts of the market that haven't become as overinflated by the credit boom. House prices to salary ratios are lower in poor parts of London too. This means that cheaper bits of London are going to tempt BTL investors before more expensive areas, and affordability will return to normal in poorer areas too.

I'd guess East Dulwich is somewhere in the middle between posh London's excessive prices and grimy undesirable London, so I think East Dulwich will put in an average performance.

[Jeremy]

Also bear in mind that when the crash is over, there will be a large number of first time buyers, who have all been saving their cash, waiting for the right time to buy. So yeah, I guess the lower end of the market could be the first to bounce back!

[Josh]

Jeremy Wrote:

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> Also bear in mind that when the crash is over,

> there will be a large number of first time buyers,

> who have all been saving their cash, waiting for

> the right time to buy. So yeah, I guess the lower

> end of the market could be the first to bounce

> back!

they may well have been saving their cash, but from now on banks will be keeping salary multiples to less than 3.5 and insisting on deposits of 20% (or making mortgages cripplingly expensive at higher loan-to-value ratios) until the risks to banks of further house price falls have passed. This means the market won't truly recover until house prices revert to historic salary multiples and first-time buyers without heaps of cash can afford to buy again.

[Jeremy]

Yes, at the moment you'll find it hard to get any mortgage if you don't have a 20% deposit. But you can still get loans for around 4x salary, and at 5% fixed for 2 or 3 years... it's not all that bad really. I know several potential first time buyers who are wondering whether to take the plunge this year.

[Josh]

I'm sure there are buyers around. It's a myth that nobody buys in a crash. In reality people keep buying all the way through it, always hoping they've timed the bottom about right. It's also a myth that nobody can sell - selling is easy if you're prepared to undercut the competition.

A lot of people seem to be saying that it's a bad time to sell, but I think the opposite might be true. House prices are still much higher than historical norms when measured against salaries or rents. They're still well above fair value, so anyone selling now can still lock in profit from the boom. But i think the psychological pain of taking a hit on last year's values is too much for most sellers, which is probably why only those who feel forced to sell will do so. In the fullness of time, I think today's forced sellers will thank their lucky stars they got out so near the peak.

[macroban]

Don't worry. It's over.

[????]

Sun had the same lets make a story out of our inability to even vaguely understand stats headline too

[Siduhe]

Alternatively....

http://kenfrost.0catch.com/deadcat.JPG

Not saying one or the other view is right - but some of the reporting is far from balanced.

[Kingsbury David]

Just for the picture over the river, our house prices have not dropped. Not a pound or Euro. Not in the cheaper areas or the posh ones. Our newspaper ads still plug 3 bed semis in grey suburbs for ?330,000 just the same as at the peak, so presumably some remote places have dropped a lot to change the average but not anywhere popular. I presume Dulwich is the same although when I was looking 15 years ago I found it to be the best value area of all so probably relatively still is. If you drive a few miles to Blackheath it's back to the maximum but I looked all over London and only ended up back here as Putney proved just beyond my means after losing a property at the last minute there. Blackheath however was way off the radar.

With all the tricks the government are pulling (sorry, the bank of England is independent isn't it) they are stringing the boom out endlessly by artificially lowering interest payments (that can't last 25 years can it?) and shovelling our cash to mortgage firms supposedly to lend to buyers but being spent on bonuses. The conditions that fuelled the credit/debt mountain are now being increased to deepen the hole even further, which explains why there has been no price correction north of the river at least.

[SteveT]

Why isn't this thread in the property room, come on admin wake up and earn your corn.

[SeanMacGabhann]

Steve - the threads are about prices in ED - not about renting or selling individual properties

[Administrator]

SteveT

If you read the head post in the Residential section it reads "This section is purely a listing of properties, if you want to discuss or get advice on local properties please use an alternative relevant section."

If you have an issue with that please contact me directly and do not take a thread off topic. Rude man.

[lard]

Kingsbury David Wrote:

-------------------------------------------------------

> Just for the picture over the river, our house

> prices have not dropped. Not a pound or Euro. Not

> in the cheaper areas or the posh ones. Our

> newspaper ads still plug 3 bed semis in grey

> suburbs for ?330,000 just the same as at the peak,

> so presumably some remote places have dropped a

> lot to change the average but not anywhere

> popular. I presume Dulwich is the same although

> when I was looking 15 years ago I found it to be

> the best value area of all so probably relatively

> still is. If you drive a few miles to Blackheath

> it's back to the maximum but I looked all over

> London and only ended up back here as Putney

> proved just beyond my means after losing a

> property at the last minute there. Blackheath

> however was way off the radar.

>

> With all the tricks the government are pulling

> (sorry, the bank of England is independent isn't

> it) they are stringing the boom out endlessly by

> artificially lowering interest payments (that

> can't last 25 years can it?) and shovelling our

> cash to mortgage firms supposedly to lend to

> buyers but being spent on bonuses. The conditions

> that fuelled the credit/debt mountain are now

> being increased to deepen the hole even further,

> which explains why there has been no price

> correction north of the river at least.

Newspaper ads are just ads. Just because they don't appear to drop their price, doesn't mean that actual selling prices aren't dropping. You highlight how people can easily be misled by sales techniques.

Similarly, how can they not have dropped in Euro terms when the Euro is so much stronger than last year?! That is nonsense.

Every index points that actual sale prices are dropping and have dropped for high end, low end, popular, rough, north, south, houses, flats etc

[benmorg]

Kingsbury David Wrote:

-------------------------------------------------------

> Just for the picture over the river, our house

> prices have not dropped. Not a pound or Euro. Not

> in the cheaper areas or the posh ones. Our

> newspaper ads still plug 3 bed semis in grey

> suburbs for ?330,000 just the same as at the peak,

> so presumably some remote places have dropped a

> lot to change the average but not anywhere

> popular. I presume Dulwich is the same although

> when I was looking 15 years ago I found it to be

> the best value area of all so probably relatively

> still is. If you drive a few miles to Blackheath

> it's back to the maximum but I looked all over

> London and only ended up back here as Putney

> proved just beyond my means after losing a

> property at the last minute there. Blackheath

> however was way off the radar.

>

> With all the tricks the government are pulling

> (sorry, the bank of England is independent isn't

> it) they are stringing the boom out endlessly by

> artificially lowering interest payments (that

> can't last 25 years can it?) and shovelling our

> cash to mortgage firms supposedly to lend to

> buyers but being spent on bonuses. The conditions

> that fuelled the credit/debt mountain are now

> being increased to deepen the hole even further,

> which explains why there has been no price

> correction north of the river at least.

You're probably just looking at asking prices, which paint a misleading picture. They are well above the level at which deals are actually being struck, and of course those properties that do sell quickly disappear from the listings - you moostly see ads for the stuff that's got stuck on the market because it's overpriced.

[tommy]

Anyone with equity in E.D looking to take advantage of low interest rates and "trading up" locally ?

[????]

Tommy the problem is you really need a lot, and I mean a lot, of equity plus huge job security to trade up (let alone the factor that there is almost no movement in the market anyway and mortgages are toughto get) especialy when you add in all fees/stampduty etc...to illustrate...."a falling market gives you a great opportunity to trade up" ..mmm maybe

Your place ?500,000 at the peak lets say 20% fall in prices...= lost ?100,000

Fancy a house that was ?750,000 at peak...lost = ?150,000

stamp duty ?40ish + fees etc....... eats up your ?50K 'gain' and you've probably had to increase your mortgage in a very wobbly job market

Really, you have to be doubling your house value or be in the ?1m+ value bracket to really gain from trading up at the mo.....Clearly if you were planning on moving anyway, havejob security and a lot of equity then you're going to be getting a bit more bang for your buck

[benmorg]

tommy Wrote:

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> Anyone with equity in E.D looking to take

> advantage of low interest rates and "trading up"

> locally ?

It's very difficult to trade up at the momen%t because most people have declining equity as a result of falling prices, and you need minimum 20% equity to get a decent mortgage deal. E.g. someone who had 40% equity at peak now only has 20% equity, so can't get a mortgage on anything more expensive than their current house. The mortgage drought has pretty much put a complete stop to trading up for all but the richest or those who've owned their home for many years and consequently have a tiny loan to value ratio or own outright.

[macroban]

> someone who had 40% equity at peak now only has 20% equity

25%?

[benmorg]

macroban Wrote:

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> > someone who had 40% equity at peak now only has

> 20% equity

>

> 25%?

if prices have fallen 20%, then 40% equity becomes 25% equity. If prices have fallen 25%, 40% equity becomes 20% equity. So it depends on how much prices have fallen.

Moving can be quite expensive. When you factor in all the costs, particularly stamp duty, then trading up is even harder. Add to that the difficulty of completing a chain at the moment. The few people who are trading up at the moment are probably those who sold a while ago and have been waiting in rented homes for prices to fall.

Speaking of trading up, I wonder if people tend to trade out of east dulwich rather than staying here and trading up?

[tommy]

Hmm, good points on trading up. Yes, it depends on lots of factors as mentioned - esp I feel the completion of a chain at the moment

I think selling a property that has been improved and buying a larger property in need of work might still be worthwhile as a long term project, esp if you can fix your mortgage now for a few years

[Mick Mac]

With experience of buying a property in need of work - I would not recommend this as an easy option, or even a money saving one. There is a huge hassle factor and in terms of bargaining with builders, there is only one winner.

Buy a house needing work if you want to put your own stamp on it by all means, but I don't think you will necessarily enjoy the experience, although the finished product will hopefully be worthwhile, and I'd say you should only do it if you intend to stay in the property long term, and have a big budget kept back from the purchase, thus avoiding stress if things go over budget.

Some good points made on trading up - certainly quantifies the cost of doing so which is very interesting.

[benmorg]

Mick Mac Wrote:

-------------------------------------------------------

> With experience of buying a property in need of

> work - I would not recommend this as an easy

> option, or even a money saving one. There is a

> huge hassle factor and in terms of bargaining with

> builders, there is only one winner.

> Buy a house needing work if you want to put your

> own stamp on it by all means, but I don't think

> you will necessarily enjoy the experience,

> although the finished product will hopefully be

> worthwhile, and I'd say you should only do it if

> you intend to stay in the property long term, and

> have a big budget kept back from the purchase,

> thus avoiding stress if things go over budget.

> Some good points made on trading up - certainly

> quantifies the cost of doing so which is very

> interesting.

absolutely. The days of making a sarah-beaney-style quick profit are well and truly over - thank god. Perhaps we'll go back to thinking of houses simply as places to live rather than cash machines.

[SteveT]

Couldn't agree more benmorg.

Forget the equity, and try to spend a joyful life within it.

[Brendan]

What? A society not based on personal greed? Good god man! Next thing people will start being respectful to each other.

[????]

I will miss the minxy Sarah not being on the box tho.......