In not understanding why house prices aren't plummeting?

[Hammy02]

I don't understand how house prices seem to be staying static/just dropping a few percent. With the amount of uncertainty about jobs, people having less disposable income and the end to 100% mortgages, how can people afford to get onto the housing ladder? And yes-I am one of the bitter people who wishes they'd bought 15 years ago when prices were at a sensible level!

We have worked out that we would have to save for 5 years to get a 10% deposit on a house. So that is what we are doing.

Hammy02 I do sometimes wish we had bought when we were younger but we were doing other things, working abroad mainly and we were never in a position to buy.

the north is going to bear the brunt of the cuts and isn't part of an international property market where foreign buyers are making the most of the weak pound, the way the south is.

I do feel for first time buyers, house prices are so out of step with salaries it's amazing how any first time buyer can save enough for a depost and pay a mortgage.

Dh bought his first house at 20 and I bought mine at 21, lots of our friends were studying or travelling. I have a 26 year old brother still living at home with my parents, that would have driven me mad but so many people can't afford to leave home.

Alouiseq exactly, how can people - like me and DH or anyone else - on low(ish) salaries get a house. I am a p/t teacher so not on a crap salary but we need at least £20,000 as a deposit if not more.

SethStarkadder - also there is quite a clear divide in the number of personal insolvencies at the moment, with the north having far more than the south. Inevitably some of those bankruptcies lead to properties being sold by the trustee.

I often see people quoting the fact that an average house should be no more than 3 times the average salary. That is OK in theory but are we saying that is correct country wide? A 3 bed house in Central London is the same as a 3 bed house in the middle of nowhere? I think society has changed from when I first brought a 1 bed flat with a boyfriend. There is more expectation now, if you are a young family, SAHM and partner on average wage there is really no way they will ever be able to afford a three bed house in London. I think we need to show that renting is equal in status to having your own place. I do not see house prices especially for the larger properties in nice areas ever dropping dramatically.

surely they will have to?

If no one can afford to buy a £500K home, then if people need to sell, they will have no choice but to sell at a lower value.

"A house is only worth what someone is prepared to pay for it"...isn't that the saying?

Near me, I'm pretty sure it's the fact that there are a lot for sale, therefore competition for those who can afford to buy is quite steep, hence prices are falling.

Those with overinflated asking prices aren't selling their houses.

If houses were sold at auction or on a sealed bid basis I think the system would reflect the "market".

So many House price indexes are based on the asking price rather than the achieved price which skews peoples perceptions dreadfully.

We also see price stalls around stamp duty thresholds. Houses will either be for sale for £249,950 or £280,000. If stamp duty was abolished I think we would see a clearer gradient in prices.

The "3x salary" thing is a relic of the 80s and before, when prices reflected roughly that ratio and you could only get a mortgage for that ratio. Now, they are far more and you can, if you really want to, get a mortgage for several times your salary.

get rid of stamp duty supply would increase enormously and prices would drop.

Government won't do it as they need the tax revenue and house prices falling leads is very unpopular with the voters.

Unless you are near a large DWP/government offices area - NE/NW/Leeds then prices aren't going to drop that much.

Phil & Kirsty type shows and their property porn really don't help, implying that vast swathes of the country still have £450K to spend on a 6-bedroom Oxfordshire cottage in the catchment for a good school.

People still have to move though, through relocation or whatever. It is just a slower process than the heady days of location, location, location.

"get rid of stamp duty supply would increase enormously and prices would drop."

Sorry - how do you make that out? I don't really understand why stamp duty would affect supply. Stamp duty, after all, is paid by the buyer. An abolition would do more to encourage first time buyers than sellers, so I can't see how it would affect supply.

As for abolishing it, I can't see the government abolishing any sources of revenue at the moment! They would be rightly slated IMO.

But I agree that the stamp duty thresholds are weird and have a bizarre bottleneck effect on the market. I'd rather see the duty rate applied to the proportion of the price over the threshold, so there isn't the same stalling effect as you approach each threshold.

But some of us do not expect too much. We are a family of four currently renting a small Victorian 2 bed house. I know that if we ever get to buy we will never be able to buy a house like this. Not in the south west which is where we live.

I agree that renting should not be seen as 'dead money' a phrase my mother loves to use every opportunity she can. I DO want to buy a house at some point - or a flat - but renting the house that we do has enabled us to live in an area that we want to live in, close to both our workplaces and an excellent school.

I've heard people say prices are going up, prices are going down, I don't reckon they will change much in the next couple of years.

Abolishing Stamp duty would increase movement, not necessarily supply. It would be fairer and less inflationary to house prices if when you sold you paid the equivalent of Capital Gains on your profit.

Although I actually disagree strongly on being taxed on owning a home. Maybe second or subsequent properties but not your home.

"I'm not sure why, but here in the NE England, the prices do seem to be dropping a bit."

NE England:

June 2009
June 2010

Detached (£)
199,012
200,402

Semi-detached (£)
105,269
106,004

Terraced (£)
71,998
72,501

Maisonette/Flat (£)
73,600
74,114

All (£)
107,028
107,776

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

House Price Index report - North East Region
Comparison of June 2009 - June 2010

June 2009
June 2010

Index
195.2
196.5

Average Price (£)
107,028
107,776

Sales Volume 2,249

is that asking price or price achieved Heracles?

Price achieved.

Coraltoes explained it very well I think- high inflation, lack of supply and contractionary monetary policies.
I think we're heading for a double dip or close soon.
Massive lack if economists in new dave-nick club. Bloody chancellor hasn't even done gcse economics- makes me sick but that's another thread!

Just wait - if there is a run on the pound, it will cause rampant inflation as the price of imports goes up. That will mean interest rates will have to rise to support the currency and that may be the tipping point.

I've noticed that although the advertised prices for houses is not going down, the same houses tend to linger in the estate agents' windows for ages and I believe that the real drop is obscured by high offer prices. These stats don't lie - the average Rightmove house price (i.e. the offer price) is currently £236,332, but the average Land Registry house price (i.e. the price for which they are sold) is £166,072, suggesting tthat offer price is on average a 42% overstatement of what the house will actually sell for.

The Economist had an article on this this week

www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=2764524&story_id=16793014

They state:

"Britons seem to have an abiding faith in the existence of an implicit floor under house prices. True, there are obvious constraints on the supply of housing caused by high land prices and planning red tape. Then too the aspiration to own a home?preferably a house, not a flat?is widespread, thanks in part to the perception that property is a one-way bet. And until recently banks have been all too ready to lend on it. None of these elements alone explains why British houses are overpriced by around 30%, according to The Economist?s index of house prices to rents, but they are all part of the mix.

Jeremy Grantham of GMO, an American investment-management firm, sees the prevalence of floating-rate, rather than fixed-rate, mortgages as a common factor sustaining ?100-year? housing bubbles in Australia and Britain. Floating-rate mortgages last year reduced many borrowers? payment burden as the Bank of England dropped its base rate to 0.5% and lenders adjusted their standard variable rates downward in response. Borrowers who might have thrown in the towel on a fixed-rate mortgage were able to keep up monthly payments at that lower level. (In America, by contrast, thousands of borrowers were hit by fixed-rate, low-interest ?teaser? mortgages which reset to a higher rate after a year or so.) "

Urbandad, those comparisons are meaningless (land registry and rightmove) because you are comparing two different sets of data.

Land registry is all sales of property - that will include property sold as part of a divorce, repossessed and auctioned, sold to relatives, purchased under right to buy or housing schemes etc etc etc.

Rightmove is solely property sold through estate agents at market prices, which will tend to be those fetching highest prices.

I can only speak for my area (North London) but here property is going for well above 90% if asking price (sometimes for MORE than asking price - we were outbid on a property we offered asking price for) and is only lingering a few weeks on the market, frequently only a few days. We accepted an offer for 98% of the asking price after 3 days on the market.

I realise London is not necessarily representative of the rest of the country - but it does have a knock on effect on the rest of the market.

Prices are coming down around here but there are still many 'greedy' vendors.

Spoke to estate agent yesterday who said he's still routinely getting people putting their house on the market for 10% more than the highest valuation.

Look at what happened in Ireland. House prices dropped 50% in central Dublin. Never fear - it will happen here once public sector cuts come through.

Surely that's because they know they'll get offers 20% below the market valuation though ?