House prices

[Twiglets1]

Hi Guys, we got to the end of the last thread so need another one on this controversial topic!

And to respond to @CrashyTime I don't say "demand is strong" over and over again. In fact, I rarely comment on demand at all. My posts are more focussed on house prices and interest rates/mortgage rates.

And I don't deny economic "reality", I just don't exaggerate how bad the house price correction is likely to be. I have a running bet with @XVGN that property prices generally will fall about 5% in 2023 and another 5% in 2024 so I do believe prices are falling in most areas. Just nothing like the 30-35% crash predicted by some!

Did you write several other posts? You are right that I commented after reading just the most recent one.
In fairness, in that post you do right 'the reason' rather than 'one of the reasons' or similar.
Crashy is right that there is not an actual housing shortage but a mis-allocation and a shortage of certain types of housing. The UK does 'function' rather as a debt based Ponzi scheme. Ever increasing debt is needed to keep things going. I disagree with him/ her that this is the fault of individuals, they are merely trying to deal with or, sometimes, take advantage of the current system.

"I disagree with him/ her that this is the fault of individuals, they are merely trying to deal with or, sometimes, take advantage of the current system."

A lot of individuals were borrowing like there was no tomorrow (there is now) and many were gloating about their HPI, the Ponzi economics couldn`t have happened otherwise, large numbers of the public were mad for it!

'A lot of individuals were borrowing like there was no tomorrow (there is now) and many were gloating about their HPI, the Ponzi economics couldn`t have happened otherwise, large numbers of the public were mad for it!'

I would say some stretched themselves to unrealistic levels or decided to leverage up on BTL or some other scheme. Most just wanted a home for their family because renting is both expensive and precarious in the UK. They had two bad choices, in the main.

Fair enough, most that borrowed 10+ years ago will be fine anyway, unless they lose their job.

If people have totally over stretched themselves for a lifestyle they never had any hope of affording, it is not unfair for them to have to sell and downsize. It's a direct consequence of their actions. In fact, this lack of accountability and consequences and lack of free markets has caused major problems in the last 14 years since the GFC.

I hope the majority, who simply wanted a secure home for their family will be okay. Overall, I would like to see major changes to the current system which is utterly dysfunctional and discriminates against (mainly) young people. This is having obvious knock on effects on society.

House prices are now higher than this time last year

No they are not, unless you live in Scotland or NI ?
The majority of the country is down and expected to go further this year. I guess you might have misunderstood recent vested interest or media releases that are somewhat disingenuous.
A recap for you of the latest official report based on actual prices achieved :

• Average UK house prices decreased by 1.4% in the 12 months to December 2023 (provisional estimate), up from a decrease of 2.3% (revised estimate) in the 12 months to November 2023.
• The average UK house price was £285,000 in December 2023, which was £4,000 lower than 12 months previous.
• Average house prices over the 12 months to December 2023 decreased in England to £302,000 (negative 2.1%), decreased in Wales to £214,000 (negative 2.5%), but increased in Scotland to £190,000 (3.3%).
• Average house prices increased by 1.4% to £178,000 in the year to Quarter 4 (Oct to Dec) 2023 in Northern Ireland.

Property increasing in value in my area - estate agents I spoke to say there's a lot of demand.

Evidence?

BBC article: Property prices have risen on an annual basis for the first time in a year, according to the Nationwide, but are still below their peak.

The UK's largest building society said house prices were up 1.2% in February compared with a year ago. Signs of activity have been seen in the UK housing market, with Bank of England figures on Thursday showing a rise in mortgage approvals. But the Nationwide said the outlook was still "highly uncertain".

"The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market," said Robert Gardner, Nationwide's chief economist. "Nevertheless, near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates."

On a month-on-month basis, house prices increased by 0.7% in February, according to the Nationwide's data, taking the average UK house price to £260,420. However, it said that property prices remained 3% lower than their peak during the summer of 2022.

Rising house prices at a time of relatively high mortgage rates may prove to be a problem for potential first-time buyers, who may look for government help when Chancellor Jeremy Hunt delivers his Budget on Wednesday. However, analysts say some moves to boost the housing market can lead to house prices rises accelerating, and could drive up inflation.

https://www.bbc.co.uk/news/business-68445223

Nope

The average selling price of a house is up

Just means more high value stuff is selling than low value.

Of course the estate agents will say that there is lots of demand!

It states clearly in article above that house prices are 1.2% higher now than this time last year. I can’t really understand why this is such a debate still. About 15 years ago I used to hope for a correction in the market but in the end I had to buy (I was lucky in that I had some help). I should be mortgage free within next 10 years on a property worth currently 425k.
While things are ok for me I am very concerned about the younger generations and this is why I have said about supply and demand - unless this addressed I can’t see prices falling.

Ok, thanks. That's poor evidence. It's just a small sample of Nationwide customers who needed a mortgage. It doesn't include cash buyers or other mortgage providers. I ignore that survey.

Doesn't mean it's not true.

Property still going to best and final offers over asking locally; the 'crash' the media have been talking about since forever just doesn't look likely to happen.

Have only seen reporting of small dips in completion prices (difference of around 5% from the peak) but nothing significant?

'Now' is usually the best time to buy to get out of expensive rents, but I can see the sense in waiting to see if you're in a cheapish/secure rental, still still able to save. The higher the savings and smaller amount you need to borrow, the better, obviously.

Different for everyone's circumstances though.

It might be true in some areas and perhaps your area is one of the unusual ones where some properties are still going over asking.
Nationally, however, demand is massively down on the general trend, with mortgages approvals at levels seen just post GFC. I think it's reasonable to conclude that the great majority of estate agents have been much less busy in the last 12-18 months and also that they are very unlikely to tell potential sellers/ buyers this. They are not really a profession famous for their honesty and integrity.

I do agree with you that everyone's circumstances are different and some will be better off buying now if they can negotiate a good deal on a long term home and others may be better off waiting. What I don't think is a good idea at all is for someone with a small deposit to over stretch themselves at the moment. The world economy is in a precarious state at the moment and this will have lots of knock on effects imo.

It’s true it only relates to Nationwide customers so doesn’t reflect cash buyers etc. But I don’t agree it’s a small sample as Nationwide are the U.Ks largest building society as it says in the article. So I would always be interested in their findings and the same is true of the Halifax survey, the Rightmove survey etc even though they all measure different things.

So just that we can argue based on facts, Nationwide has approximately 10% share of the mortgage market. Once cash buyers are added, their sample will drop to, say, 7.5% of the overall transactions and these may not be representative across the nation.

I'm interested in what they say but I give an appropriate weighting to their index, i.e. not much.

So if you ignore the Nationwide data as too small a sample and you ignore the Halifax data and the Rightmove data, what data do you actually take seriously? The House Price index data? Or is that sample also too small? Genuine question.

The ultimate indicator is the ONS data albeit somewhat lagged. We have already agreed that that is what we shall base our bet on! I'm surprised you had to ask!

I mean, clearly given that Nationwide has no view into cash sales, it would be impossible for Nationwide to be a reliable guide as to overall price movements.

.... and at least the ONS has the decency to urge caution on their initial results because of their low (but much higher than Nationwide) sample size.

Unfortunately the current system won"t change IMO without a major crash, even then people will still borrow too much and VI"s will encourage them to do so.

I hadn't appreciated that the ONS data is the only data on house prices you take seriously. I tend to take a different view which is that the data from all the different sources is informative & helps to build a general picture though each has its own limitations.

I remember our bet is based on ONS data 😀

I would have thought a 10% sample (or 7.5%..) of a set of data, where the set is in the hundreds of thousands, would be pretty representative. I’m also curious as to whether the sub-set of property purchases which are cash buyers rather than mortgaged buyers would differ in terms of average value or likelihood to be able to secure lower offers against asking price than mortgaged buyers.