Property - Asking Prices

[Bristle Si]

UK house prices are not TOO high as such, its the lack of finance and the high deposit levels that are freezing out the first time buyer.

As an example lets go back 3 years and take a typical first time buyer property £150,000.

A couple with a combined income of £40,000 joint salary could get easily get a 90% + mortgage needing only £10-£15,000 deposit.

Now with a max multiplyer of 3 x salary combined with a 30- 40% min deposit the £150,000 house would need to be at least 30% lower for the same couple to afford it.

Such a dramatic fall in house prices would undermine the UK economy and if we thought we had problems now they would be nothing compared to the financial chaos caused by putting hundreds of thousands more into negative equity.

That is why I remain optimistic in so fare as it is possible to be so that we will soon start to see an easing of finance through 2011/12 and a gradual return of the housing market.

1st time buyers cannot get on the market - they can't get mortgages (many mortgages for 1st timers are 75% loan to value ratio) - unless they're a couple of 'young professionals' saying earning £50-£60K between them.
1st time buyers help drive the UK property market - without them the property market stagnates. For many people wage increases in the last couple of years have been minimal, at best - non existent in a lot of cases.
Fear of moving and increasing one's debt is also stagnating the market - movers are in short supply.

All in all a recipe for continued drift downwards in prices until property becomes more affordable for huge swathes of the potential UK house buyers.
Long way to go yet.

[cereza]

I remain optimistic in so fare as it is possible to be so that we will soon start to see an easing of finance through 2011/12 and a gradual return of the housing market

I so hope you are proved right but am sceptical in the short-term (2 years)

I have to agree sadly. The market won't pick up until confidence returns and the banks start to lend more aggressively however the banks first have to rebuild their balance sheets and the biggest drag on their assets is the value of property on which they have mortgages. These properties are not being valued realistically because the banks don't want to show the losses so it's a chicken and egg situation and it does provide an answer to shanagarrys original point that asking prices are too high!
It's going to be quite a few years until the market normalises

[EMM]

Clearly Brt Si and I were taught economics by a two different schools of thought.
How can it benefit a market and boost an enconomy if tens in not hundreds of thousands of house owners fall into negative equity due to a substantial fall in the value of their property.
How can they ever move upwards providing the opportunity for the first time buyer.

Its a very simple theory.

The first time buyer uses the profit from home no 1 to move to a better or larger property , their smaller home providing the first step on the ladder for a new first time buyer and all the way up the housing ladder.
If house prices fall the your original first time buyer cannot move as they are probably in negative equity, so the hole housing market stalls.

As the Banks and BOE continue to state it is lack of demand due to lack of finance ( not price ) that is behind the current state of the housing market.

[Bristle Si]

Clearly Brt Si and I were taught economics by a two different schools of thought.
How can it benefit a market and boost an enconomy if tens in not hundreds of thousands of house owners fall into negative equity due to a substantial fall in the value of their property.
How can they ever move upwards providing the opportunity for the first time buyer.

Its a very simple theory.

The first time buyer uses the profit from home no 1 to move to a better or larger property , their smaller home providing the first step on the ladder for a new first time buyer and all the way up the housing ladder.
If house prices fall the your original first time buyer cannot move as they are probably in negative equity, so the hole housing market stalls.

As the Banks and BOE continue to state it is lack of demand due to lack of finance ( not price ) that is behind the current state of the housing market.

It's the market conditions that control house prices, not individuals. At the mo restricted lending, lack of confidence and requirements for large deposits for some segments of the potential housing market consumer dictates that we have stagnant conditions. All these conditions 'shape' the current and future market.
From this morning's news -
"The housing market is being stifled by a lack of first-time buyers and economic confidence, according to surveyors. More reported prices falling than rising in November - a similar picture to the previous month, said the Royal Institution of Chartered Surveyors."

[EMM]

IDIVIDUALS PURCHASING DECISONS ( demand )AND ABILITY TO BUY ( Supply ) ARE THE MARKET.

Economics 101.

[shanagarry]

Economics 101.

I don't suppose that when Economics 101 was drafted the world's finances were in the parlous state they are now. Everything is being redefined in the current climate - making both 'ability to buy' and 'the market' distant cousins

[EMM]

Interesting statistics today from surveyors that house prices fell less than expected in November.

They use an index which in November was 49, when house price falls were at their highest the index was 80.

[cereza]

The big problem in the UK housing market is the fact that the previous lax requirements for mortgages have now been made too difficult for many property owners to move as well as preventing first time buyers from getting onto the property ladder. Many home owners who are in positive equity dare not move because their current mortgage will not be renewed against any other property even though they would remain in positive equity. The banks do not want to make further loans because they still need to build up their balance sheets and the new mortgage requirements , as ordered by the FSA , give them a perfect excuse. The very lax mortgage requirements presided over by Labour had to be toughened up but maybe the FSA has been too heavy and it may be necessary to ease them to free up the whole property market and hopefully by that time the banks will have money available to lend again. It'll take a while though

[shanagarry]

Given that I started this topic addressing Portuguese/Algarve property pricing but used the Rightmove point raised in the MoS suggesting UK sellers consider reducing their prices by 5% if they wish to attract buyers.

Isn't it time the sellers here were advised in the same way - although 5% would even scratch the surface

[widge]

Given that I started this topic addressing Portuguese/Algarve property pricing but used the Rightmove point raised in the MoS suggesting UK sellers consider reducing their prices by 5% if they wish to attract buyers.

Isn't it time the sellers here were advised in the same way - although 5% would even scratch the surface

Surely it is the job of the estate agent to advise the vendor of the appropriate selling price?

If Portuguese agents are either overpricing or not following their own advice then they won't sell any houses and will go bust.

As previously stated if you are neither buying or selling it's immemorial - if you are then it's up to you & your agent to price accordingly.

[shanagarry]

Surely it is the job of the estate agent

I guess there's a conundrum here - Estate agents only get paid when they sell a property and they will only get to sell a property if they tell the seller that their property is worth some inflated amount - and they will only sell the property if the price is right - easy?

f Portuguese agents are either overpricing or not following their own advice then they won't sell any houses and will go bust.

If anything their numbers seem to be on the increase - probably because there are more properties coming to the market and by definition they need more agents to sell them. Don't think so!

My take - for what it's worth is that sellers are seeing properties being advertised at the inflated amounts and following suit. If common sense could prevail or somebody broke ranks - it might have the desired effect. Somehow I don't think so as everybody believes their property is worth that bit more because........

[laserblazer]

I still think that it's mainly down to owners not that bothered about selling unless they get a good price.

[sam]

Back to the Uk - we were buying a house a few years ago at about the time of the last market downturn. It was advertised at £550k and had been on the market for a while. We agreed £490K, but then found out that it had problems and pulled out. It stayed on the market for a long time, and never sold. Property prices locally are now about the same or perhaps slightly more. It came back on the market a few weeks ago at £850K, as far as I know most of the problems still exist. I can only assume that it is better to have a property that you cannot sell and value it at £850K, than have the same unsaleable house for sale at £550K.

[EMM]

Interesting report in this weeks Portugal News.
In Nov the average valuation used by Portuguese banks when assesing mortgage values fell EXCEPT in the Algarve where there was an increase ??

Make of that what you will.

The national mortgageable value for a villa in Portugal is just over 1200euros/m2.

[sunman]

report here that mortgage lending in UK is down what is in reality 90% from 2006 to 2011

http://www.thisislondon.co.uk/money/art ... -buyers.do

the reckless lending was out of all proportion, but even these levels are shocking

property turnover on The Algarve is at a standstill, the only valuation worth listening to is that of which a buyer is willing to pay, paper valuations are exactly what the name says they are.