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A house price crash in 2010 and a boom in 2013?

bebo — Sat, 12 Feb 2011 11:47:56 +0000

A house price crash in 2010 and a boom in 2013?

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Home Page > Finance > Real Estate > A house price crash in 2010 and a boom in 2013?

A house price crash in 2010 and a boom in 2013?

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Posted: Sep 08, 2009 |Comments: 0
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After falling for 18 months is the housing market finally starting to recover?

For the first time since the crash began, both the Nationwide and the Halifax house price indexes are showing a price rise in the last quarter (2.6% and 0.8% respectively).

Prices down 20%

While this is seen as good news by many in the housing industry the overall picture still looks far from rosy, with Halifax showing an overall fall of 20.1% from the market’s 2007 peak and Nationwide showing a drop of 14.6%.

Meanwhile, figures from the Land Registry (which should be the most accurate) suggest that the fall is somewhere between the two at 17.74%.

In other words, despite the recent rises, a house that was worth £250,000 at the market’s peak is still only likely to be worth between £199,750 and £213,500 today.

Nevertheless, has the past quarter seen the start of a recovery or are we looking at an upward blip in an otherwise downward trend? The Royal Institute of Chartered Surveyors (RICS) certainly seems to think things are picking up. They’ve ditched their previous forecast of a 10 – 15% drop in prices this year and are now predicting a slight rise.

Not all agree, however. According to Seema Shah of Capital Economics:

“it is impossible to say what is going on from Nationwide and Halifax data because their samples are so small as there are few properties on the market.”

Recent price rises

Understanding what has driven the recent price rises may help to predict whether they may be sustainable over the coming months.

Martin Gahbauer, chief economist for Nationwide, suggests that the explanation may be a short-term supply shortage.

He cites the sharp decline in transactions in 2008 (down 43% compared with 2007). This produced a large pool of prospective purchasers who, while in a position to buy, were put off by the uncertainty generated by last year’s banking crisis.

Some of these buyers have now re-entered the market — encouraged by increased affordability and very low interest rates. Though the resulting rise in transactions has been modest it has been enough to produce a short-term rise in prices as it has coincided with very low levels of supply.

This may explain the price rises of the last three months, however, if Mr Gahbauer is right we should not expect this ”recovery” to last. This is because the circumstances he describes are likely to be temporary and do not point to a change in underlying market conditions, which remain poor.

We’ve also seen in previous crashes that prices don’t always go down in a straight line. In 1993 the Halifax house prices to earnings ratio (a measure of housing affordability) rose temporarily, just as it did in May and July this year, only to then fall back steadily for the next two years.

Predictions

The website housepricecrash.co.uk has helpfully put together a table of over 20 UK house price forecasts from leading industry analysts. And while the average prediction is for an overall drop of around 21%, nearly half the forecasts predict a drop of between 30 – 50%.

The fact is that forecasts vary wildly with a variety of factors creating both upward and downward pressure on prices. We look at the likely effect of some of these factors below.

Unemployment

By far the biggest threat to house prices over the coming months will be rising unemployment.

The consensus amongst commentators is that it will rise from its present level of 2.44 million to over 3 million by early 2010, with some forecasters suggesting it could get as high as 4 million.

When unemployment rises this fast house prices fall as people fail to keep up their mortgage payments and are either forced to sell their homes or have their homes repossessed.

In other words, history does not support those who predict that the crash is over despite the coming onslaught of redundancies.

Wages

Already, as unemployment rises we are seeing pay freezes and lower wage inflation. Since in the long-term house prices tend to rise in line with wages this is another reason they may be slow to recover.

Worse still, houses remain overpriced relative to wages according to the Halifax whose price to earnings ratio stood at 4.36 in July. While this is down significantly from its July 2007 peak when the average house was worth 5.84 times the average wage, it is still above the long-term average of 4.0.

To put this in perspective, during the last crash the price to earning ratio fell as low as 3.09 after which it took nearly 7 years to recover to 4.0.

Bear in mind also that as a result of globalisation — which has increased international wage competition — we are unlikely ever again to see the kind of wage inflation that helped house prices to soar in the 1970s and 1980s: A time during which the price of the average house in the UK rose 1450% (CLG).

Lack of credit

Another constraint on price recovery will be the continued lack of mortgage availability.

The days when banks lent for buy-to-let portfolios are over — they will now only give money to the most credit worthy and those with large deposits.

Nor does it look like this will change any time soon. In the Bank of England’s August inflation report Mervyn King stated that:

“the banking sector is still in a very bad way, and it will take several years for it … to get back to the point when it will be … in a position again to lend normally.”

Without a recovery in mortgage lending it is difficult to see how prices can be sustained once sellers (whether forced or otherwise) begin to return to the market.

Repossessions

So far, historically low interest rates have helped to limit the number of repossessions. However, according to the Council of Mortgage Lenders (CML) things may be about to change.

For all of 2009 the CML is predicting there will be 65,000 repossessions — the highest level since 1992.

Yet during the first six months of the year there were only 24,000. If the CML are right that means we’ll see another 41,000 before the end of the year.

Such a spate of repossessions would not only damage market sentiment it would send a flood of cheap houses onto the auction market. And the signs are ominous — already the number of mortgages in arrears by three months or more stands at 270,400.

Silver linings?

Are there any silver linings amongst this gloom? The answer is “yes”, although they may be of little help in the short-term.

Interest rates

The first of these is that interest rates may not rise as fast as expected.

The Bank of England’s latest inflation projections suggest that while interest rates may have to rise during the next two years they will probably not rise as much as predicted, helping to keep mortgage costs down.

Additionally, if (as expected) taxes go up and government spending falls following the general election then the Bank may become even more reluctant to raise interest rates.

A banking recovery

One of the reasons the rate of mortgage lending is currently so low is that banks are trying to repair their shattered balance sheets.

As they eventually do recover we should see an increase in mortgage lending, which will help boost prices.

However, as Mervyn King stated, this is likely to take place gradually over years rather than months.

A property shortage?

In the short-term the supply of properties for sale is largely determined by sellers’ confidence, the need for workers to relocate and whether or not financial pressures are forcing people to sell.

In the long run, however, supply is determined largely by the rate of housing construction relative to the rate of household formation.

Expected demographic changes together with projected high levels of net migration into the UK suggest that over the longer term there will be a significant undersupply of homes.

The government expects the number of new households in England to increase at a rate of 252,000 a year between now and 2031.

Meanwhile, rates of construction have fallen to record lows with only 75,000 homes expected to be built this year (RICS) compared with 175,000 in 2007.

2010 crash and 2013 boom?

It seems then, that there are two distinct pictures — one short-term and one long-term.

In the short-term it seems likely that prices will continue to fall, despite recent rises. Our prediction at YouMove is for a further price fall of 10 – 15% by early 2011.

We would then expect prices to stabilise (though they may continue to fall in real terms) until around 2013, before a shortage of supply causes them to rise in the longer term.

And, if the shortage of houses turns out to be as acute as some projections suggest we may be on course for another serious boom in house prices in about four years’ time.

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Article Tags:
house prices, interest rates, house price crash, house price forecasts, private sale, youmove, price crash, property boom

Learn How To Sell Your Own House Fast

bebo — Sat, 11 Sep 2010 11:54:45 +0000

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The Ultimate House Cleaning Checklist Book + Audio Bonus

bebo — Thu, 22 Jul 2010 11:45:42 +0000

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The End of the Global House Price Boom

bebo — Sat, 03 Jul 2010 13:20:58 +0000

Weighed down by the credit crunch and high inflation, the global house price boom has ended, according to the latest Global Property Guide survey of house price indicators.

Only 13 countries in which dwelling price indices are regularly published saw prices rise during the year to end Q1 2008, while 21 countries saw dwelling prices fall in real terms, i.e., after adjusting for inflation.

In most countries where house prices are not falling, they are clearly losing momentum.

The biggest house price fall was in Latvia (Riga), down -38.2% by May 2008 from a year earlier, after adjusting for inflation.

US prices also fell during the year to end of Q1, by anything from -4.2% to

-18.1%, after inflation, depending on which index is used.

In Europe, significant real house price falls took place during the year to end-Q1 2008 in Ireland (- 13.2%), Luxembourg (-5.8%), Portugal (-4.3%) and Malta (-4.9%).

UK house prices were only slightly down at end-Q1 from a year earlier, the house price crash having begun in earnest in early 2008. House prices fell during the first quarter by between – 0.7% to -2.1% (inflation-adjusted), depending on the index used.

In Japan, the housing market is now losing momentum once again. The urban land price index for 6 major cities was up only 4.1% year-on-year (y-o-y) to H1 2008 in nominal terms (2.9% after inflation), down from 7.8% over the same period in 2007 (7.9% after inflation). The national index for Japan fell by 0.7% y-o-y to H1 2008 (-1.9% after inflation).

Inflation woes

In nominal terms, 28 countries saw their housing prices rise during the year to end-Q1 2008, while only 6 saw prices fall.

However when property prices are adjusted for inflation, the picture looks entirely different. Skyrocketing oil, food and commodity prices have pushed inflation up around the world.

In Ukraine for instance, nominal house price growth was sharply down from 79.5% in the year to Q1 2007, to 18.2% in the year to Q1 2008. But when adjusted for inflation, property prices actually fell by -6.4% y-o-y.

In real terms, property prices fell y-o-y to end-Q1 2008 in Norway, Spain, Greece, South Korea, New Zealand, Indonesia, South Africa, Israel, Estonia and Lithuania, despite nominal price rises in all these countries.

House-price booms elsewhere

On the other hand, strong house prices increases were observed in a handful of emerging economies. Ahead of the pack was China (Shanghai), with an enormous 40.5% nominal house price surge during the year to the end of Q1 2008.

Other countries with impressive nominal house price increases y-o-y to end-Q1 2008 were Bulgaria (31.6% y-o-y), Hong Kong (31.1% y-o-y), and Singapore (29.8% y-o-y). Strong house price gains also took place in Cyprus, Australia and Taiwan.

Again, when adjusted for inflation, many of these price rises look much less impressive. The world’s top-performing housing market (after inflation) was not China or Hong Kong or Singapore, but Slovakia, where real house prices rose by 29.3%.

Causes of the downturn

There were arguably three main factors behind the end of the housing boom:

· After a very long boom, house prices had become stretched in many countries. The main indicator of this is the price/rent ratio, which compares the relationship between the buying price of a dwelling, with its rental price.

As the boom progressed, buying prices become high (in relation to rents and financing costs) in many countries, leading to decisions by some buyers to rent instead of buying. Mortgage-holders also came under extreme pressure as interest rates rose. A key lesson is the critical importance of monitoring price/rent ratios, to ensure that house prices valuations stay within reasonable limits. (Declaration of interest: The Global Property Guide produces comprehensive price/rent ratio estimates, globally).

· Inflationary pressures forced central banks to raise interest rates. This particularly impacted European countries where mortgage loans were primarily made on variable interest rate terms. Countries with heavily indebted households are also vulnerable when interest rates increase.

In developing countries, the overall economy (which strongly sways the mood of the housing market) is sometimes very sensitive to interest rate changes or to direct intervention by the monetary authorities. In some countries, mere threats of interest rate hikes are enough to shake the stock market and scare away foreign investors. But conversely, developing countries typically have smaller mortgage markets, reducing the impact on housing markets.

· Unsound regulatory and banking practices in the US and elsewhere led to over-lending by mortgage providers which, when these unsound loans began to go bad, caused a financial crisis. The bad news spread both by a panic contagion effect, and because many banks outside the US turned out to be more exposed than initially expected.

Prospects

Inflation remains an extremely challenging problem for the world’s central banks. In addition, the financial shocks to the world’s banking systems resulting from house price falls remain to be worked through (historically, most banking system collapses around the world have been caused by falling house prices).

Until these financial systems feel more confident that their problems are behind them, loan volumes are likely to fall. Therefore, it seems likely that the world’s house price momentum will continue to go down.

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Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00

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The Global Property Guide is a research publication and web site for the high net worth investor in residential property ? providing information about the process and benefits of buying property in any country in the entire world.

Decorate Your House With Whispering Creek Wall Fountains

bebo — Sat, 19 Jun 2010 11:56:27 +0000

Interior decoration is now a booming business upgrading it with the recent well being techniques such as- Feng Shui that are literally based on wind and water as the main elements. Increasing demand for water as a decorative piece of your home improvement has resulted in to a stylish comeback of indoor water fountains or waterfalls that can be installed in to your office area, home or garden. If we retrospect in the last classic eras we will find the magnificent water fountains lying in the big royal castles boasting of their glorious history.

But now it is not the criteria required to have an indoor water fountain or waterfall in your dream house. Now the royal decorative water features are available in an affordable range with specific space friendly modulations. A special kind of design under the same category is Whispering Creek Wall Fountains. Owning a whispering creek wall fountain will actually make an unspoken style statement for your house with a blend of calming and tranquil atmosphere.

The traditional wall fountains are also well accepted as they have the adaptability to fit in the different home architectures and to be established in the small niches of the home. There are a number of benefits offered by the indoor water fountains but the predominant feature is that it adds on the silent beauty of the house. The whispering creek wall cascades look amazingly attractive with the light and sound effects. There are hoods installed in the fountains that illuminate a variety of pleasing lights with the trickling sound of water. It also fills up the entire area with the positive energy, fresh breezes of air and a soothing ambiance.

The whispering creek wall cascades can slightly entice the viewer and work as a great stress buster providing natural scenic joys to celebrate with. There are countless options available in the same category as these can be modified or customized using a variety of materials and advancing up the features. You can go for the various finishes of the frame that can be metallic or wooden as well. You can play with the imagination using the huge assortment of solid stones coming in to eye catching colors and shapes. The more artistic way can be experimenting with the contemporary look by adding mirror in to the cascade.

The Whispering Creek fountains are not equipped with a dimmer control and are not accessible in Featherstone or Marble till now. The water flows onto multi-colored pebbles, integrated lights enhances the fountain beauty and that altogether offers a comfortable sensory experience. A big wall fountain leaves a lavish expression as well as a boasts about your lush living standard but more precisely reflects the creative bent of mind. It consoles the soul and pacifies the human bodies.

The Whispering Creek Wall Fountain will surely bring peace and serenity to you and your family when this lovely fountain is added to your home.For More info visit :Whispering Creek Wall Fountain

History of Armani Fashion House

bebo — Mon, 17 May 2010 12:05:27 +0000

There is always a legendary story behind the development of a prestigious brand. We have posted a lot articles related to this theme. Now let’s continue to discover the story behind the famous Armani fashion house.

The founder of Armani House is Giorgio Armani. He was born in 1934 into a humble family in Piacenza, a small town near Milan. He didn’t receive any professional training in fashion design. Graduated from the local public school, he entered University of Milan medical school and in 1957 he got a job at the Milan department store La Rinascente. But his talent and passion to fashion design cannot be ploughed under. In 1964 Armani designed a line of menswear for Nino Cerruti. Encouraged by his partner Sergio Galeotti, Armani left Cerruti and in 1970 became a freelance fashion designer and consultant. He soon made his mark. In 1973-74, at the prestigious Sala Bianca fashion show in Florence, he presented to great acclaim bomber jackets that treated leather as a regular, everyday fabric. This penchant for using materials in unexpected contexts and combinations came to be known as a defining characteristic of his genius.

In 1975 the Armani fashion house was founded. And then he launched a revolution in fashion with his unlined and unconstructed man’s jacket. Completely loose and informal, the blazer offered sensual hints of the body beneath, marking a major departure from, on the one hand, the stuffy suits that straitjacketed men in the 1960s, and, on the other, the sartorial abandon of the hippie generation. The rumpled jacket was an immediate success, and a new breed of tailoring was born. Three months later, he unveiled an unstructured jacket for women. Made with traditional menswear fabrics, it was as simple and soft as the man’s and bore a masculine authority. With this alternative to long, flower-child skirts and classic French tailleurs, Armani joined Paul Poiret and Coco Chanel as an emancipator of women’s fashion. In the 1980s, the exquisitely tailored Armani “power suit” for men and women came to symbolize an era of international economic boom. Armani became the first fashion designer to appear on the cover of Time magazine since Christian Dior in the 1940s. Armani began to grow to a global brand.

Today the House of Armani is renowned for its elegant simplicity and sophistication, and an ethos that has continued to motivate and inspire Giorgio, and is apparent in everything from Armani clothing, jewelry, watches and cosmetics to Armani perfume and even home interiors.

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How To Create Your Own White House Garden.

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