Property prices thread

[PDH]

Monterey Bay is around 55-60f year round - a bit cold.  That's why the Great White sharks love it, lots of cold water wildlife here!

[Sheilbh]

Monterey Bay is around 55-60f year round - a bit cold.  That's why the Great White sharks love it, lots of cold water wildlife here!

Sharks tho

If there's sharks that house is probably a bit too close to the water for me.

[PDH]

The Central Coast is a marine mammal protection area, that means less fishing and more protections for the otters, seals, and sea lions.  That also means that the sharks who find such mammals tasty also roam here.  Every year we get breathless news reports showing sharks swimming in the Bay - though they don't actually do too much.  (people walking on the seaside rocks and getting swept out by big waves is a far greater problem).

The surfers don't seem to mind the sharks too much.

[Tonitrus]

I remember lovely (and very throaty) morning sea lion chorus that could heard all the way up hill on the Presidio. 

[PDH]

I live near enough to the wharf that I get to hear them most of the year around - it was confusing the first few nights, now they are just "The Boys"

[Savonarola]

Here in Toronto, the story for as long as I can remember it is that (a) we are in a property bubble; and (b) it is just about to pop - or maybe it already has!

I have read many, many articles along these lines, and many of them advance serious and apparently irrefutable economic arguments as to why this is so. Somehow, it has escaped the notice of these learned authors that exactly the same theories and predictions have been advanced for at least twenty years, yet the promised bubble bursting has not, in fact, happened.

It seems to me like no one has a freaking clue as to why property prices have not "burst", or can make a prediction that is worth anything. I assume that property prices will, in fact, at some point go down, because all markets are cyclical, but I am convinced no-one has any real idea of when or why they haven't already.

The analogy I use for such economic analysts is that they are like doctors who, no matter what the patient's condition, always tell the patient "you are going to die". I mean, it is always true, but it is somewhat important to know when ...

The Globe and Mail has a piece on Canada's housing market which explains some of the causes for the rising prices:

The trouble with 'bubble': Why Canada's red-hot housing market is defying the burst

If all of Canada has had a growth of 168% since 2000; what are Toronto and Vancouver?  (And if Britain is 104%, what is London?)

[Tamas]

https://www.theguardian.com/business/2021/apr/30/uk-house-prices-increase-at-fastest-rate-since-2004

High demand and low supply could create conditions for housing super-boom, says Nationwide

Pastel-coloured houses in Sedgefield, County Durham
The average UK house price was up by 7.1% in April compared with the same month in 2020, to a record of £238,831. Photograph: Peter Atkinson/Alamy
Mark Sweney
@marksweney
Fri 30 Apr 2021 09.16 BST

92
House prices in April rose at the fastest rate since 2004 as the UK faces a potential sales "super-boom", with buyers rushing to take advantage of the extension of the government's stamp duty holiday.

The average UK house price rose 2.1% in April compared with March, the biggest monthly rise recorded in 17 years, according to the mortgage lender Nationwide.

The frenzy of activity in the property market pushed the average UK house price up by 7.1% in April compared with the same month in 2020, to a record of £238,831. The average UK home is worth £15,916 more than a year ago.

The annual rate of growth was up on the 5.7% recorded in March, and just below the peak rate recorded during the coronavirus pandemic of 7.3% in December.

"Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the budget prompted a re-acceleration in April," said Robert Gardner, the chief economist at Nationwide.

The UK's biggest building society said high demand and the limited number of homes on the market could fuel a summer boom, with double-digit percentage growth in annual house prices a possibility by June.

"The combination of high demand and low supply could create the conditions for a housing super-boom the likes of which we haven't seen since the early 2000s," said Iain McKenzie, the chief executive of the Guild of Property Professionals.


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The market is also being boosted by the low cost of borrowing, with the government encouraging lenders to offer first-time buyers 95% mortgages by offering a guarantee scheme running until the end of 2022.

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Last month, the chancellor, Rishi Sunak, extended the stamp duty holiday on houses sold for less than £500,000 in England and Northern Ireland until 30 June. After that, it will be reduced to £250,000 until 30 September, before returning to its original level of £125,000.

"Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the budget," Gardner said. "With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months."

Andrew Wishart, property economist at the consultancy Capital Economics, said an acceleration in annual house price growth into double digits over the summer was now "all but guaranteed".

He added: "With the economy set to recover quickly and interest rates very low, we don't think that the current surge in house prices will be followed by a correction."

I guess the only thing, as usual, is that people who are asked to comment are all financially interested in making people think prices will rise.

[Sheilbh]

If all of Canada has had a growth of 168% since 2000; what are Toronto and Vancouver?  (And if Britain is 104%, what is London?)

Since 2000 - only 116%

[crazy canuck]

Here in Toronto, the story for as long as I can remember it is that (a) we are in a property bubble; and (b) it is just about to pop - or maybe it already has!

I have read many, many articles along these lines, and many of them advance serious and apparently irrefutable economic arguments as to why this is so. Somehow, it has escaped the notice of these learned authors that exactly the same theories and predictions have been advanced for at least twenty years, yet the promised bubble bursting has not, in fact, happened.

It seems to me like no one has a freaking clue as to why property prices have not "burst", or can make a prediction that is worth anything. I assume that property prices will, in fact, at some point go down, because all markets are cyclical, but I am convinced no-one has any real idea of when or why they haven't already.

The analogy I use for such economic analysts is that they are like doctors who, no matter what the patient's condition, always tell the patient "you are going to die". I mean, it is always true, but it is somewhat important to know when ...

The Globe and Mail has a piece on Canada's housing market which explains some of the causes for the rising prices:

The trouble with 'bubble': Why Canada's red-hot housing market is defying the burst

If all of Canada has had a growth of 168% since 2000; what are Toronto and Vancouver?  (And if Britain is 104%, what is London?)

Ten years ago, The Economist magazine concluded Canadian real estate was grossly overvalued. Nine years ago, Merrill Lynch declared Canadian housing was afflicted by "overvaluation, speculation and oversupply."

10 years ago I tried to explain to Yi that he should stop reading the Economist like it was the Bible and start considering other sources.  People have been calling our market a bubble for a lot longer than just 10 years ago.  Hell I have a friend who sold his house 20 years ago looking to cash in on the imminent collapse.  He is still renting.  I think he still reads the Economist too.

To answer your question for Vancouver in 2000 the average price was 400k.  Now it is 1.8.   Here is a chart going back to 1977.

https://www.cbc.ca/news/canada/british-columbia/pandemic-real-estate-vancouver-1.5898782

[Sheilbh]

Also my answer is v wrong.

Property prices in London since 1990:
https://landregistry.data.gov.uk/app/ukhpi/browse?from=1990-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Flondon&to=2020-06-01&lang=en

[Josquius]

I think we are due for another few years of the current boom. Covid has pushed forward the rise of flexible working a decade or two overnight and people are slowly adapting and moving to where they would actually rather live and away from the places they were forced to live for work.
This might well see London prices brought down in the long term once foreign investors wake up to this.
Bad news for anywhere nice in the north. Though intetrsting potential afoot for how society will change if all of the educated skilled people from small towns aren't forced south.

[Tamas]

Ok so when are monthly change in average property prices data coming out next in the UK? There was big news on the year-to-year March percentage of 17% but no mention this year of how prices are changing month to month.

We are now rather seriously looking to buy (or rather, more seriously than ever before) but I am quite worried about buying at the top. I saw some mention that in the US it is expected purchases will fall by 25% by the summer, I think in Hungary they have already plummeted by 30% recently, would be good to know what's going on in the UK.

In our area it still feels rather frenzied. Good deals (as in, nice houses which would had been 350-ish a year ago being advertised for 400) are being scooped up in what feels like days/a week. But, I am thinking, if what's going on and looming in the world won't put a stop to price rises, what will?

The second dilemma is: IF there are price drops coming, will they be big enough to offset the potentially higher interest rates we'd pay if we wait? I am quite convinced we ought to find a deal which offers fixed rate for the whole 20-25 years period - 10 years might be enough a cushion but if this IS the top of prices for a while, we may find ourselves in a bad situation 10 years from now, if forced to renew on decreased value and much higher interest rates.

Rambling done.

[Sheilbh]

Ok so when are monthly change in average property prices data coming out next in the UK? There was big news on the year-to-year March percentage of 17% but no mention this year of how prices are changing month to month.

Latest general stats released at end of March go up to January:
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2022
I think they're updated quarterly.

You might also find the Land Registry site helpful - though this also only goes up to January 2022 and back to about 2005 but is a monthly breakdown:
https://landregistry.data.gov.uk/app/ukhpi/browse?from=2006-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Fengland&to=2022-02-01&lang=en

I think it's released monthly but is normally a snapshot of two months ago (I think the estate agents release data on a more monthly basis - but obviously there may be issues with using their data ). Thing that strikes me about sales volume is that it's actually a little low compared to the normal range over the last 16 years - I assume that's because people aren't selling now?

We are now rather seriously looking to buy (or rather, more seriously than ever before) but I am quite worried about buying at the top. I saw some mention that in the US it is expected purchases will fall by 25% by the summer, I think in Hungary they have already plummeted by 30% recently, would be good to know what's going on in the UK.

You know my view that the market has been supported by low interest rates but the fundamental issues is fairly chronic undersupply. I don't think that's going to change over the medium/long-term but will in the short-term if interest rates rise because of inflation.

Here's a Times Money piece which has some predictions from the different groups (but, in the UK, the statistics is backwards looking - the projections are being made by estate agents and banks):

When will house prices fall?
By Hannah Smith    updated April 4, 2022

Buying a home

The UK property market boom might soon be over, as experts predict that rising inflation and the cost of living crisis could cause prices to fall as much as a tenth in 2023.

Currently the market is overheated. According to the latest figures, property prices have increased by an average of 14%, or £33,000, making it increasingly difficult for first time buyers to get a foot on that elusive first rung.

In this article we explain:
    Why house prices are currently so high
    What you can expect to pay for a home in the UK
    Whether house prices will fall this year
    House price predictions for next 5 years
    What will happen to property prices 2022 and beyond

This article contains affiliate links that can earn us revenue*

Why are UK house prices so high?

The price of the average UK home has nearly trebled since the turn of the century.

On the surface, it looks like the main long-term driver has been simple supply and demand: a shortage of housing stock compared to high demand for properties.

While this is a factor, the Bank of England says its record-low interest rates have really been powering the housing market.

Rates have been at rock bottom for more than a decade, and were at a record low of 0.1%. As a result, it was very cheap to borrow money to buy a home.

The Bank of England increased the base rate in December 2021 in response to soaring inflation in the UK to 0.25% and then twice again in 2022 to its current rate of 0.75%. Further rises are expect throughout 2022.

The Covid-effect

Since the onset of the Covid crisis, low interest rates have been joined by three other important factors in driving up house prices:
    The stamp duty holiday
    Higher savings rates during lockdowns
    People wanting to relocate for pandemic-related lifestyle reasons
    Desire for bigger homes with more space

But what is the trajectory from here – will house prices drop?

Growth in average house prices in the UK gathered pace in the second half of 2020 – a trend that continued through 2021 and into the first months of 2022.

It had been expected that the end of the stamp duty holiday and furlough last year would result in less demand for house purchases but that has not proved to be the case.

In March 2022, UK house prices grew at the fastest rate since 2004, at 14.3% in a year, according to Nationwide, up from 12.6 per cent in February.

The London market was again the weakest performer in the UKThe price of an average home now a fifth higher than at the start of the coronavirus pandemic – £265,312, or more than £33,000 higher than March 2021.

We have more on how to avoid paying too much for a house here.

While the first interest rate rise from the Bank of England came in December, there was a lot of speculation in the months before that it would happen and a number of lenders raised their rates in expectation.

What are the regional variations?

There are a number of reginal variation within the Nationwide figures:
    Wales remained the strongest with house prices up 15.3% year-on-year
    Yorkshire saw a 13% year-on-year rise
    London was again the weakest performer in the UK at 7.4%
    But prices in the capital are still the highest in the UK at £518,333

Is there a greater demand for rural locations?

With working from home likely to be a more permanent part of many people's lives, demand for properties outside cities and commuter belts has jumped.

Lockdowns highlighted the value of greenery and space, triggering a surge of interest in properties in rural and coastal areas, according to ONS statistics.

House prices in some hotspots – such as Conwy in North Wales, North Devon and Richmondshire in the Yorkshire Dales – have risen at three times the national rate.

House prices in Scotland, meanwhile, rose 16.9% over the year to August – against a growth rate of 9.8% in England and 12.5% in Wales – with estate agents reporting significant interest in rural and remote properties there.

Meanwhile seven London boroughs have seen price falls. And Londoners bought a record number of homes outside the capital in the first half of the year.

House price predictions

What does the future hold for the UK's housing market? There are a few factors that could put a dampener on the recent spectacular growth.

The cost of living crisis, impacted heavily by record petrol and energy prices, alongside rising inflation and tax rises could dampen economic growth and stall the housing market. Rising interest rates to curb soaring inflation will increase mortgage rates.

But, at the moment for those that can borrow, mortgages are still cheap. So it's a good time to buy even with many buyers chasing just a few properties. Find out which, if any, lenders are still offering mortgages below 1%.

This, of course, assumes that the upward trajectory will continue and buyers don't end up feeling that they overpaid.

Capital Economics expects the Bank of England base rate to peak at about 2%, pushing average mortgage rates to 3.2pc. While still historically low, that is double the 1.6pc rate recorded at the end of 2021.

In this respect, in large part due to the "race for space" in rural and coastal areas, many housing market predictions remain bullish: Hamptons house price forecast is for a rise of 3.5% a year between 2022 and 2024.

Lloyds Banking Group expect house prices to maintain their current strong levels over the next year, but growth to be much flatter through 2022, at around 1%.

Property consultancy Cluttons suggest that in some parts of London, prices could fall by as much as 10 per cent next year while Foxtons predict growth of 1 to 3 per cent in the capital.

In the short-term the property market is expected to continue its upward trend, but high inflation will push interest rates up which, coupled with squeezed household finances, will slow the housing market down by the end of the year and into 2023.

I wonder if your area is particularly exposed to Londoners wanting a bit of green?

In our area it still feels rather frenzied. Good deals (as in, nice houses which would had been 350-ish a year ago being advertised for 400) are being scooped up in what feels like days/a week. But, I am thinking, if what's going on and looming in the world won't put a stop to price rises, what will?

For what it's worth - my experience is it's also frenzied on the rental market right now.

The second dilemma is: IF there are price drops coming, will they be big enough to offset the potentially higher interest rates we'd pay if we wait? I am quite convinced we ought to find a deal which offers fixed rate for the whole 20-25 years period - 10 years might be enough a cushion but if this IS the top of prices for a while, we may find ourselves in a bad situation 10 years from now, if forced to renew on decreased value and much higher interest rates.

From what I've read the long-term fixed rate mortgages here are relatively new and not offered by many/all banks/building societies which may limit them and make them a little more expensive even than you'd expect for a fixed rate. Just because it's a smaller market at this point.

My understanding is most mortgage providers generally offer shorter term fixed rate mortgages for 5 years and then at the end of 5 years you'll normally be able to update th terms to a new fixed rate for another 5 years and so on. For obvious reasons

[Sheilbh]

Seen this 2000 BBC article being shared and
http://news.bbc.co.uk/1/hi/business/593477.stm

Some highlights:

Property prices rose in December at a rate of 30% a year. Estate agents say it is not a repeat of the disastrous 1980s boom. Are they right? BBC News Online's Alex Hunt reports.

When the good times were rolling in 1989, property prices were rising at an annual rate of 34%.

The cost of the average home, led by London, more or less doubled between 1985 and 1989.

We all know now that those increases pushed prices up to an unsustainable level. After a 33% slump the average property price only reached 1989 levels again in 1997.
[...]
No-one wants to see that sort of boom followed by bust market - also seen in 1972/73 and 1978/9 - returning to the UK.
[...]
To some extent all those points are true, but there are worrying signs that things are about to change.

The UK's largest mortgage bank, Halifax, recorded property prices rising at an annual rate of more than 30% for the month of December. In the three months to the end of the year prices rose at a rate of 20%.

The average cost of a property in the UK is £83,000, up £10,000 on the year according to figures compiled from its lending by the Halifax, which will this week release details of regional breakdowns.

According to the latest, broader Land Registry figures, for July-Sept 1999, the average cost of a property in the UK was £97,600. In the London area this figure rises to £155,000.
[...]
 With average UK earnings of £23,000, this will make the average home 4.3 times more than average earnings. This is approaching the house price-to-earnings ratio of five hit briefly before the bubble burst in 1989.

The situation in London is even more extreme. The average salary is £28,000, the average property price is 5.5 times that.

These sorts of prices have already begun to freeze some out of the London property market.

Even joint buyers - say a nurse and a teacher with a combined income of £45,000 - now find it difficult to buy more than a small flat unless they find a mortgage company willing to stretch the standard lending criteria of 2.5 times joint salary.

Good God. Average house price is now about 9 times average salary in England and Wales, at about 14 times in London

[Josquius]

Sickens me to think. I know people bought not too awful flats around 2000 for well under 50k. These days that'll be getting you a proper crack den or super rural shack.
Even in the late 2010s there was an area I liked where prices were within reach.... Not so now.
Hell. Just since covid the place where I'd probably buy a "forever home" in the UK if that was the plan (Chester le Street) has shot up thanks to its ECML station and Londoners moving up.