UK: The nervous wait before the plunge - FT

[verbatim]

[*The nervous wait before the plunge * (Subscribe to read | Financial Times)

Is the rollercoaster about to drop precipitously? Hints have been arriving from all directions that the UK housing market is stopping its long, steep ascent and is about to plunge. Mervyn King, the governor of the Bank of England, gave a sober assessment last week to a backing chorus of gloomy data releases from housing-watchers.

There are risks both of undue alarm and undue complacency here. Undue alarm, because the UK housing market faltered before – in 2005 – then acquired a second wind; and because in most parts of the country, house prices have recently been growing faster than other prices. The Financial Times house price index puts house price growth at 8.9 per cent over the year to October, and at an annualised 6.1 per cent over three months. That is a slowdown in the rate of growth; it is not a fall, let alone a crash.

Yet that does not mean the British homeowner can breathe easily. Every sign seems to be pointing down: an authoritative survey of estate agents, for instance, places their mood somewhere between gloom and panic. And although a fall in house prices is far from certain, it could be steeper and more prolonged than most people have assumed.

That is a lesson easily learned from a look at the US. (Part of the excitement of a rollercoaster ride is to stand in the queue listening to the screams of those whose ride began earlier.) US house buyers were told that a national fall in house prices would not happen. It has. Combined with some extraordinarily imprudent lending, that fall contributed to the subprime mortgage debacle. But it has happened despite an economy that appeared in rude health.

The US experience shows what should have been obvious: house prices can fall without a recession as a trigger. Dizzying height and a rise in interest rates to modest levels are enough. The UK has both those attributes in spades.

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also in the FT

[*Buy-to-let crisis hits UK housing plans * (Subscribe to read | Financial Times)

A growing crisis in the buy-to-let sector is leading builders to “mothball” city centre developments until investor demand picks up.

Edit: sorry, you need a subscription for this second article.

[Who_ll_take_the_rap]

You would wonder why the sudden and domino type falling house prices is slowly working its way around the world of Western Capitalism.

I have been wondering for many years now as to when the authorities would start to really worry about the real serious effects of a forty year falling birth rate. Up to now, the only response from Western Governments was to put more money aside for pension premiums to allay the funding problem of an elderly society.

Securitisation was a clever way for an elderly society to directly capture the added value of the generation of young working men and women. Both young people in a relationship would have to work and thereby directly create the mortgage repayments and interest needed to fund the rapidly aging society. That way, they could get at the wealth created before the Government of the day collected it in taxes; of which they would not end up with much.

It appears now that because of Western Governments failure to recognise the inequalities of this situation that it now finds the whole system ready to implode. Why?

Young people have consciously or by a clicking into action of a hidden natural reaction in the way of survival of the race, are no longer buying into rising house prices or higher rents fueled by the Securitisation vehicle. Next phrase of my theory is an increase in Birth Rate as a result of the collapse of the financial system. Governments by their failure to react positively to falling birth rates have a lot to answer for! They have flogged to death the exploitation of the youth of the Capitalist World.

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Thought I’d add these comments from the excellently named Miles Shipside of Rightmove (UK equivalent of daft).

Miles Shipside, commercial director of Rightmove, said: "Prices are set to flatline in 2008. While we do not expect a price drop overall, there will be parts of the country that are over-priced and over-supplied for the likely levels of affordability and demand next year.

“In these areas, motivated sellers are starting to cut their prices and will need to be the cheapest on the street to sell. Whilst bargain hunters will be paying less for these properties prices will rise where demand continues to outstrip supply in quality areas close to major conurbations, especially London,” he said.

According to the survey, the average time a property is on the market has jumped from 85 days to 92 days in the space of one month.

“If you have to sell then seriously consider dropping your price and taking an offer now rather than holding out, you could end up being offered even less in a few months’ time,” added Shipside.

ftadviser.com/?m=11173&amid=122613

Fair play to Miles.

[Gatelodge]

Part of the excitement of a rollercoaster ride is to stand in the queue listening to the screams of those whose ride began earlier.