Is this it?

[Selkirk]

Have we reached the bottom of the property market? I think there will be further cuts to the interest rate in the next 6 months and then prices will go up up up.

Any views

cheers

Selkirk

[Preston]

Hi

The most convincing predictions I've seen suggest that the market hasnt reached the bottom yet and probably wont do until the end of next year, for two main reasons. Firstly, the last two slumps lasted alot longer than one year before prices started to recover. Secondly, I dont think the house price cycle is driven primarily by demand; money supply is far more important.

How many times have you heard buy to let investors (and the advisers trying to flog them money) that prices must go up because the population is increasing; or homelessness is increasing; or immigration is increasing; or household formation is increasing because of divorce?

Or, how many times have you heard people say, "we live on an island so theres only so much land to build on, so prices must go up?"

And yet if these really were the things that determine house prices, then they should still be going up, when clearly they are not.

In the 70s house prices rocketed when the first deregulation of bulding society lending was introduced; more money became available to buyers and so prices increased. In the 80s deregulation brought the banks into mortgage market in a big way for the first time; again, more money meant higher prices. In the 2000s the banks radically changed their lending policies - some say because regulation passed from the Bank of England to the FSA - but again, for whatever reason, more money chased what is, at least in the short to medium term, a fairly finite supply of houses.

In each case the crash has occured because the market suddenly realises that the product is over valued and the money supply starts to dry up. Its a bit of a myth that our property market has been depressed by sub prime lending in the states; that certainly started the loss of confidence, but it revealed was that the banks in this country and elsewhere didnt have a strong enough asset base.

Dont get me wrong, there has to be an underlying demand and because there is, broadly speaking, an excess of demand over supply, in the long term prices will still go steadily upwards. But the price cycle is quite a different phenomenon to long term price trends; in my view prices will only pick up again when the money supply gets going.

So when will money start to flow? Well, who knows is the real answer, but I think the banks will continue to be cautious until they have rebuilt their balance sheets, until confidence in each other returns and until their confidence in the economy increases. And in my view thats at least another year away.

In the last 2 house price cycles, cash prices have taken 5 years or longer to recover to their pre crash levels. So that would mean around 2012 at the earliest.

What do you think?

Preston

[Gee]

Hi there

As always, I find myself agreeing with Preston.

However, I think he has missed an important factor in the housing market and that is apart from the relatively new demand from Buy to Let investors such as ourselves and the loan supply, the residential market has always depended upon owner occupation demand which is driven by such necessity factors as death, divorce, work relocation and personal choice factors such as wanting to move to a better property.

The first 3 factors are fairly rigid and this demand will always be with us however by far the largest reason for house purchase is moving to a better/larger house and this will depend on confidence not only in the property market but in the economy as a whole. At the moment, we are facing a recession, large numbers of workers (self included) are facing redundancy and in view of all the economic uncertaincy, there will be very few people wanting to trade up their house and take on a larger mortgage.

For this reason I think the housing market will continue to deteriorate for a number of years until the economy settles and employment prospects improve. We have been there before and things will eventually improve, however it does seem to be a global recession and therefore is likely to take longer to return to normal.

What does anyone else think?

Cheers

Gee

[Pauly]

A housing boom is based on greed, but a housing crash is based on fear:

Fear of further house price falls;

Fear of recession;

Fear of job losses.

crazy house prices (ratio of 6.5 years of an average salary / to house price) could never last and the credit crunch stopped the boom in its tracks.

In the past 12 months (Oct 07 - Oct 08) house prices fell 15% and we are at the start of a hefty house price crash.

In the previous three house price crashes (most recent May 1989), where house prices fell for four years and it took until 2001 (11 years later) before prices returned to pre-crash (1989) levels.

My prediction is that house prices will continue to fall at least until 2011/2012, from peak to trough by 45%, then stagnate for a further two years then finally start rising again, at which point I will remortgaging and buying property again, as I am lucky enough to have a tiny mortgage on one of my two properties.

Landlords who have stretched themselves too far (bought several properties, in the past two years, with a small deposit, with interest only mortgages are going to be in real trouble). As an interest only mortgage is basically gambling on house prices to rise and is little more than renting money from the bank, as the mortgage debt is never paid off, just interest on it. Consequently, this type of borrower's debt will increasing as quick as prices continue to fall.

I sympathise most with first time buyers who were strongly encouraged by the government to get on the property ladder (and wrongly advised that there would be no more busts just a never ending boom), now they have massive mortgages and will be stuck with negative equity and unable to move for years and years to come.

[Mortitia]

Hi all,

I agree with most of the above BUT the geographical differences of north/south to put it crudely also play a part. it would be interesting to know which regions you all write from. Young FTB's are not coming to the market at the bottom end anywhere in the UK and this must affect the overall market eventually and so prices must fall.

Since Monday I have been looking for a loan to buy something I have had my eye on for the last 2 years which I am in a unique position to barter on so I am hoping the market is as low as possible. I have been impressed with the enthusiasm and knowledge of the local bank types I have met although they are struggling whilst waiting for 'new products' to be announced in the next few days. Most think the bank rate will fall again.

My best way forward seems to be with a flexible small business loan from a major high street bank. Another sign of the times was when today I walked into a solicitor's not known to me next to the bank to see about conveyancing. I had an immediate interview with a partner who is only working mornings from next week as there is no business but very happy to take my instructions and do it from home if necessary!

I feel privileged to be a landlord.

All the best,

Mortitia

[Melboy]

My instant answer is that property will continue to fall in value through 2009.

Location and type of property obviously plays an important part on just how much prices can fall.

Having said that I am going to view a property this afternoon which I shall probably buy.......good location and a good price.

I sealed bid on a property only last Friday but lost out. Trust me, there are a lot of cash buyers out there who are buying irrespective of what doom and gloom you may read in the papers and on the news and on the telly.

Mel.

[Simon Dewsberry]

"the property market" is a very vague expression.

It is made up of clearly defined sectors, areas and target markets.

Ie ...starter homes, flats, family homes, executive homes, retirement homes, Hmo, city centre "luxury" apts, holiday homes ....etc,etc the list goes on

then we also have student housing, social housing both private and council.

These sectors will all perform differently in different areas depending on demand and local social status.

A lot of prop is holding its value, a lot is dropping ...some, like seriosly overpriced "lux" appts are now valued at their true worth!

Last week an assoc of mine bought a 3 bed at auction for 43k and sold it 3 days later for £55k ...mv at present is £75K.

Like Melboy i am watching and waiting for the "deals" with cash at the ready to leap in and steal a bargain !

There are plenty around now and after feb 09 i expect to see a lot more..

Are we at the bottom ...NOPE ...i reckon within the next 12 mths it will turn tho ....

Agree with Mel there are a lot of cash buyers ready to rock and roll just biding their time ...most of the LL i know are looking to buy (with cash)

The Rodent