quote : "Early signs of a turning market are reduced turnover and a preference among vendors for indicative prices rather than tenders and auctions.
The average number of days it takes to sell a property is another indicator, ranging from around 50 at the trough of the market to around 25 at its peak. "
the first part surprises me I thought a turning market would see more houses being sold not less.
the second part showing houses selling in 25 days at the peak and 50 days at the trough i can understand. (BTW the quote refers to NZ not UK).
The decline in prices would be signalled by the sellers expecting higher prices than the buyers are willing (or able) to pay, this difference would result in a lack of sales until one or the other groups chose to change their expectations.
If you are talking about a downwards turning market, then it would mean less houses are sold.
Buyers are going to wait a few months get the house cheaper, and sellers will try to hold out for higher prices rather than sell for a more realistic price.
yes that makes sense. with the shares analogy clearly being that when the market is falling there are far fewer buyers. i think my local estate agent is definitley doing far less business than he was. any estate agents want to comment ?
I doubt it. They're all too busy planning their retirement. Those who can't yet afford to retire are instead busy looking into re-training as debt counsellors.
If you asked this question 1 month ago I would have said no.
But I've been reading a few property websites and most of the Landlords are describing what sounds like the start of the UK housing market crash i.e.
empty estate agents, only experienced housing landlord buying, First time buyers chickening out, interest rates on the increase, house seller discounting for quick sales, people asking estate agents to phone them back when the house are 10-30% cheaper etc..
So yeah we may have just be seeing the sparks of the crash now.... plus we are due a few more increases in interest rates.
Plus with 20% increase last year I wouldnt expect it to go up again.
I also think it is likely that there will be a house price crash, but it may not happen for a while.
It is easy enough to recognise a market bubble, but very hard to predict when it will burst. Unemployment and interest rates are historically low at the moment, and the "British dream" of owning your own rabbit hutch (in a vile housing estate miles from anywhere) remains prevalent. I would not be surprised if the crash doesn't come for a year or two yet.
On the other hand, it could start tomorrow. It really is very difficult to tell.
though, in honesty, wouldn't you say this is wishful thinking rather than reliable prediction? (it's a wish I share incidentally!). AFAIK, we've never had a property crash set in quite these circumstances - historically incredibly low interest-rates and strong (albeit housing-equity funded) economy in conjunction with enormous failures in the pensions industry. It's seems possible to me also that we'll go into a short decline followed by some hefty-wage bargaining and up we go again! In any case there are too many considerations, all uncertain, to factor in. I'm looking at stamp-duty overall and taxation on BTL as more significant perhaps soon after the beginning of the next government. If these are left as they are then only big interest rises are left as a regulator.
i go by the charts and the previous trends. i am assuming (a big assumption i know ) that this boom-bust will follow the shape of the last 3.
first: there was a period of exponential growth , defined as increasing price growth per month or quarter eg 1000 £ in may , 1200 £ in june ,
1400 £ in july etc. any mathematician will tell you that exponential growth of this sort is unsustainable .
second: there was a period of decaying growth ie £ 1500 in august ,
1300 £ in sep , £800 in oct etc etc
(the point in the graph where it goes from increasing growth to decaying growth is called a point of inflexion)
third : the growth stopped altogether and reached what we mathematicians like to call a turning point. at the turning point house prices neither go up nor down. they remain static.
fourth: after the turning point we see negative growth ie price falls eg £-800 in dec, -£700 in jan , - £ 600 in feb
five: eventually prices stop falling and we reach a minimum turning point in the graph and they start rising again.
this pattern is so clear in the british housing market of the past and so evident today that i cannot see it being prevented.
at the moment we are just past the point of inflexion and in the phase of decaying growth where prices are still rising but more slowly each month and quarter.
eventually (in q2 or q3 2005) they will stop rising and start falling.
if they dont i have wasted all my years of education and study and will take up flower selling.
(I did my degree in maths and taught it at secondary level for 2 years) Unsustainable only means it can't go on forever - it doesn't mean it can't go on for another year or two. Nor does it rule out the possibility of a year or two of low to zero growth followed by another spurt. It may be fair to argue that what goes up must come down but it can do so in a variety of ways and at any speed.
I think points of inflexion only have any real meaning for mathematical functions which are continuous (e.g. y=sinx - which oddly enough provides quite a nice analogue for the housing market even if it is a bit idealistic. But if you believe in repeating cycles it's a remarkably close facsimile).
On the other hand, if you examine a share price - or even the FTSE as a whole - you cannot attach any mathematical meaning to changes in price direction. To put it another way, you can, if you want to, call a change from rise to fall or fall to rise a point of inflexion but it doesn't provide any useful information to do so. Periodicity may be inevitable (the so-called 'long run') but length of period is incalculable.
As Harold Macmillan once famously said - "Events dear boy....events."
The problem with modeling generally is that no matter how carefully you try to encapsulate all the parameters and how fairly these are all weighted in a final equation you only have to be short of one variable to render the model useless. Economics has always suffered from trying to deal with vagaries. Still nothing wrong with a good education.....or flower selling for that matter.
Not here, but in Japan housing is 90% down with 0% interest rates and unemployment never above 5.5%
If it's a housing bubble, falls may be quite moderate. If it's a credit bubble (and that will burst when the credit taps shut) then we're likely to see severe and prolonged falls. I guess we're finally approaching the point where we get to find out which it is.
Apparently so, though perhaps not as badly as over the last decade. They still have minor deflation too.
I'm consistently 2 to 4 years early when I do, which isn't much use to betting folks. That said, the most obvious form of credit trouble would have to originate in either the derivatives or mortgage-back markets and an environment of rising interest rates would be more likely to uncover fault lines there.
The theory goes that property has become a primary asset market in a credit bubble. This means that credit is loaned against a rise in values, and that the extra credit also drives further rises in value. Since the mathematics mean that each one percent expansion in credit requires more credit than the last, for a fixed stock, values must tend towards exponential. Thus a failure of values to rise short-circuits the process and is a recognised danger point in the cycle. A signifier of this process would be lenders both raising rates, and cutting the amount of credit offered. There's usually a period of prices not going either way. Those who are overleveraged at this point run into trouble as they have difficulty making loan repayments which were predicated on their bet on continued rising prices being fulfilled. Lender/borrower disputes of this type have been a feature of all previous credit bubbles, and may form the start of what becomes lender panic and credit crunch.
The odds of some giant scandal (a la Enron) appearing at this point are quite high.
A month's pause is hardly enough to start ringing the bell, but if the other omens begin to appear, then I guess the question will be settled sooner rather than later.
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