Thursday, 13 December 2007

More good news

It is four out of four.

Yes, it is more good news from the Royal Institution of Chartered Surveyors (RICS). House prices have fallen for the fourth straight month.

The latest survey from the RICS shows that house prices fell in England, Wales and Northern. However, the news wasn't so great in Scotland. Unfortunately, prices are still rising there. Lets hope that things get better north of the border next month.

The RICS said that inquiries from new buyers were still falling heavily, while the number of newly-agreed sales was dropping at its fastest rate since 1999, when Rics first started questioning its members about local housing developments.


speedtheplow said...

Jeremy Leaf from RICS also said that "house prices were unlikely to fall sharply while Britain's job market remained in good shape."
Let's see what he says in 6 months' time. "House prices have fallen sharply because people with jobs cannot afford their post-teaser rate mortgages"?

pt said...

I live in California (so that's my excuse for not knowing as much about the UK as others on this blog). I am curious, apart from Northern Rock, and elevated interbank lending spreads, has there been a severe collapse in the market values of some companies or financial instruments in the UK, like there has in the last few months in the US?

It seems to me that many people in the UK still aren't sure there will be a big drop in house prices. That means the prices of many UK financial instruments are poised at the edge of a cliff, like Wily E Coyote. Some of the more aggressive ones, that were at the cutting edge while prices were rocketing up, are probably significantly overvalued.

Am I (half-)right?

Markbaldy said...

In reply to your question... a lot of people are still in denial about house prices.
I have beleived for the last 2 or 3 years that a credit crunch would happen when people could no longer take equity out of their houses to fund a champagne lifestyle (whilst earning lemonade wages !)
What annoys me is when some so called expert says we in the UK have a strong economy and we are not like the US - what a load of tosh - the UK economy is all smoke and mirrors - consumer spending IS the UK economy and that is all founded on borrowed money riding the back of inflated house prices...till now that is.
Things are about to get tough - we have vitually no manufacturing here to employ people like we had back in the 1930's and our balance of trade deficit is getting bigger as we import all the cheap stuff from China/India etc... and those products are about to get expensive, so expect inflation here to go through the roof... I wonder if the BOE will do the right thing then and increase interest rates or will they dream up another index where everything that goes up in price will not be included !

pt said...

Thanks, Mark. In the next 12 hours, I'll be shorting the UK pound in favor of an Asian currency. But that seems like a crude way to play the mispricing of UK assets connected to the housing sector. Which tradable securities do you think are most vulnerable to the coming general realization that the UK housing bubble will deflate? In the US in May, it was US homebuilders and Markit's ABX indexes.

If you're mad about high home prices, you may as well profit from the accuracy of your point of view.

mogul said...

Not sure how far US homebuilders have dropped, but I believe that the UK market has already factored in the crash. Barrat homes for-instance is now at 450p down from 1200p in Jan. But with a P/E ratio of about 4; they're actually looking quite cheap in my point of view.

Other UK home builders and related to look at are Persimmons, Bovis, Wolsely, Redrow, British Land, and Taylor Wimpey. All have had large falls. The benefit of hindsite would have made the short seller a very rich man.