House prices are defying gravity and living on ‘borrowed time’.
The claim comes from Telegraph writer John Ficenec, who in this morning’s paper says that house prices have broken free from gravity and that there are “six clear reasons [why] a nasty correction looms in the coming year”.
He cites quantitative easing as the great “money printing experiment in history”, saying that while much of that money flowed into the stock market, a great deal also found its way into house prices.
Ficenec says: “What we are now witnessing on trading screens around the world is the unwinding of the era of monetary excess, and house prices will not escape the fall-out.”
He says that share prices are already falling, but that there is a delayed effect on property prices because the market is so inefficient.
He says: “Transactions can take up to three months to complete and the property itself may have to languish on the market for even longer.
“The prices are also dictated by estate agents, who have an interest in inflating them to raise fees.
“The number of transactions is also still about 40% below that of 2006 and 2007, which allows prices to stray from the fundamentals for a longer period.
“It is true that Britain is suffering from a housing shortage, which drove UK house prices to a record high of an average of £208,286 in December, but like all asset prices they are on borrowed time.
“The fundamentals of demand and supply in UK housing will undergo a huge shift in the year ahead.”
Ficenec also discusses what he calls the death of buy-to-let, with predictions that 200,000 landlords plan to exit the sector after George Osborne’s tax raids.
Another Telegraph writer, Olivia Rudgard, yesterday also warned that landlords investing in 90% of the UK and who purchase with a mortgage will be losing money within five years.
The calculations, to do with the ability of landlords to deduct mortgage costs from rental income, use data from LSL firms Your Move and Reeds Rains.
Ficenec’s article is here
Rudgard’s article is here
Comments (12)
“The prices are also dictated by estate agents, who have an interest in inflating them to raise fees.
I’m trying but can’t think of a time when I advised a vendor to up the asking price to help sell the property!!!!!
I wonder how many landlords actually understand this stamen by Rudgard,
“From 2017, landlords’ ability to deduct mortgage interest from rental income before working out a tax liability will be phased away. This will drag significantly on landlords’ ongoing returns, with some investors even paying tax where they have zero income or a loss”.
You mention tax and many panic!
Who?
Click bait.
Well, if you write an article predicting a steady increase in house prices no one will click on it. If, however you predict a crash, loads of people will click on it.
It’s true that the property market is different from the stock market in that it’s not such a ‘perfect market’ as economists say. However, property has real intrinsic value – you can live in it, you can work in it, it keeps you warm and it keeps you dry. Share certificates don’t.
Most importantly though, in Britain there is a massive real imbalance between demand and supply – that’s what really supports property prices.
Re: ““The prices are also dictated by estate agents, who have an interest in inflating them to raise fees.”
Dear John Ficenec,
Yes you are quite right we always inflate the prices, even if we haven’t sold a house for a decade we still keep inflating the price because………………………….?
Mr Ficenec I am sure you know something about everything, like all good journalists, but you seem to know absolutely nothing about the property market.
Please stick to what you know Mr Ficenec, star wars maybe? Disney Land possibly? or even fly fishing by J R Hartley. Just keep away from adult conversations, clearly you don’t have the intellectual or emotional capacity.
If they all keep predicting a crash it will eventually come true… maybe decades down the line.
All these reports seem to put all of us estate agents as some sort of bystander to the housing market. ‘theres a crash going to happen and there’s nothing you can do about it’
So prices drop, some people lose out, first time buyers wont, (they will get a house they want at a good price) this then kickstarts the market again. some people will wait and those that cant wait are going to have to take a hit. It happens it’s life…
Good agents will weather the storm.
Outstanding ignorance to think agents dictate prices, overlooking the fact someone has to make a buying decision for each transaction. If he’d said greedy vendors it wouldn’t have been quite so stupid.
The rest of the article is full of nonsense it is hardly worth commenting on.
If I was the editor of that paper is call this journalist into my office for chat.
More like call the t**t in and give him a bonus, I’m afraid!
It sells papers, I’m afraid – and gives other t**ts the opportunity of reportedly making statements along the lines of (traditional) Estate Agents “lining the pockets of their designer suits”; of “cashing in big time”; and charging “a stifling amount of money to sell a property” in order to fluff up their own mangy feathers and try to look like a quarter-decent sparrow.
Luckily, only a tiny proportion of homeowners fall for such billshut – as swallowing it would most likely cost them dearly.
Maybe someone should do a survey of hopeful vendors who list their properties through call-centre Agents and see what percentage of them read the offending rag.
My guess it’ll be in the high 80’s…
…and please note, Quirkster – that’s a GUESS – NOT A BET!
I’ve come over all 2014 when we used to have the http://www.housepricecrash.co.uk boys on here religiously saying the same things, in fact this is just the stuff the last 3 of them that are still holding out get positively moist about.
Anyway, good to see Her Majesty’s Telegraph confirm that if you use an estate agent on a % based fee to sell your house then you will get more money for it.
Jonnie
I thought I was reading the Guardian! Let’s pop a note in the diary for 12 months time to see how it panned out.
absolute tosh……………..
It is very London Centric view rather that total tosh. In London some areas are 20-25% over value which means a crash is inevitable. In some districts the market clearly peaked last year with both transactions and prices adjusting quite sharply this past 12 months.
Outside London and judging the general awareness of the industry of the article, ‘Tosh’ is giving him polite credit he doesn’t deserve