House Prices On The Isle Of Man

[Sebrof]

You need to guess because there are so few sales that one or two big houses - or a lot of small ones - can alter the mix, and therefore skew the result. As I said, there aren't enough sales to know what the truth is.

 

But it's a reasonable assumption that things aren't quite as rosy as the estate agents claim.

 

But you can look at the registry or on iomonline and get your price for benchmark stuff if you've a bit of local knowledge. Like you can spot 3 bed semi's from the street names usually, which are a good indication of the market average.

 

THe problem is that unless the mix of houses in your base period is very similar to the latest period, the comparison will be invalid.

 

When an outfit like the Halifax publishes price figures, they are basing them on a sample of many thousands, and this tends to average things out.

 

Here, where the sample size may be only 50 houses, there is every chance that you will be comparing apples with oranges.

 

But it's certainly too early to draw any definitive conclusions about the trend in Manx house prices. We need to wait until hindsight comes to our aid.

 

S

[Slim]

THe problem is that unless the mix of houses in your base period is very similar to the latest period, the comparison will be invalid.

When an outfit like the Halifax publishes price figures, they are basing them on a sample of many thousands, and this tends to average things out.

 

Here, where the sample size may be only 50 houses, there is every chance that you will be comparing apples with oranges.

 

That's only a problem for unusual properties, theres enough 2 bed mews or 3 bed semi's selling to get a handle on the price. Take another example, the price of new houses, they're still going up and still selling, albeit at a slower rate.

[Albert Tatlock]

I agree lots of people are staying put and watching the situation at the moment. Quite a sensible approach IMO.

 

Unemployment will be the main indicator to watch here wrt house prices IMO, and once/if unemployment hits around the 1200 mark I predict a fall in house prices of around 15%.

 

The current indicators lead me to believe this is likely to happen here toward the end of 2009. But things will quickly recover in 2011, so the best advice would be to hang on to your job and stay put, and - if looking to buy here do it in Nov 2009, if looking to sell and not in a hurry wait till 2011.

[Owen]

I think it's easy to get lulled into a false sense of security when thinking about the current recession. A small economy like the Isle of Man tends to be "padded" from the primary effects of the recession because of it's size. We've had some problems already, but they're nowhere on the scale that the UK is experiencing. It also takes longer to impact us but the impact will come.

 

Albert .. I like the way you've linked house prices to unemployment; their indirectly related, and I wouldn't be surprised if your predications came true.

 

Speaking about property prices, there's a talk coming up organised by the Junior Chamber of Commerce about property:

 

Lisa Quayle, managing director of Quayles Estate Agents and Tim Groves, a qualified chartered chartered surveyor at Black Grace Cowley will give two separate presentations on aspects of the property market on the Island at on 13 January, 18.00 at the Sefton Hotel.

 

More here: http://www.thebestof.co.uk/local/the-isle-...property-market

[marshall_42]

you can check the difference between asking price and sale price on iontoday and in the courier about 6 weeks after the sale completes.

[Rocketman]

I've just paid 10% less than the asking price but sold for the asking price....It helps that I'm a twat i.e know your position, prep the house to sell, dont be afraid to walk away, use knowledge that etate agents give you ( which they probably shouldnt tell you) to your advantage. Getting money out of the bank is very tough though. in this regard, If there's a world championship for hoop jumping..sign me up, I should medal !

[manshimajin]

I would have thought that the following will impact house prices here over the next 2-3 years at least:

1. The multiple of average house price to average earnings here is higher than the UK - the UK multiple suggests that to come back into line with long term affordability a drop of about 40% is needed. The effect here may not be as great because of the structure of the market but when a 'bubble' has reduced affordability there has to be some significant adjustment in prices. Bubbles either burst or deflate.
   
2. If banks are not lending as much this is bound to have an effect - if you get 80% of valuation rather than 90% then you either wait longer to build up a deposit or you offer 10% less.
   
3. How cautious are banks about advancing loans in times of increasing unemployment? There must be a few people who would have looked 'good risks' 2 years ago who are looking dicey now. This potentially reduces the size of the buying group available.
   
4. Will we be isolated from the financial sector employment fall-outs? I personally don't think so. Given this sector represent 30% of GDP and is a major employer it means that a major source of new buyers is reduced and a source of sellers is increased - leading to a change in supply and demand.
   
5. People who might like to come to the Island to retire are now having problems selling homes in the UK and Ireland - and if they do manage to do it are selling for substantially less than they would have done 12 months ago - so fewer of them with less cash must impact sometime.
   
6. People are currently holding off putting property on the market even though they really want to sell - again there comes a point when they may not be able to continue holding off.
   
7. A lot of the 'big hitters' who may have liked to come here for tax management have now been 'hit' themselves - who will buy the top end properties? Top end properties in Ireland dropped about 25-30% in value two years before the rest of the market due to lack of purchasers.
   

This suggest to me that whilst the deflation in house prices may take longer to be visible in the IOM housing market it will happen - we are not magically protected from economic realities.

[bluemonday]

we are not magically protected from economic realities.

Indeed.

However some elements think we are.

The next couple of years will come as a great eye opener.

[Slim]

The multiple of average house price to average earnings here is higher than the UK - the UK multiple suggests that to come back into line with long term affordability a drop of about 40% is needed. The effect here may not be as great because of the structure of the market but when a 'bubble' has reduced affordability there has to be some significant adjustment in prices. Bubbles either burst or deflate.

 

Partially true, but it's worth looking at mortgage afford ability rather than just the earnings ratio. Don't forget that interest rates have dropped. When those average price to average earnings were lower, the interest rate was above 10%.

 

[*]Will we be isolated from the financial sector employment fall-outs? I personally don't think so. Given this sector represent 30% of GDP and is a major employer it means that a major source of new buyers is reduced and a source of sellers is increased - leading to a change in supply and demand.

 

Agreed, and if people start losing their financial services jobs and are forced to sell, prices will drop.

 

Also theres signs the migrant workforce are leaving, taking with them rental income, this could force more properties onto the market. Of course this could also help keep unemployment low.

 

On the other hand, offshore economies traditionally do quite well out of recessions, as people are looking to avoid rising taxes.

[manshimajin]

The multiple of average house price to average earnings here is higher than the UK - the UK multiple suggests that to come back into line with long term affordability a drop of about 40% is needed. The effect here may not be as great because of the structure of the market but when a 'bubble' has reduced affordability there has to be some significant adjustment in prices. Bubbles either burst or deflate.

 

Partially true, but it's worth looking at mortgage afford ability rather than just the earnings ratio. Don't forget that interest rates have dropped. When those average price to average earnings were lower, the interest rate was above 10%.

Slim, I would say that a prudent bank (a virtue they now seem to have rediscovered) would be working out mortgage affordability for clients based on long term interest rate trends rather than current exceptionally low ones. Otherwise people would be able to afford very high loans that they will not be able to service when interest rates inevitably rise again in maybe 2 years time. Part of the problem was banks lending based on low rates. US and UK banks got this dramatically wrong over the last 3 years. Low BoE rates may not (should not) mean home buyers can borrow a lot more so it may ease the situation for existing mortgage holders but not create an artificil stimulus for buyers.

 

I am sorry that I shall not be around to hear Lisa Quayle's and Tim Groves' presentations on 13 January. It will be a good judgement of their probity if they do not try to talk up the market without an honest and realistic evauation of the impacts of the negative factors that are emerging. Estate agents forecasting the market is always open to big risks.

[oldmanxfella]

I am sorry that I shall not be around to hear Lisa Quayle's and Tim Groves' presentations on 13 January. It will be a good judgement of their probity if they do not try to talk up the market without an honest and realistic evauation of the impacts of the negative factors that are emerging. Estate agents forecasting the market is always open to big risks.

 

I'm not sorry I'm missing it. I'm going through the process with a client looking to move to the Island and the pile of old shite that one or two agents have trotted out to him recently has made me laugh.

[Addie]

I'm going through the process with a client looking to move to the Island and the pile of old shite that one or two agents have trotted out to him recently has made me laugh.

I'm still waiting to have any old stuff trotted my way from any island agents yet (with the exception of Cowley Groves that is)!

[Gladys]

[*]If banks are not lending as much this is bound to have an effect - if you get 80% of valuation rather than 90% then you either wait longer to build up a deposit or you offer 10% less.

Note too sure how that works, but in general you have given a fair summation of how we could expect things to pan out. Although Slim feels that recession is generally good for offshore centres. Not much good though, if the cost of offshore is more than the investment is making in returns and the expected savings in tax.

[oldmanxfella]

Note too sure how that works, but in general you have given a fair summation of how we could expect things to pan out. Although Slim feels that recession is generally good for offshore centres. Not much good though, if the cost of offshore is more than the investment is making in returns and the expected savings in tax.

 

I can't agree with Slim's assessment - this recession is going to be very bad for offshore. Bank interest rates are at a 300 year low and who wants to set up an offshore account in an Island that offers poor depositors compensation to defer a negligible tax charge? Most tax planning work has dried up because people are now sat on massive losses and will only need planning or structuring when they start making gains again, and investment returns are so low that many of the expensive investment or insurance products sold through this Island don't stack up any more as your paying more in charges than your actually making on returns. I think its a good time for the UK to be reviewing our business model because we don't actually seem to have one at the moment.

 

I do admire his head in the sand approach though.

[Slim]

I can't agree with Slim's assessment - this recession is going to be very bad for offshore. Bank interest rates are at a 300 year low and who wants to set up an offshore account in an Island that offers poor depositors compensation to defer a negligible tax charge? Most tax planning work has dried up because people are now sat on massive losses and will only need planning or structuring when they start making gains again, and investment returns are so low that many of the expensive investment or insurance products sold through this Island don't stack up any more as your paying more in charges than your actually making on returns. I think its a good time for the UK to be reviewing our business model because we don't actually seem to have one at the moment.

 

I do admire his head in the sand approach though.

 

I've been slightly misquoted I think, I've said that offshores have traditionally done quite well out of recessions, I didn't say we weren't going to come out of this unscathed.

 

There's a few positives to offshore banking worth remembering though in the current crisis, eg:

 

- offshore private banks don't tend to loan money, and don't do mortgages, but earn fees from charges, so really aren't affected by the current credit crisis.

- people want to put money offshore for reasons other than saving tax, there's some very good reasons to keep your cash offshore during a recession.

- offshore accounts exist to service other offshore structures. That all still exists, and with potential rising taxes those structures, particularly for offshore branches, may become more attractive even.

 

Sometimes people have to bank offshore, and as one of the only places to offer compensation, I think we're looking pretty attractive.

 

I'm not saying we won't be hit, I'm just saying that we might do ok, there is some positives.