It’s cutback time
Thursday 6th November 2008, 3:00PM GMT.
ISLANDERS are worried about job security and are about to cut back dramatically on spending, according to a new survey.
The survey, conducted by Guernsey-based business Island Analysis, has found that the vast majority believe the economic situation is going to worsen significantly in the months ahead and that people are gloomy about the medium- to longer-term prospects.
A representative sample of 1,500 Channel Islanders answered questions face-to-face and online in the three months to end of October. The results show that 42% of Jersey residents indicated that they were concerned or very concerned over job security. Just over 25% of Guernsey residents had the same fear about their job prospects.
Despite lowering interest rates, 45% of Islanders were concerned or very concerned about house prices, and almost half of the respondents said that they would be cutting spending on holidays and personal travel. A total of 54% said they would not spend as much in the next year on going out to eat and drink.
Read the full story in the Jersey Evening Post. Click here for subscription details. Individual editions are also available online.
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Yes, I agree. We are about to experience a prolonged and severe time of financial hardship. Something that we have never experienced before. There is also going to be a shortage of food and we are all going to have to cut back and return to a simpler way of life.
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Yep, and they have a good reason to be concerned. The only good news in all this is that house prices will fall as redundencies will lead non locals to repatriate: this in turn will result in an easing of demand.
If you are thinking of buying a house in the near future you might be well advised to hang on a bit…prices sure as heck ain’t going to go up.
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Some islanders are doing less hours than before and other islanders are being sensible and putting any spare cash away.
Big ticket purchases are being deferred unless they are really required and small economies are being made on a weekly basis.
Everything might be fine and if things start to look up in a year or so and jobs are secure some of these savings will come out as islanders treat themselves or put down a deposit on a house or flat.
Jersey is an island in a geographic sense but maybe not to such an extent in an economic sense, everyone is watching to see which way the wind blows!
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It makes no difference to us because our house is already paid for, but if it was not then I would share everybody else’s concerns.
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Since when has history been news?
The surprise is that Island Analysis and the JEP should consider the ‘credit crunch’ and economic slowdown as ‘News!’
Anybody with a little business savvy will know that the banking malaise has been with us for over a year!
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Phil, non locals can’t buy houses in Jersey so them repatriating will not have any effect on Jersey House Prices, It will have an effect on the overpriced rental of non quallies flats. The J-Cat non locals who can buy are essentially employed so they are highly unlikely to be made redundant so that will not have an effect. Jersey may have to tighten its belt a bit but house prices will be more likely to level out rather than decrease, it’s not the same as the uk because of the shortage of land to buy new houses.
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Sorry bergerac i have to disagree. It all comes down to supply and demand. If there is no demand then prices will fall even if land is short. Estate agents and sellers will drop prices to attract buyers but at present the buyers are all drying up because of the crunch. While i dont predict heavy loss’s as the UK i would say Jersey will see a downturn in its house prices.
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It is supply of credit that is driving down house prices worldwide and that will of course affect Jersey just the same. The years of cheap credit are over and prices in Jersey have to fall even further than in the US and UK to come back in line with peoples wages. Average wage c £40k but average house c £480k – its simple maths. Prices in Jersey have been completely unaffordable for most working people for a couple of years now driven up because so much property is owned by the BTL brigade and other property speculators. But once prices start crashing they will be looking to exit sharpish.
Most working people need a mortgage to buy a house and now they will need a 10% deposit and only able to borrow 4 times salary the bubble will burst spectacularly here. A property is only worth what a willing buyer and seller with reasonable information agree it is worth.
Suggesting that limited supply will support prices is a red herrings this is a credit crunch. I lost count of the UK property owners who harped on the same late 2007 and at the start of this year and pointed to the massive immigration and the UK Governments claim until recently that hundreds of thousands of new properties were required.
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lets ask a few more people other than 1500, what they think.
the j.e.p. could run a full page of questions.
and they could be posted back to whoever will collate the answers.
i hope the glass is more half full than half empty.
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Jersey’s housing market has already stalled but my gut feeling is that there is as much chance that Jersey’s property market will become a haven for capital scared out of equities etc. as there is that it will stall and slide. We will all have to wait and see which way that cat jumps. A slight revaluation in 2009 which may lead to a downturn later in the year or may pick up slowly in the Spring depending on local and macro-economic factors. Nothing like the crazy growth we saw in the last two years but if you’re waiting for some nice cheap three bedroom houses I wouldn’t hold your breath if I were you.
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Jersey IS different to the Uk in the fact that people will not lower the price of their property to sell it. They will just sit on it for as many years as it takes to sell it. No-one in Jersey is in a hurry to sell their home. If I valued my home at £500,000 and no-one bit, then i would just wait till someone did. Therefore the market would become static, but it wouldn’t go down. Now if people started leaving the island in large numbers then that would have an effect but I cannot see that happening anytime soon (however the way prices on everyday items are going, may be sooner then we think).
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Credit crunch, mortgage availability, redundancies, repatriation, cheap properties elsewhere, buy to let decline, economic slump, lack of confidence, tjghtening belts….HOUSE PRICES ARE COMING DOWN…no matter what those with a vested interest might say.
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Phil seriously, no matter how much you may want them to come down, they wont…. They’ll stagnate. I have no vested interest, I’m just telling it like it is.
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I think it is ‘watching the cat’ time as well.
There are a lot of For Sale signs out there and they are remaining stubbornly in place for weeks at a time.
A stroll past estate agent’s windows shows the same houses up for weeks and there are ‘New price’ signs up on the property in the back of the JEP, I take that as a sign that the vendor has lowered the asking to try and stimulate interest.
So I would guess that the next set of house price statistics will show near price stagnation and a very slow market.
What wil happen next will depend on if the Buy To Let brigade decide it is time to grab their gains and run, how banks retrench and how the world economy goes.
Minor slump, house prices will stagnate for a while; full blown recession with big companies like GM going to the wall, anybody’s guess what will happen.
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House prices may have slightly dipped but as the UK takes drastic action with interest rates this can only support Jersey housing market and soften any fall. UK and Jersey economies are different and a key control of interest rates is outside of the islands control, though it does have a big impact on us. New buyers will be able to access much cheaper credit locally (and figures corssed, still have jobs). Although there maybe some pressure to reign in the multiplers for loans I believe the lenders are looking more closely at affordability and ability to pay.
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The UK was signalled out last week as the western country that will suffer the worst recession by the IMF. This conclusion or the figures which resulted in it fed in to the desperate and virtually unprecedented 1.5% cut in the base rate. So if the UK is heading in to a grim recession and Jersey depends in its two main industries, finance and tourism, on the UK why are people still in denial as to the impending financial crash here ?
Think about this. The current worldwide crises is centred on finance and property. The reason the UK was signalled out was because it is much more dependent on the finance industry than other countries and has had a larger property bubble than most other countries. What about Jersey eh ? We are totally dependant on the finance industry and property prices have been over the last three years significantly more over-inflated than those in the UK. UK house prices are still dropping like a stone now when the average house to wage multiple I read recently is 6 times. In Jersey it is 12 times ! There will be no return to the cheap finance that supported these prices.
I really cannot see any way for Jersey to avoid this perfect storm. Time to start saving all the pennies, paying off all the debts you can and thinking of a plan B.
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Al, just so you know, property prices in some areas of the UK dropped but in others they have remained steady or even slightly risen, it depends on the area. Now the interest rates have dropped the prediction is that sales pick up again, It is too easy for people like you to predict gloom without actually thinking…
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My wife has just got a job working in Jersey hospital essentially employed,we are relocating from England would it be advisable to buy or would we be able to get a resonable priced 3 bed rental property.
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Bergerac. Almost every day I read the Times, the Financial Times and flick at the Telegraph and Independent. I also read the JEP most days and as I currently rent in Jersey and work in the finance industry I have given much thought to this current crises over the last year and how it may affect Jersey. Just because you have a different view does not mean that you are an oracle and know the truth and anyone who disagrees just needs to bother thinking about things more. I would suggest it is more likely that you have your head in the sand and won’t except the inevitable.
Which areas in the UK have stable or increasing prices ? They are down 15% according to Nationwide on average (yes on average so some much much more !) and predicted to collapse the same again before prices bottom despite the interest rate falling. Even if there is a small area somewhere which for peculiar reasons has bucked the trend that does not impact the basic facts – house prices are crashing virtually everywhere. This is a credit crunch. People can no longer borrower as much to finance the purchase of property and that won’t change any time soon and applies here just as in the UK. Property is only worth what a willing buyer and seller can agree it is and inevitably therefore prices will collapse as borrowing on ridiculous multiples / buy-to-flip / liar loans are basically gone. This is good news for most people. All increasing prices do is redistribute wealth from the young to the old.
Mark to rent a very basic 3 bed J cat property will cost I imagine £2,000 to £2,500 a month. Welcome to J !
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Rental is relatively cheap in Jersey compared to the UK at 3-4% of market value per annum. Unfortunately that market value for a 3 bedroom house is alledgedly circa £500,000 so expect to pay £15 to £20K.
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One of the peculiarities of the Jersey housing market is that the island’s biggest lender, Jersey Home Loans, has now left the market.
It was prepared to take on loans with low deposits and high multiples to get the business.
Quite what effect this will have on the local property market is hard to say, it will depend on what the remaining lenders decide to do.
Also there is a considerable ‘Buy To Let’ sector in the island, are these investors going to sit on their assets and try and ride it out or are they going to move their cash elsewhere?
Interesting times indeed!
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Al, hope you read the JEP today! I think that has just proved my point, an increase of 21%. Maybe I am an oracle after all :0)
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Geno
Just look in this very edition of the JEP, 3 bed J cat houses are going for between £1995 and £2300 (£24-£28pa) then put on top your monthly utility bills and rates and property maintenance (which are far higher than in the UK). Al’s ballpark figure is more like it, if not even a bit on the conservative side. Geno, I assume you are “qualified” and therefore out of touch with the exhorbitant rentals charged on “non quals” and J Cat properties. Anyone planning on relocating to Jersey should do their homework on the cost of living here, including medical, dental costs and child care (and then getting to and from the island to visit family). The higher salaries offered reflect the high cost of living and not taking this into account could leave one battling to make ends meet.
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The detailed numbers over at the States web site show that the price of one and two bedroom flats rose in 2007 but have declined in 2008.
Houses are still looking OK but I would be hesitant about buying a flat now.
There is a lot of property for sale and I know some people who are hanging on to their house by their fingernails.
If big fat banking bonuses do not turn up this year they will be forced to sell in the new year or sink deep in to debt.
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Mark
Jersey is pricey and too many people spend time worrying about what they don’t have rather than appreciating what they do. However, Jersey is probably one of the nicest and most beautiful places to live in the British Isles. If you can get passed all the superficial whining and shallow attitudes you’ll be very happy here. I left Jersey several years ago but still love visiting. Good luck with the move.
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ACS, Qualies or not rental costs are very high. Granted non-qualies and J cat accomodation is a lot more expensive but I still pay over the figures Mark pulled out from the sky for my 3 bed house! I am Jersey born and know that I have it easiER than J cat or non-qualified residents but certainly not easy, I struggle every month to put food on the table. Not all qualified residents are rich idiots with their heads in the sand! At the end of the day none of us are forced to live here, I am not using the ‘boat in the morning’ saying because I love this island despite its problems and hope to ride out the storm along with all my family who also live here. You dont have to be Jersey born to love this island !
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bergerac,
I am sorry but this 21% figure is the total percent for the year todate. 21% since last year. All this tells me is that the prices will at least fall 21% over the next year to fall in line with wages and demand. I agree with Al, get you heads out of the sand and start planning for the future. Those without a back up fund will feel this harder than anyone else.
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