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| The UK housing market: a bubble about to burst? |
Sustainability
by David G
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#1000009
of 3278
 13 Jun 2002
11:51 PM |
If the value of a property is defined by how much the market is prepared to pay for one months occupation, a halving of interest rates will double the market price of that property.
Unfortunately, there is no difference between interest rates moving from 7.5% to 15% or from 4% to 6%. Although, in the 'bad old days' wage inflation could be relied upon to shrink the debt - this is unlikely in a low inflation economy. |
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Wrong measure?
by Martin H
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#1000008
of 3278
13 Jun 2002
11:17 PM |
We hear much about the increase in the average price of a property. But when the Independent some weeks back showed 10 (ten) residential properties for sale in London totalling GBP250 million, how meaningful a figure is the average?
Some auctions are based not on the average but on the mean price, an equal number above as below.
If applied to housing this might present a more truthful picture as to the real state of the UK property market, thus enabling informed decisions to be made.
We might discover that we have not been as successful as we were thinking, thus putting a brake on the rate of increase. |
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Conflicts of Interests
by Richard
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#1000007
of 3278
13 Jun 2002
10:15 PM |
| We have been so conditioned by the commentators - most of whom have a vested interest in seeing property prices continue to rise - to accept as the conventional wisdom that the recent surge in house prices is sustainable and that the rate of increase will gradually tail off (no boom and bust). That conflict of interests will probably only be recognised by the media (which benefits from estate agents' advertising revenue) after the bubble has burst. Soon! |
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Ooops we've done it again...
by Rob Alloway
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#1000006
of 3278
13 Jun 2002
10:04 PM |
Well thats the way I see it.
We are in the grip of yet another greed fed frenzy.
Every Bull isee writing ramping up the market points to one thing and thats interest rates.... But thats just a piece of the overall jigsaw. The fact that they are at 4% makes the whole thing even more worrying. A rise of just 2% would mean repayments of 50% more, on loans that are enormous spells disaster. This combined with the current economic market and the ensuing unemployment that must follow leads up to possibly the biggest slump we have seen for a very long time. I do not have the opinion that things will be "an easy landing". House prices have gone far far in excess of what they were in relation to earning in the last slump of 1988-1992, thus the drop will be a whole lot harder and more difficult to swallow. Its a matter of when not if and I thin the catalyst will be something far simpler than a huge interest rate hike.
Rob |
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A speculative bubble
by c
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#1000005
of 3278
13 Jun 2002
10:03 PM |
The argument is that if house prices are rising at 18% per annum, they are therefore bound to fall. Not necessarily. The data suggest that they are continuing to rise. Expect a flattening off over the next five years. Bubbles burst, but the United Kingdom is not currently heading for recession. Or is it?
c. |
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simple choice either inflation /devaluation or a price crash for Housing
by Burry
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#1000004
of 3278
13 Jun 2002
08:16 PM |
Demographics will soon lower the need for hew houses , unless there is a flood of immigrants.
Meanwhile for the short term policies of giving out building permission to friendly builders has ensured good profits for the builder and high prices.
In the mean time the firemen want 30,000 quid ( 40% pay rise) otherwise they cannot afford to pay rent, let alone eat. So the great economic miracle comes to a head, people un able to afford the most basic necessity of life, a roof over their head.
Of course there is no inflation in the UK. House price rises are not inflationary an don’t not count in “official figures….
It would be interesting to se the figures for inflation adjusted to include house price rises over the last 6 years.
The situation is not sustainable. There is a simple choice either inflation /devaluation or a price crash for Housing. Who said Boom & Bust was over? |
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House Prices
by Julian Moore
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#1000003
of 3278
13 Jun 2002
08:16 PM |
| I believe that provided interest rates remain historically low, then property prices will remain strong by todays standards. That's not predicting the rates of growth we've seen over the past three/four years, quite the contrary..we could see stability (no increase above inflation) for the next few years, but not a crash. My interpretation of long term interest rates are that they will remain historically low, but not be viewed as 'historically low' in 5 or 10 years time (i.e. any return to double digit interest rates would be improbable, and un-seat any government). What does this mean? It means that there will be no crash in property prices, there may be a down 'blip' to be replaced by confidence (sod it, let's just move!) very soon after. But let's not get carried away, good properties in the right area will attract higher growth compared to poor properties in the wrong area. Note..areas change!! Two curve balls...1/ Europe, they could screw anything up and 2/ un-employment (as a result of Europe), this could really shake the tree of wealth. |
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I used to think it is a bubble, but now I'm not so sure
by Heidi
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#1000002
of 3278
13 Jun 2002
08:04 PM |
It depends where the money is coming from, which is being invested in UK property, esp. in London.
There were headlines in French newspapers early this week about a razzia (in the US and in Europe) against the Russian mafia. It was stated that the major channel for laundering money is to buy property. If there are no restrictions on who can buy UK property, then perhaps some of the USD7bn that the French newspapers talked about have gone into property in the UK? If that's the case, then putting up interst rates won't force such investors to sell, but it would hurt the average British owner-occupier buyer. |
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