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| The UK housing market: a bubble about to burst? |
House prices
by Kully
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#1000024
of 3278
 14 Jun 2002
10:02 AM |
Esate agent must be held accountable for adding to the feeding freenzy, as an example a friend who brought he semi 2yrs ago in the midlands for £108k had it recently valued by 3 agent with prices ranging from £145 - £175k. Should there not be a better way of valuing a property, not just what an easte agent can squeeze out of the market.
A raise in interest rates may be the only way to help buyers see sense. But can the economy outside of housing handle an increase ? |
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House Prices
by A worried buyer
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#1000023
of 3278
14 Jun 2002
10:01 AM |
I am currently looking to buy my first house on the South Coast. The FT's top story today along with recent reports on the levels of home owner debt, is starting to make me reconsider entering the market.
I always knew price increases would slow, but most commentators stated that it would be a gradual tailing off rather than a crash. Those with vested interests thought it grow but at a slower rate.
This has made me feel rather unsure. What advice can people offer me ? |
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House Prices
by Aaron Hodgson
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#1000022
of 3278
14 Jun 2002
09:51 AM |
| To be quite honest I blame the estate agents for pushing the prices up an up, all they think about is commission! |
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House Prices
by Emma
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#1000021
of 3278
14 Jun 2002
09:48 AM |
| Still I'm waiting for the government and bank of England to do something about the situion for first time buyers. As a single late 20's female career girl, I pay massive rent but find myself unable to get on the housing ladder. What is scary is that I earn a good wage and am in a better situation than many people I know. When is the goverment going to help my generation? Like so many other people my age I work hard, support myself and want to own my own house. But simply can't meet the prices demanded (2 bed terrace in estate - £175K). We need more cost effective housing for first time buyers (not tiny little places you can't swing a cat in). We need subsidies to get first time buyers into the market. Because if first time buyers can't afford to get on the housing ladder then sooner or later the government is going to get hit with a generation of people who can't afford to buy a house. |
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The UK housing market: a bubble about to burst?
by Michael Chiun
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#1000020
of 3278
14 Jun 2002
09:38 AM |
I see the governor's statement as a verbal intervention to slow down the housing market. Given the uncertainty outside UK, he would prefer to leave interest rates unchange. Any increase is likely to be small. So, a slow down is more likely.
Unlikely to rise relentlessly.
A collapse is less likely.
No, not in today's climate! |
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Three bubbles
by John Gambato
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#1000019
of 3278
14 Jun 2002
09:06 AM |
In the nineties the booming economy on both sides of the Atlantic created three bubbles: TMT stocks, the US dollar and the property market. The first one is now history, the second one is beginning to burst and the third one can only follow.
The markets will always correct any imbalance and will usually overshoot the ‘Fair Value’ of any asset in doing so. From an overbought position they will move to an oversold position, which is what is happening now in the stock market. So the property market bubble won’t gradually deflate but burst, probably in the next 6 to 12 months. |
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Housing Market
by Mark Boughton
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#1000018
of 3278
14 Jun 2002
09:04 AM |
Once again the doom mongers are at work. The current rate of house price inflation is clearly not sustainable in the longer term, however, I do not believe that we are back to the late 80's.
Conditions are so different. I don't think its quite time to reach for the noose and find a big tree just yet, as the media would have us believe. A slow down will come, but as regards free-fall I think not. |
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The poll result does not inspire confidence
by Peter J.
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#1000017
of 3278
14 Jun 2002
08:32 AM |
For the most part FT polls usually produce a correct picture - they have over the past 18 months.
The current results of this poll seem to suggest that "bust" is on the way. However the "bust" is likely to impact London and the SE and the high end of the market far more. London in particular has become ovepriced due to foreign buyers - restrictions should be put on the ability of non-UK nationals to purchase property in Britain - oops forgot that should be non-EU nationals!!
A "bust" is long overdue and the so called crash in the early 1990's was more of a temporary setback in the inexorable climb of property values since the 1970's. Anyone who remembers the 1970's also knows what a property crash really is - it isn't fun.
Hopefully the adjustment will be slow but the poll here does not inspire confidence. |
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Russian Mafia investment in London
by gogettem
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#1000016
of 3278
14 Jun 2002
08:00 AM |
| On the other hand, that US$7 bn of Russian Mafia money would only buy 2 small bedsits in Streatham, so an interest rate rise would be effective for the market as a whole. |
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House Prices
by Realist
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#1000015
of 3278
14 Jun 2002
07:51 AM |
Whilst speculation on the UK situation is good and and well, it may serve prudent to look at the bigger picture and the macro economic level.
With confidence betrayed by the corporate greed of recent years both in industry and finance individual investors are shying away from the equity market. They may be putting cash in the housing market, but not currently to lose even more???
Whilst the debt of the recent over expansion accumulates and there is little growth to provide revenues to reduce this mountain, more cost cuts will emerge. This will result in job losses. Job losses will result in loss of salary and inability to pay mortgages.
More over whilst the banks are only just begining to announce the bad debts form the recent boom period, more will be uncovered. With the highest levels of debt accumulation since the debt crisis in the 70's the banks have little choice but to increase interest rates to recall some of their cash. Many major lenders are close to reaching their critical capital adequacy levels of cash reserves. The realisation of owning millions of over priced houses is little compensation. The banks are between a rock and a hard place as raising interest rates may well cause properrty prices to fall. This will destroy a large value chunk of thier asset base as it is the banks who own the houses. Increasing rates will only devalue their asset. However real cash is better than inflated cash. A hard decision to make.
However if nothing is done to slow the out of control and speeding train now it will crash. Economics provides many levers to help control the economy, unfortunately the interest rate lever is the most effective lever in the cabin.
Due to the extreme levels of debt owned by individuals and corporates, the smallest increases coupled with additional job losses could impact heavily.
To be honest we haven't really experienced a recession yet. Is the worst yet to come??? |
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25 year loan indexed at base rates???
by Russell
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#1000014
of 3278
14 Jun 2002
07:35 AM |
Does anyone else think it's crazy that you take on a 25-year commitment/mortgage on the basis of the Bank's overnight rate? Why are mortgages not indexed to the long end of rates where the volatility is less? Perhaps then we would not get such extreme valuations in the market (on both sides over the last 15 years) and we could get on with paying for our homes in a more ordinary fashion (rather than being obsessed, as my parents were, to the level of interest rates).
I suppose it doesn't really suit the banks to take on any of the Interest rate risk themselves, I mean it's not like that's their actual role in the economy or anything, is it?
On a side issue, I'm 27 years old and earn an above average salary. I can't afford to buy a place as good as the one I rent. So eventually, if things remain the same, I'll move away. It's just not possible to chase prices higher unless I get paid more, so where will the next level of price increases come from? If house prices are linked to the level of short term rates and unemployment/average earnings, then I ask the house price bulls - can you imagine a situation rosier than the present one? |
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buy-to-let unwinding
by rentier
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#1000013
of 3278
14 Jun 2002
06:22 AM |
| My favourite estate agent in Surbiton has received 4 1-bed flats to sell this week from "professional" investors. He expects these to be bought by owner-buyers. My rental-agent has 27 flats unlet on his books, mostly owned by "one-off" investors who topped up the mortgage on their first home to buy their 2nd ones. I'd expect these "amateur" investors to be selling by Spring 2003 to buyer-owners and a more normal rate of increase (7-8% per annum) to return. |
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Real Estate
by Californian
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#1000012
of 3278
14 Jun 2002
05:52 AM |
Living in southern California, I can tell you a thing or two about real estate booms and busts.
The time to sell is not when everyone is sure the market is going to bust.
The time to sell is when everyone you talk to is sure that it will go higher.
Of course if you sell, then what do you do with the money? Where do you live?
I don't know what your tax situation is there, but, in the US the first $250,000 in profit on a private home sale is tax free if you lived in it for at least 2 of the last 5 years.
Thats a good deal. You used to have to re-buy a home within 18 months of selling your old home or be taxed on the profit. |
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North South Differentials
by A Scotsman
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#1000011
of 3278
14 Jun 2002
12:28 AM |
It's interesting to me at least that my son and his "intended" recently bought a small 1.5 bedroom flat in Bristol for £136k which is probably £20k more than I would get selling my 3 (large) bedroom, 150 year old solid granite house in 0.5acre in NE Scotland..
Which represents the best value and which is the more realistic?
One effect is of course that I could never afford to move South... My house would probably be worth £500k or more if it was anywhere below about Birmingham...
So - my advice is that those of you sitting in artificially high priced houses in the SE should sell up, move up here, and buy something twice the size of what you have now for less than half the price.. ie, get out now before it all goes "phut"... |
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House Prices
by Andrew Doyle
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#1000010
of 3278
14 Jun 2002
12:16 AM |
| As mortgage rates are the lowest in 40 years the response of the ordinary home owner is to borrow more against strongly appreciating asset. Whilst economy and inflation are subdued unlikely that this trend will reverse quickly. |
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