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| The UK housing market: a bubble about to burst? |
Relative Wealth
by Steve
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#1000039
of 3278
 14 Jun 2002
11:37 AM |
| Little c - If I was to move back to the North with £40-50k in my account - I could buy a nice little terraced house in Greater Manchester. I would be earning the same as my colleagues but would not have the burden of a mortgage as they would. That is the temptation!! However I will stay put I think for a couple of years at least and see how things pan out. My salary would probably half if I packed in my job and moved north, so in the long run I will be better of staying in the SE. |
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house prices
by jason mitchell
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#1000038
of 3278
14 Jun 2002
11:33 AM |
| I am in the process of buying a flat in London at the moment. I don't think house prices are about to drop significantly. There is enormous latent demand out there that will sustain prices at their current level. Clearly, the current rises are unsustainable but I think we will see a plateauing as the Bank of England eases up interest rates. There will be no crash. Rates will not have to go up high enough to cause it. The late-Eighties slump took place in a totally different situation. I think the most alarming thing about the current situation is that people are running up credit card bills because they think house prices will continue to rise significantly. They need to be more careful. |
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Housing Market- its a disgrace for 1st time buyers
by Rachael
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#1000037
of 3278
14 Jun 2002
11:21 AM |
All I can say is that I hope the prices stops rising, I can barely afford to purchase a home as it is. Houses that used to around the £60,000 mark are suddenly £110,000. Brilliant for the owner but if your a 1st time buyer like myself, the only thing you can find yourself affording is a dingy run down flat in the nasty side of the city- for £75,000!!!!
I also think its digraceful that people put their houses on the market, get the full asking price and decide to take it back off that market, only to put it back up for sale two months later at £6000 more than before and still sell it! I'd like to think there is no way the market can sustain itself, and that it will slow down, but with the amount of people out there looking for houses, supply and demand definatly play a major role.
I think something needs to be done to stop the prices rising, otherwise we'll still be paying off our mortgages when we're 60. |
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Thanks for the warning, Chaz
by c
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#1000036
of 3278
14 Jun 2002
11:18 AM |
So, I'm going to lose my job, Chaz? If true, the UK housing market is in serious trouble, Steve! But the two are indisputably linked.
With deepest respect, I remain, as ever, your little
c. |
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Property Boom & Bust
by Mr S.
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#1000035
of 3278
14 Jun 2002
11:18 AM |
Booms most usually go bust. If it is a bubble, then it will undoubtedy burst. Your poll and comments suggest that an increasing number of people are convinced that there has been a boom and that this most definitely is a bubble.
One has to ask why the UK, more than most real estate markets, swings from boom to bust. It is the manner in which property is transacted and the lack of transparency which allows middle men, developers and speculators to manipulate the market for relatively short term gain. It is long overdue that the the Government considers what actions would deliver a more stable growth pattern and take this rather tedious subject off the dinner table discussion list.
One action would to be to review the right of non-EU nationals to participate in the UK real estate market. At the risk of picking on one group, the participation of highly speculative Asian investors has been particularly damaging to the London market and this has had a knock-on effect for the national market and wider economy. There are some markets that should not be allowed to run free because of imperfections (supply-side constraints) and this is one of them. Restricting ownership to EU/UK nationals would not undermine the economy (Switzerland is hardly impoverished!) and has healthy international business investment. Considering multiple property ownership, we should also ask ourselves how many homes one person needs.
What role has been played by the print media (i.e. advertising revenues - don't bite off the hand that feeds you) with their overly positive commentary? Take a hard look at the biased market, but influential, forecasters (most notably Halifax and Nationwide) who will always veer towards bull rather than bear positions.
Having pointed the finger at all of these groups, those who lose out in any bust should only blame themselves for imitating sheep. |
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The UK housing market: a bubble about to burst?
by Pete
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#1000034
of 3278
14 Jun 2002
11:13 AM |
Another reason why I don't think it is about to burst is because there is no other sensible alternative to invest in right now.
Equities and fixed income don't look too attractive at the moment and with all the news of corporate bankruptcy/pensions scandals etc. bricks and mortar do seem a safe haven and the only investment opportunity offering a decent return. |
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Property Bubble
by KCH
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#1000033
of 3278
14 Jun 2002
10:58 AM |
Property has historically risen, dramatically so. The late eighties slump was fueled by Nigel Lawson's capping of mortgage relief which led to a most extraordinary frenzy. Also, at the time, lenders were going as high as six times salary, something that is not a feature of the current boom.
There is, however, one fundamental point which is persistently overlooked. You have to live somewhere. either you can rent, with the prospect of the rent relentlessly rising or buy your own place with relatively fixed outgoings.
The primary cause of the slump last time was more than doubling interest rates within a fairly short period. Given the tightness of family budgets (paying back borrowings of 6X earnings), there was bound to be a high casualty count. Now that borrowings are not as high, there is more scope for the family budget to absorb some rate hikes and still keep on an even keel.
There is insufficient housing where people want to live. With more and more single parent families, this pressure shows no signs of easing.
Supply and demand rules. I do not believe that the residential propety market is going to take a major hit but will slow done.
As far as buying to rent is concerned, if the location and presnetation is right, there should not be too much trouble in renting.
Again, supply and demand rules. If the supply outstrips demand, rents will stagnate but the srufy properties are the ones which will remain empty. |
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Correct C
by Chaz
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#1000032
of 3278
14 Jun 2002
10:57 AM |
....except that many high value jobs in London are being jhacked these days. The City is shedding its high earning MBA types at a ferocious rate...this will be all too obvious by the end of the summer.
The meedja mob have not been too happy since the demise of the TMT boom and its associated fat creative/marketing/advertising budgets.
This will eventually impact on the pices of housing in London and that itself will impact up north, the differential between London and Manchester (say for a 4 bed semi or inner city 2 bed flat) has been fairly constant in the past 15 years.
C |
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Houseprices
by Sue
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#1000031
of 3278
14 Jun 2002
10:55 AM |
One of the factors that is driving the housing market via personal homes and the buy-to let market is the wish to invest for the long-term in something more attractive than personal pension plans.
I decided to move house (by increasing my mortgage) rather than take out a pension when I became self-employed last year. I spend what I would have spent on pension premiums in mortgage interest. The benefits as I see them are; my money is being invested in something that my children and I can enjoy the use of, the return is tax-free (unlike pensions since the abolition of tax relief on dividends in pension funds introduced by this Government) which helps off-set the tax relief I would get on pension premiums at 40%, but most importantly, I won't be forced to buy an annuity to realise my fund (I simply move to a smaller house on retirement, which I would do anyway) and I am free of the charlatans, risks and charges of the Financial services sector (Equitable Life, numerous forms of miss-selling etc etc).
I also bought a flat to let a couple of years ago on what was then an 80% mortgage. It has been let ever since with no problems, covering the mortgage and growing in value. I have no intention of selling it so what happens in the interim is of less concern but will use it and maybe others to generate an income in retirement.
I agree that it is less attractive to enter the buy-to let market now because rents have not risen to match property prices but how many of us wish we had got into the property market long ago. The long-term trend, even once distortions such as disilluison with pensionsa nd the stock market have disappeared must be upwards given the need for more homes for smaller households, demographics/land shortgages etc.
All this means that my view is that we may see a dip in the next 2 years or so if interest rates are used as a blunt instrument to frighten people off but that in the long-run the property market will rise as it must reflect supply and demand. |
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A special explanation for Steve
by c
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#1000030
of 3278
14 Jun 2002
10:49 AM |
I think you need to think about jobs. Compare London and Manchester. What jobs will be available over the next ten years? Where can you earn more, even if you play for Manchester United?
As long as the London job market remains buoyant, London house prices should stay up!
As ever, please feel free to take issue with little
c. |
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It will burst
by Chaz
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#1000029
of 3278
14 Jun 2002
10:38 AM |
...because every bubble bursts
the reason behind the bubble is the lack of alternative investment opportunity in the past 2 years along with low interest rates that sucked too much money into housing, much of it into 'buy to let' investments.
In the US some areas will also go pop for exactly the same reason.
Anybody who believes that house prices can 'only' go up is a muppet and deserves what is coming to them.
I am concerned that there is now nowhere one can 'make' money through investment although I believe that the US soon will be worthy of consideration once the $ fall a bit more against the €
C |
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Seize the moment??
by Steve
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#1000028
of 3278
14 Jun 2002
10:34 AM |
| I made an offer on a 2 bed flat in the south east in Nov 02. It was a protracted purchase that took 6 months and luckily the asking price wasn't increased during this time. I have been in there a matter of weeks now and the value has increased by 50% since I made the offer. I personally hope that price increases will ease up and go back to a 4-6% value increase. However, I could kick myself if there was a crash. It is very tempting to cash in and move back to my native North West. I could buy a house outright with the profit! Oh, what to do??? |
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The UK housing market: a bubble about to burst?
by Pete
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#1000027
of 3278
14 Jun 2002
10:21 AM |
| I think as long as the Government/Bank of England don't intervene the market will sort itself out. Fundamentals will come into play, like first time buyer affordability. If people can't afford to get on the ladder the this will act as a natural brake on the market. Obviously any significant rise in interest rates will hit confidence but as long as it is not a deliberate ham fisted attempt to manipulate the market then I don't see a crash - a slowdown definitely at some point. One more caveat, no significant increase in unemployment. |
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oil prices
by Max
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#1000026
of 3278
14 Jun 2002
10:11 AM |
Persistent high oil prices, and high natural gas prices in the US and Europe soon, are slowing the world economy, this feeds through into lower investment returns, increased unemployment, and hence less money for house purchase.
These high energy prices are here to stay due to imminent peaking of world oil and gas production due to resource constraints. It is only a matter of time until the energy price recession causes house prices to fall. |
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price balloon
by Helen
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#1000025
of 3278
14 Jun 2002
10:07 AM |
A work colleague was in the office just now. She had intended to buy a £300k house. Delays had gone on for three months. In the meantime house prices rose; so yesterday the seller asked for an extra £30k.
This was the second time the same thing had happened to her: a huge price rise during the process of buying.
She decided to stay where she is and build an extension.
It's only an anecdote but I think a large-enough proportion of potential buyers are finally twigging that there's a limit. |
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