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| The UK housing market: a bubble about to burst? |
Property bubble.
by Andy Thatcher
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#1000054
of 3278
 14 Jun 2002
12:56 PM |
Unemployment at a low.
Interest rates at a low.
Lack of supply in the housing market.
High demand in the housing market.
Anyone who can't read the above and work out that this current rise has a long way to go, is a mug.
Once the supply starts to rise significantly, along with the interest, rates the bubble may burst.
This is at least a year to 18 months away. |
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bubble trouble
by Martin Jerrett
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#1000053
of 3278
14 Jun 2002
12:50 PM |
I have difficulty in understanding why our employment market and our economy can be in such rude health if our output is zero. The only thing driving the economy is consumer spending, in turn driven by the lowest cost of borrowing money in living memory. In other words, the British public are spending money they dont have. We are now in record consumer debt.
This leaves us on a knife edge: if lendors start asking for their money back and interest rates rise, home-owners who have borrowed significant amounts to finance new kitchens, new cars, holidays, 2nd homes etc will run into tremendous difficulty. Buy-to-let owners will be the first to suffer.
I dont believe in gentle "correction". The housing market survives on false confidence and when consumers lose confidence the market will nose-dive and land with a thud. |
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Everybody's doing it
by Brett
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#1000052
of 3278
14 Jun 2002
12:50 PM |
Anyone who invests at the height of a frenzy is asking for trouble. And those who buy to let, could fail - many wil perish. They are gambling, assuming they dont have the cash lying around, on Equity increases and sustainable rental income. Fact is that more people are buying with less people wanting to rent and with a glut of rental property on the market rents have reduced by as much as 40%. Plus with talk of a crash/deflation which could be instigated by interest rate hikes, you could lose on the capital outlay.
I agree, other investments are risky at the moment, but we cannot have an economy where the only people who prosper are those who buy and sell property.
Generally once people have jumped on the bandwagon you have missed the boat. |
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Doomed if you do, doomed if you don't !!
by Nick
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#1000051
of 3278
14 Jun 2002
12:49 PM |
I am currently purchasing a house with my partner and are 1st time buyers. We have had to pay 16k more than we originally planned for a house which we actually like. Since we began looking in January 2002, prices have increased at least 10k, and we have struggled to get on the market. We took the view that we could be doomed either way, as either we will be priced out of the market, or buy and experience a slump. I agree with so many others that regulatory control has been disgraceful, and there has been no help for 1st time buyers form the government. We will really struggle, initially, and as young professionals still with university debts, the future will be very tough if the market bursts.
We are relying on equity to re-mortgage and gain more favourable rates in order to reduce our monthly payments, with this news it may not have been worth the gamble. Thanks a bunch, looks like we have been duped !! |
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A view from abroad
by Foreigner
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#1000050
of 3278
14 Jun 2002
12:33 PM |
As a non-UK resident it is startling that so many people in the UK have bought the media fairy tale that the overheating property market will conveniently slow down in a nice orderly fashion and everyone will live happily ever after. I suspect this is a case of believing what you want to believe.
Unfortunately things don't work like that in real life. For every asset class the historical value pattern has been "up the escalator and down the elevator". The escalator now appears to be at the top floor.
I don't buy the supply and demand argument either. That ceases to apply when too many people are priced out of the market and simply can't afford to buy. Demand is driven by affordability.
Renting has suddenly become a very sensible option! |
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Bursting bubble
by Phil
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#1000049
of 3278
14 Jun 2002
12:17 PM |
I can't think of enough words to describe the gullible, sheepish, trusting, credulous, naive, innocent, susceptible (getting the point,) Brits.
Did you all seriously believe this boom was just some accident of the market fuelled by low interest rates. You all fell for the dot com's, then the next wheeze to get your cash dreamed up by the city and the banks was the buy to lets, and "investment in property," because it is of course the only safe investment. Be real!!
The Banks couldn't loose this one. Picture the scene in Pommery's wine bar a few years ago between a few bankers, it goes like this. "Well Gerald that dot.com things nearly done, imagine then if we get joe public now to borrow loads of our money, mainly the money we took off them in the dot.com bubble. Yeh, that delicious irony of lending them their money back, making it really attractive by dropping interest rates, and once they have it, and we have it secured on their properties, we will increase interest rates. They will call it a correction, we call it the gravey train! One percent increase in rates will rake us in Billions more, and we can't loose. When the punters can't pay we get their houses, and sell them on to those first time suckers who are renting and have been desperate to get their foot on the first rung. Then we create another mini-boom with them and lock 'em in at 6% interest rates as we drop the rates again over the following few years."
Guys, admit it, you have all been duped. |
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Housing price boom
by Kelvin mansbridge
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#1000048
of 3278
14 Jun 2002
12:14 PM |
| The weak equity markets and poor performance of pension funds is going to make property a good investment for some years to come. People will buy to use property as the equivalent of a 'lump sum' at retirement and to rent out to 'make their capital work harder'. I see no immediate danger of a crisis. |
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Housing Market
by Linda Erskine
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#1000047
of 3278
14 Jun 2002
12:06 PM |
| I think the the boom will peter out gently. |
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Bursting bubble
by Phil
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#1000046
of 3278
14 Jun 2002
12:03 PM |
I can't think of enough words to describe the gullible, sheepish, trusting, credulous, naive, innocent, susceptible (getting the point,) Brits.
Did you all seriously believe this boom was just some accident of the market fuelled by low interest rates. You all fell for the dot com's, then the next wheeze to get your cash dreamed up by the city and the banks was the buy to lets, and "investment in property," because it is of course the only safe investment. Be real!!
The Banks couldn't loose this one. Picture the scene in Pommery's wine bar a few years ago between a few bankers, it goes like this. "Well Gerald that dot.com things nearly done, imagine then if we get joe public now to borrow loads of our money, mainly the money we took off them in the dot.com bubble. Yeh, that delicious irony of lending them their money back, making it really attractive by dropping interest rates, and once they have it, and we have it secured on their properties, we will increase interest rates. They will call it a correction, we call it the gravey train! One percent increase in rates will rake us in Billions more, and we can't loose. When the punters can't pay we get their houses, and sell them on to those first time suckers who are renting and have been desparate to get their foot on the first rung. Then we create another mini-boom with them and lock 'em in at 6% interest rates as we drop the rates again over the following few years."
Guys, admit it, you have all been duped. |
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Giving agnostic faith
by c
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#1000045
of 3278
14 Jun 2002
11:54 AM |
As you are one of the few contributors who actually appreciates a little deconstructing, agnostic, is the pin really nearing the bubble?
If I may quote you directly:
"Being old enough to have lived through both the previous booms (bought my first-ever London house for £6,950 in 1969, sold it for £18,000 early in 1973)I can only observe the same symptoms now arising - people proclaiming how much the values of their properties have risen, but in rather high-pitched voices, looking over their shoulders. They know it can't last, however much they want it to."
Agnostic, history may repeat itself, but usually in subtly different and unpredictable ways (re. chaos theory).
"It begins to look as through stocks and property are sitting on opposite ends of a see-saw. If there is reasonable proof (say three clear weeks of reasonably steady FTSE rise) that the market has bottomed, watch people selling their bought-for-investment property to raise cash to buy shares! This bubble could burst quickly and ferociously - and with luck, my little house will still be worth what I paid for it in 1991. But not a great deal more, I suspect ...
The only question is whether the first upward move in interest rates will do it, or whether the real crisis will come with the second one, a month later."
I don't accept your premise. There is no close correlation between stock prices and house prices, but neither is it negative (c (correlation) = +0.5). Interest rates clearly have a causal link in both markets (in opposite directions), but what drives house prices are wages. If the job market in London remains buoyant, keep your house. I am still a bear on stocks. History will clearly judge our relative positions. I await with interest.
As ever, please feel free to take issue with little
c. |
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Sustainable? Depends.
by D.C.
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#1000044
of 3278
14 Jun 2002
11:54 AM |
| We are in a far differant climate in the UK at the moment than we were at the time of the last bust. Our economy is much stronger. I think this time it will depend on WHERE you live. The London and Manchester markets will stay strong, along with other buoyant areas. The rest of the country will suffer a slow down, however a crash is bvery unlikely. |
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Where does the market play?
by Brett
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#1000043
of 3278
14 Jun 2002
11:49 AM |
| The FTSE is plunging to new depths and accompanying the London fall are what it appears all indices around the globe. What does this mean? If the listed companies wish to look less embattled then job losses will surely follow, as they indeed are. Particularly high earners in the city will be hit the hardest. If job losses reach a high enough level then, then particularly people in London will find alternative employment thin on the ground with and be forced to accept a severe salary cut. With consumer spending and inflation so high - the reason d'etre of the current house price bubble, then consumer spending will eventually be cut back, furthering job losses and redundancies. From here, combined with the excessive consumer borrowing people may find mortgage repayment hard. I realise these are simple arguments, but in summary the economy is not strong enough to support such inflationary pricing on houses. |
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House Prices
by Scott
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#1000042
of 3278
14 Jun 2002
11:43 AM |
Buy to let has reached a point
now where there are far more places to rent than buy.
The touble here is that a lot of people are renting who want to buy,but as fast as they save up their deposit house prices increase further.
You cannot blame the estate agents, they had a rough time
for a number of years before the recent boom.
The main problem is greed and some greedy people will get their fingers burnt when interest rates go up, the people to feel sorry for is the first time buyers who have a hard enough time trying to get on the ladder.
The real winners are the mortgage lenders who encourage buy to let and yet when/if re-possession kicks in they will be covered and losses to them will be minimal.
Remember the Tech Bubble lots
of novices lost their shirts,
the phase deja vu springs to mind. |
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the pin is nearing the bubble
by agnostic
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#1000041
of 3278
14 Jun 2002
11:40 AM |
Being old enough to have lived through both the previous booms (bought my first-ever London house for £6,950 in 1969, sold it for £18,000 early in 1973)I can only observe the same symptoms now arising - people proclaiming how much the values of their properties have risen, but in rather high-pitched voices, looking over their shoulders. They know it can't last, however much they want it to.
Mr. S raises some extremely valid points. Californian restates the old stock-market adage - professionals buy on the way down and sell on the way up, amateurs buy on the way up and sell on the way down. It's just as valid in the property market.
It begins to look as through stocks and property are sitting on opposite ends of a see-saw. If there is reasonable proof (say three clear weeks of reasonably steady FTSE rise) that the market has bottomed, watch people selling their bought-for-investment property to raise cash to buy shares! This bubble could burst quickly and ferociously - and with luck, my little house will still be worth what I paid for it in 1991. But not a great deal more, I suspect ...
The only question is whether the first upward move in interest rates will do it, or whether the real crisis will come with the second one, a month later. |
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House Lotto
by P Singh
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#1000040
of 3278
14 Jun 2002
11:38 AM |
| I have moved 3 times in 3 years. Originally purchased a house in Reading 1993 for £47500 and sold 1999 for £100000. Brough a house in Wolverhampton 1999 £105k sold for £120k 2001. Bought current house £162k worth £185k. It has worked well for me but i was lucky as a first time buyer to be able to buy a house when they were affordable. I feel sorry for first time buyers because you are paying "silly money" for property that is beyond your means and not all that. The frenzy created by the media and estate agents has pushed prices up and up. If prices collasped i am okay but many will not with negative equity and high mortgages! |
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