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| The UK housing market: a bubble about to burst? |
Correction due but when
by Chris Lee
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#1000250
of 3278
 22 Sep 2002
06:20 PM |
I have been calling a correction in house prices for some time, but the market still climbs. However when houses in south yorkshire sell the same day with maybe a dozen viewings and gazumping, something is wrong.
When a property which struggled to fetch 32,000 sells within days for 50,000, and all in the space of 12 monthswhat are we to make of that.
I read that a sizeable proportion of london property purchases are buy to let business. With the economy worldwide supposedly in turmoil what happens to corporate let expenditure. With falling demand by tenants, and the landlord being spooked by lengthening voids, the attraction to sell and recoup some capital gain will be to much to resist. Increased supply, climbing interest rates, slowing income growth and lack of confidence could then do some real damage to the general property market.
And dont forget the poor performance of equities has pushed investors into looking at residential property as the harbour of capital growth whether through buy to let or a home. When the stock market comes good again, watch the money diverting back into equities robbing the housing market of demand investment.
However the main driving force on the demand side is increasing nos. of single people/one person households etc. Personally I can actually see this trend occuring before my very eyes and it is a powerful driver for increasing demand.
I do on balance see trouble on the horizon for over stretched house owners, it is just a matter of time. |
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Property & the coming taxes
by JJ
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#1000249
of 3278
19 Sep 2002
11:20 PM |
I wouldn't fret too much over property prices, they're going to come down by a combination of market forces and the coming new labour screw-up of the economy through massive "wealth redistribution" and huge spending plans.
As the economy grinds to halt under the weight of extra taxes, EU inspired red tape & sluggish world economic growth, the government will turn to other sources of taxation.
Enter property.
Property related taxes are already rising. They are going to rocket. Unlike rich people who can move to more inviting fiscal climates, property can't go anywhere. Therefore it is easy to tax and under Labour's newly rediscovered politics of envy any property owner is "rich" and therefore worthy of being screwed for more taxes.
People in the buy-to-let market want to watch this one - they must be loaded under old Labour thinking!
Homes across the UK are to be revalued, which effectively means that council taxes will rise three to four times in London & the South East.
Expect other property related taxes in the coming years as Labour struggles to find areas of the economy to tax.
Also, people will increasingly have less disposable income, that combined with a slowing economy, possible rising unemployment, which in turn means dented consumer confidence will mean lower property prices. |
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The End is Nigh
by Farmer Giles
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#1000248
of 3278
19 Sep 2002
10:55 AM |
| Sell your pokey flat in Crouch End and use the money to buy yourself a 20-acre farm in France (they cost about the same). Grow organic veg in the sunshine and watch your kids grow strong and healthy in the fresh air. Who the hell needs the pollution, drugs and violence of central London anyway. |
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The thing about land is...they don't make it anymore
by SingaporeD
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#1000247
of 3278
19 Sep 2002
10:37 AM |
| The reason house prices keep going up is a simple result of the most basic law of economics: supply and demand. If supply is restricted, prices rise. They don't make land anymore, more people are living alone, incomes are rising, interest rates are low, so of course house prices are going up. They will continue to do so until the factors above change. Interest rates will have to rise to 12% (as in the early 90's) in order to start reducing demand, because people have to live somewhere. One solution would be to do what they do in Singapore (which, like the UK, has limited land area), that is to build up. Singapore is covered in 30 story blocks of flats (very similar to council falts in UK), and they sell for approx. 150,000 GBP. Not cheap, but then they don't make it anymore! |
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Housing
by Guest Jade Herts
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#1000246
of 3278
13 Sep 2002
02:36 PM |
In response to "Location, loacation, location" Belgium Guest. I cannot agree that the smart people are selling and moving away. Some inevitably are, but as we all know, the ever increasing influx of people coming into the London area will continue to keep the prices high due to an overall net demand for housing [once taking into account the sellers and movers away - an overall very small minority].
The south has and always will be an area that people gravitate to, and although the old and more adventurous amongst us may well "get out of the rat race" this will be more than replaced by the influx of overseas immigrants, and young would be aspiring professionals from other parts of the UK.
Coupled with low building numbers, low interest rates [remember - the Govt wish into Europe and to remain competetive, these have to remain low as in Europe] and "circular money" i.e. inheritances handed down through the generations based on high property values on death being used as large deposits - will serve to maintain the upward pressures on prices.
A stagnation and levelling is a realistic proposition - but large reductions not !! |
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'Would be buyer' dilemma
by Fergus
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#1000245
of 3278
11 Sep 2002
04:03 PM |
I really wonder what to make of it all.
I sold my house in Bucks November 2001 convinced that the Sept 11 attacks and rising tension in the middle east would drive oil prices, and therefore inflation and interest rates higher in 2002.
How wrong I was - if anything 'the regions' have experienced greater price growth than London itself since then.
As I work in London I rented a flat hoping for some correction in prices that reflected the huge discrepancy between incomes and 'valuations'.
So, looking back I've missed out on +/- 20% growth over the period, paid a fortune in rent and seen negligible growth on my capital when inflation is taken into account.
At the end of the day I need and want a home, and am poised to buy again, but in the back of my mind sense that people have 'had enough' of these absurd valuations. Even if I were to buy now and there wasn't a crash it could be a long time before the incomes/price ratio moderates such that I may even have the option of finding a buyer of my property even on a 'money back' basis.
Far too may people seem focussed on "what will it cost me per month", without projecting as to what higher interest rates will mean for their repayments and many seem happy to ignore the 'capital account' altogether...
Surely such ambivalence is folly when sop many people are carrying so much secondary debt which is more likely to be there undoing.
Call me a cynic, but surely the MPC don't want to upset the apple cart when equity withdrawal is the only thing keeping the economy going...
You can only spend a pound once, but the debate is, was my strategy right, but just 12 months too early? |
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Supporting house prices
by Martin H
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#1000244
of 3278
11 Sep 2002
03:13 PM |
Guest makes some valid points. However, one of the major factors holding up house prices unmentioned is the lack of housing being built.
Last year we built the fewest number of houses since 1927. This despite the fact that there is a greater tendency by people wishing to live separately, rather than as part of extended families.
Increasing unemployment should have a future bearing on pay and hence inflation, although public sector increases are a worry if they continue at such rates year after year.
The main future problem is 'buy to let' market. The lack of good return to offset the periods when a property is empty will mean some people leaving that sector of the market. They might find that they bought at the top, and have to sell between 5%-10% lower ignoring costs and loss of interest that the original capital might have earned. |
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Housing Market
by guest
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#1000243
of 3278
11 Sep 2002
01:30 PM |
The market won't burst but it will drop 10-20%. To ask why you have to look at what is holding prices up - excess demand over supply with supply driven by low unemployment and low interest rates.
Unemployment is driven by the economy which will falter in the next 12 months - it is fundamentally being driven by the consumer loading up on debt, perversely encouraged by the housing market.
Interest rates will go up to control inflationary pressures in the economy. To pick 2 factors; oil and labour. On oil there won't be an invasion of Iraq soon but continuing tension over the next 6-12 mths will feed higher oil prices. On labour, productivity in the UK isn't going up and with higher wages this is inflationary- who is getting the higher wages? Inflation in the public sector is now running at 7%.
A rather modest in interest rates from 4%-5% increases the interest payment component of a mortgage by 25%- i.e you were paying 10,000 on your 250,000 mortgage suddenly you have to find an extra 2500 a year.
Lastly, there is developing evidence that central banks need to conrol asset price bubbles witness Japan and now the US
The economy is like a bicycle, when it is moving it is fine but you fall over when you stop - and you if go too fast and fall off it can be truly nasty. |
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Location, Location, Location
by Belgium Guest
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#1000242
of 3278
11 Sep 2002
11:47 AM |
| I moved out from the UK to the Isle of Man Because the TAX burden in the UK is much too high and the services provided by the state remain very poor. Yes Location, Location, Location is what it’s all about. Just got myself a 6 bed property in Belgium for £100k and I can still travel into London fast and cheap. In Belgium i don’t get mugged walking down the street or speed cameras taking my picture. The cost of living is much lower. I bet no one has a property in the south that is a patch on mine and cost less than £300k. Stamp duty in Belgium is 10% but it stops prices running away. If location is what it all about then what has London got to offer me ? Nothing. Smart people are selling now and moving up north or abroad so London will not have a long term housing shortage because it’s an area that few people really like. |
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UK housing market, a bubble about to burst?
by Gary
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#1000241
of 3278
03 Sep 2002
12:51 PM |
Without doubt the current pace of house price inflation is unsustainable, however, circumstances are different from the last house price crash. Crucially interest rates are considerably lower and more importantly look set to stay in the low trend for the forseeable future. Rates will probably be higher this time next year but not a great deal higher.
The big problem is the level of household debt. Commentators are fond of pointing out that house price/income ratios are still lower than in 89, however, they fail to account for the levels of personal debt that is at unprecedented levels. I think we are at a stage where debt is now at dangerous levels with serious implications for consumer demand going forward.
Assuming that interest rates remain benign only a rise in unemployment will topple the housing market. So far the UK has fared well, but the outlook in europe is deteriorating and the US has stalled somewhat. As long as the general global economy improves by Q402 or Q103 I think the UK housing market will avoid a crash. If this is not the case the UK consumer could start to run out of spending ammunition, then we could see problems. |
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Last week Nationwide reported prices rose 2.5% in August.......This week Halifax says 0.2%.....
by Shareholder
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#1000240
of 3278
03 Sep 2002
10:23 AM |
So what about statistics and experts!!!!
I bought a bottle of pop for 49p or was it £6.02 ie. 12.5 times more.
How much are the plonkers paid who come up with the figures? I suggest they get rid of them and reduce the cost of mortgages by the amount saved on their wages! |
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History repeating itself.
by Eddie DInnage
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#1000239
of 3278
01 Sep 2002
05:27 PM |
I have reserching the nature and patterns of economic bubbles throughout the ages.
The pattern of a bubbles appears in many forms to us ie opposite sex, cars ,opportunities to make vast amounts of money quickly and easily (ever heard of that one anyone?),
by understanding what makes and breaks a bubble in the past we can look for indicators that suggest what future circumstances will arise. Obviously we cannot predict exactly what will happen, and I have seen a horrendous amount of mistaken predictions made by eminent people and institutions over the last few years.
The first housemarket bubble appeared in ancient Greece in the year of 333BC sadly there was no historical evidence detailing the circumstances around it so no evidence that we could rely on is there so has to be discounted. But I was for whatever reason glad to see that bubbles have been forming bursting and reappearing with regularity for as long as there has been humans around it sort of makes people who are now struggling feel that they are not as stupid, alienated and unlucky as some have been feeling as of late.
Moving on more recent times was the South sea bubble which took casualties from all over Europe in the 15th Century from there the Tulip Mania occured where tulips were changing hands for ther equivalent of $200,000US in todays money. Then from Australina mining ahares, to Internet Shares to the current housing market.
In all cases where easy money is seen to be made or rather the prospect of easy money to be made people simply see the Gold-Nuggets and close down all other thoughts and conveniently forget the last scathing thinking that THIS IS THE DAT WHERE ALL OF MY FINANCIAL WORRIES ARE LAID TO REST, AT LAST!
I can only come to the conclusion that this is inherently human to do this. This process or function of human behaviour seems to think that when something valuable is to be gained that unless they act NOW, IMMEDIATELY the world shall open up immediately and swallow them whole, a fear of losing out which quite envelopes the individual.
I find that frightened people are often impulsive and will take information from their environment and use this as a yardstick to process their next movement. I was watching a documentary on The millenium bridge across the Thames, you know the one where it kept wobbling! (and no the artchitect was not drunk) It appeared that it was the music that was being played at 60 beats per minute which in independent tests showed
A if a group of people walk to no music there is no pattern.
B if a group of people walk to music of 120BPM they do not walk in time but DO walk faster.
C if a group of people walk to music of 60BPM they walk IN TIME AND AT THE SAME PACE.
What occured on the bridge was that people walked at random heard the music that was at at 60BPM and then walked in time and the slight left and right forces of the feet coming down first caused a little wobble which upon richocheting across the bridge and combined with another foot down causes a pendulum effect to occur and being humans we will all say we are contrarians, but unless we are supermindful we CONFORM to the crowd without our knowing about it.
This caused the bridge to wobble in time and also if looking at the same priciple applied to the housing markets where first a little wobble, combinging this with falling stock markets and a general lethargic market adds another wobble. Another foot down or fuel to the fire is low interest rates, combining with the fact that buy-to-let is going up alarmingly and more houses are being built than ever and QUICKLY! by folks keen to surf the wave.
In conclusion I can only predict one way for the housing market to go, already it has reached historic prices when compared with inflation what cannot be predicted is WHEN. In all the bubbles historically the value of the article disappears as quickly as it came. And if the interest rates goes up and the economy still is gloomyish negative equity arrises then so many first time buyers will have been sold themselves up the river.
This has happened recently in Japan with 100yr Mortgages being passed from generation to generation, the bubble burst and in 6 months I believe the house market dropped 65%.
In silicon valley the story is similar and even in hong-kong the same pattern of bubble to bust emerges as it always has done, does now and will continue to do so for all long as there are human beings.
P.S. I am looking to correspond with folks who have an interest in psychology and economics; free from from ******** and spin and on a more practical basis than theoretical any age and from any circumstances I do not discriminate.
regards
Eddie
Dinnage4@aol.com |
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Just like an emerging market
by The Reverend, Hong Kong
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#1000238
of 3278
01 Sep 2002
11:20 AM |
What's really amusing is that the public in Europe & America thinks it is more sophisticated than their emerging markets counterparts. Alas, they are just the same.
In 1996/97, house prices in Hong Kong were in bubble mode. Punters believed that prices could only go in one direction and demand would always outstrip supply. After all, loads of young and immigrant families were coming into the market and there wasn't much space left to build. Let's buy-to-rent went the clarion call. It's a sure thing. We can make money in bed.
Sound familiar? Well, prices in my lovely city are down by almost 70% since the peak in mid-1997. Why? Well, everything went well until incomes started to fall once the stock market collapsed and the region went into a deep recession. Then you had the deadly combination of high prices and madly illiquid household balance sheets. (People forgot that faling equity prices and rising property prices make their portfolios very illiquid and much less able to cover cash flow constraints). Suddenly the penny dropped and everyone wanted to sell. But there were no buyers. Oh dear. And then real interest rates began to rise sharply because falling house prices meant people had to tighten their belts and the economy hit the wall. All of a sudden, all those buy-to-renters faced lower rents and sharply falling resale prices. Calamity. And all because, like their investments in sure thing equities, they got greedy, didn't do their homework and believed that prices only go in one direction.
Welcome to emerging markets UK. The land of straight line foecasts and ostrich syndrome. Anyone for short sterling? |
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Controlling house prices
by Michael Reid
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#1000237
of 3278
30 Aug 2002
06:39 PM |
High house prices do more harm than good.Its not real wealth and it distorts the economy.
They create a very highly geared population which is overborrowed and overly vulnerable to financial markets.
An efficent economy needs a
mobile labour force.Affordable housing is essential to mobility.
Two things might help.
1. If house prices were included in published measures of inflation Government might be more keen to ensure housing remained affordable.
2. If lenders were not allowed to put all the long term risk of increases in interest rates onto the Borrowers - i.e. all deals had to be fixed for the term of the loan - the lenders would be a lot more careful about how much they lent to whom and for how long.
MWR |
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London demographics.
by Spindrift
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#1000236
of 3278
28 Aug 2002
01:48 PM |
Sid and Ethel Cockney have lived in a Victorian terrace in London for thirty-five years, the mortgage is paid.
The house is worth £150k, no house of this type can be bought for less anywhere in the capital.
Surely it's natural and proper that Sid and Ethel cash in their investment, retire to Sarfend and spend the profit realised on Germaloids and gin, making room for younger, highly paid professionals?
Whole areas of London are changing in this way, the old Londoners, only one generation away from slum dwellers, are selling up and sodding off.
Islington was as rough as anything in the early eighties, now you can't heave a brick without hitting a cappuccino bar. |
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