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| The UK housing market: a bubble about to burst? |
answer to question
by Jack Straw
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#1000683
of 3278
 12 Nov 2002
06:31 PM |
The long and short of it is yes.
This is part of the reason why the govt has predicted a requirement for 1 million new homes in the next 10 years.
One new approach adopted by councils is to force building companies to incorporate "affordable housing" into any new development.
Another I have seen is that in certain areas cash incentives to leave concil housing are offered, rather than house purchase.
However for wealth creation in the working classes and the maintenance of the property boom - there are key successes in this strategy.
If you have a council house to buy the answer is buy it while you can, if you can afford any extra burden. |
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council homes
by a question
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#1000682
of 3278
12 Nov 2002
06:15 PM |
| because of these sales are there going to be less council homes in the future or are new developments allocated to the council. |
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Housing
by Ex Council Tenant
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#1000681
of 3278
12 Nov 2002
06:06 PM |
| I guess I am a fortunate one. I effectively bought my council house at a 60 % discount, lived in it the minimum period required and sold at a vast profit to move on. It seems to me that the forum here are concerned only with those who are first time buyers needing to find a hugh deposit etc to get into the housing market. Consider those who can still buy ex council houses at reduced prices. That helps to prop up the prices too you know. |
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by david
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#1000680
of 3278
12 Nov 2002
06:04 PM |
thanks extra dry.
i am hoping my property in london which i bought a year ago wont go down too much below the price i paid for it due to the lower proportion of 3 bed houses in greater london. The studios however are very overvalued, (£120k in my area) and if I was a first time buyer I would look to the home counties. |
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The final phases of a boom
by JJ
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#1000679
of 3278
12 Nov 2002
06:01 PM |
Property prices, according to some surveys at least, have been accelerating, something which is typical in the final phases of any boom.
Those last people who get on board are the ones who think: "if I don't get on now I never will, so at great personal risk they jump on the fast moving bandwagon often just before it goes off a cliff."
The UK property bubble has been remarkably resilient, despite the slowing economy and the loss of highly paid jobs.
Thanks to the move from inflation to deflation/low inflation the housing market received a very big one time boost in the form of lower interest rates (this won't happen again), which are likely to remain low for a long time and will no doubt go lower, giving the housing boom more mileage no doubt, maybe for as long as 12 months, who knows? If 50-year mortgages are introduced, who knows how long it could go on for? But end eventually it will.
However, hopes that prices will plateau are misplaced, they rarily do after a bubble or a boom has run its course. They go sharply in reverse as speculators pile out as quickly as possible and often start a stampede.
Speculators in London have been buying properties purely for the capital gains and don't even attempt to rent the properties out, these are in it for the quick buck.
Even if base rates go down to 3% there will come a point where prices will no longer be able to do 25-30% a year sustained by ever falling borrowing costs, as people's income rise by only 3-4% in an OK economy.
The UK property market has all the signs of a bubble. Fast rising prices, outpacing fundamentals and fueled by easy and cheap money (the classic fuel of all booms) coming from a highly competitive mortgage market with players desperate to lend to grab market share.
The boom will end at some point, simply because the easy credit taps have been switched off and this is unlikely to come about due to fast rising interest rates this time. |
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Mr Martini
by Jack Straw
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#1000678
of 3278
12 Nov 2002
06:01 PM |
Mr Dry Martini – you appear to be shaken and perhaps even stirred. Your prediction
of a drop in house prices a 40% is pure folly, and im not even commenting on 60-70% figure. – see below:-
Investment bubbles are, by definition, represent extreme and irrational valuations. It is therefore foolish to predict an “imminent” crash. What one can say now though is the following:
1. It will collapse within the 2-3 years from now.
2. It will fall to at least 40% of today’s prices (and probably 60-70%) irrespective of how high it goes before the crash.
3. It will not find a “plateau”
4. There is, and will be, no “organised support”
5. Very few people will be able sell near the highs
Your further prediction that interest rates will raise has been clearly not been listened to by the FED, and most likely the BOE next moth.
The truth of the housing markets is that they are demand driven. These factors are not purely based on supply sided economics. If you believe that you are living a lie.
The demand for housing is predicted to rise by 1 million homes over the next 10 years. Therefore with demand increasing, and a steadily aging population – the net average wealth of the nation is therefore also increasing. This clearly leads to price net increases.
Your logic secondly falls down on the fact that house pricing does not directly correlate to movements in either interest rates or home defaulting. If this was the case we could match both charts.
I live around the canary wharf area and can clearly see that even when a market reaches maturity another product cycle can be created via a market manipulation – i.e. the activation of 2 buildings housing 15k of workers of both HSBC and Citibank. Thus creating a new product cycle.
I believe if you worked in the markets influenced, or had a relevant position you would be more knowledgeable over this situation. However I am not elitist I wholly encourage people of all abilities to place comments on FT.com. Congratulations on your postings even if this is one of the worst emails ever placed on FT.com – my final thoughts to you are as follows – direct from Macbeth Act 5 Scene 5
1. My thoughts on your verbal barrage
"Hang out our banners on the outer walls" said Macbeth. "Look at them. Our castle is so strong we can laugh at them until they get bored!
2. This one speaks for itself
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing. |
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Politics and intervention
by Extradry Martini
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#1000677
of 3278
12 Nov 2002
05:53 PM |
Rob G:
You’re not missing anything – of course to say that intervention in the foreign exchanges has anything to do with socialism or even politics is ridiculous. (The poster that said it has either not read the financial pages of the press in the last 2 years or has been unable to understand them. He has realised how out of his depth he is, thrown a tantrum and has resorted to insults. As a result his contribution is worthless and should be ignored.)
Actually, what I failed to include in that post was that the buying of reserves should be as quiet as possible, even done through gold or oil purchases (thereby having to buy US dollars) on the way.
David,
I am looking at average house prices in the UK, that have moved more than 40% away from their long term fair value trend (See the Nationwide’s own report on this). As markets tend to overreact, I expect a move of more like 60-70% before it bounces.
You say that London wasn’t affected so dramatically as a whole in the last bust – nor was the rest of the country. That was because inflation masked the real fall in price values – 40% against a nominal fall of 14%. This time around it is different. Inflation is dead for the foreseeable future (caused by the same forces slowing down investment in the economy) and will not be there to bail people out.
You are right to say that prices will fall differently. In general, those properties that have risen the most (taking into account improvements etc) will fall the most as they are the ones that are most overvalued |
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The Real Hoogers
by Lulu the Cat
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#1000676
of 3278
12 Nov 2002
05:49 PM |
The real Nicholas van Hoogstraten was famed for - among other things - correctly identifying the peaks in the market since the 1960s, and duly selling off the bulk of his housing stock each time - most recently and most profitably in 1989.
The thing I'd like to know is whether, from his prison cell, he's planning on selling off his properties right now, or if indeed he already has... |
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martini
by david
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#1000675
of 3278
12 Nov 2002
05:26 PM |
why would it be hard to sell near the high?
How can you say prices will fall 40% from current prices?
Wouldnt prices fall differently around the country, for example if london as a whole is looked at, prices weren't affected so dramatically in the late 80s. |
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A martini to morality!
by Hoogstraten
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#1000674
of 3278
12 Nov 2002
05:25 PM |
I note Dry Martini is a financial trader – maybe I will buy something from your stall at Spitalfields in the weekend? It should be easy to spot you – presumably you wear a nightie and roman sandals? I think this will be your outfit because you can arbitrarily define what is moral and what is not:
“In general, investment and morality considerations do not exist in the same dimension. Making or losing money from the asset markets (as long as you are doing it fairly and legally) is neither moral nor immoral.”
If you are not Jesus, I would be unsure as to why you would make such an astoundingly pretentious remark as to what constitutes morality? I now realise I have underestimated you – you are all seeing, so have decided that a plague will descend on the UK property, in biblical fashion. I will sell immediately, as a consequence of your devine intervention.
Finally, I am surprised that when working on your stall, you do not find that your sales are sometimes affected by more than economic fundamentals – surely sometimes sentiment plays a part as well? Maybe it gets difficult to determine what is moving the market you are busy counting the customers change, and getting buffeted by the wind? |
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True, true
by Knowledge is Power
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#1000673
of 3278
12 Nov 2002
05:23 PM |
Rob G;
True, but depends on how much you raise it ;-)
Sorry me being pedantic! |
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Home Ownership and Socialism
by Rob G
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#1000672
of 3278
12 Nov 2002
05:22 PM |
Home ownership is not a socialist ideal, it is a Thatcherist one!
As I'm sure everybody here knows, It was encouraged by the Iron Lady in the hope that it would encourage people to respect themselves, their property and their neighbourhood.
People in rental accommodation usually have little regard for the property of its surroundings. The 'garden full of old Cortinas' syndrome prevails, particularly in council-owned properties.
Of course the socialists see this attempt to encourage home ownership as the 'enslavement of the masses' but I firmly believe it is the only way forward to a better society.
People will respect their own property no matter how cheaply it was obtained. |
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Mania
by Extradry Martini
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#1000671
of 3278
12 Nov 2002
05:18 PM |
David
Investment bubbles are, by definition, represent extreme and irrational valuations. It is therefore foolish to predict an “imminent” crash. What one can say now though is the following:
1. It will collapse within the 2-3 years from now.
2. It will fall to at least 40% of today’s prices (and probably 60-70%) irrespective of how high it goes before the crash.
3. It will not find a “plateau”
4. There is, and will be, no “organised support”
5. Very few people will be able sell near the highs |
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To K.I.P
by Rob G
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#1000670
of 3278
12 Nov 2002
05:13 PM |
K.I.P,
I don't think there will be any extra revenue if they are making less in stamp duty on the purchase of 1st homes. |
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Hoogy - Have I missed something?
by Knowledge is Power
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#1000669
of 3278
12 Nov 2002
05:07 PM |
Rob G,
What should the government do with all that extra revenue?
HocusPocusStraten;
With regard to "socialism" and government intervention with BoE practices, I’m sorry have I missed something, It’s just I find you comment inaccurate & fatally flawed.
The government set's the hymn sheet that the BoE sings from. Which has been operational for what 4-5 years? An amendment or adjustment to this would not be socialist anarchy – merely enhancing and improving to refine the process further. I think it has been Labours finest move to give the BoE independence on setting UK rates & that’s from a non-labourite too!
With regard to the poor masses, that’s a shameful comment. People deserve a place to live & if they can own it all the better & good for them. The principal fact that there are many that cannot afford to do so (due to soaring house prices), does not mean that they should be belittled or ridiculed! I can understand their resentment, I can also empathise with an entire generation waiting on the wings who, if this current boom continues will be in a different social class to previous generations. ‘But no, their pay can rise to meet the levelled off prices’. Well, no actually, it can’t. The more a company pays you, the less competitive it makes itself in a global environment. Just look at all the tele-support being shipped out to India (case in point). Something will give, or there will be a fundamental change to the structure of our society. Which do you think is more likely to happen? |
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