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| The UK housing market: a bubble about to burst? |
Calling all Estate Agents
by Living in Hope
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#1000848
of 3278
 16 Nov 2002
01:51 PM |
Yes, interesting point re. Estate Agents. They seem to be notoriously silent on this forum (unless they are not willing to reveal themselves).
Are there any EAs willing to add their tuppence-worth? |
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RE: Just Precious
by PG
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#1000847
of 3278
16 Nov 2002
11:31 AM |
To Rob G - however much you disagree with what they say, or how irresponsible you think they are, what they say is in effect the truth. With interest rates at the levels they are, and the fact that 'most' homeowners (apologies - mortgage payers) haven't moved in the last few years, people have never felt wealthier, and I suspect the 15% figure is correct, it is for me.
I understand why you've highlighted this article, and I guess you can't blame the estate agents for trying to push their commissions higher (the gits - apologies...), the trouble is, most people beleive their hype i.e.
(i) Lower interest rates, next movement downwards.
(ii) Prices incresing, perhaps even by 10-12% once market slows, corrects itself.
ROLL UP, ROLL UP, EVERY ONE'S A WINNER.
Thing is, depends on which side fo the fence you happen to sit, trouble for me is I'm straddling it at the moment, can't make my mind up, and as stated previously having only recently visitied this forum, I don't feel qualifed to do so.
I might ask my local estate agent for advice, there again perhaps NOT!!! |
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Just Precious
by Rob G
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#1000846
of 3278
16 Nov 2002
11:08 AM |
I'd like to share with the forum a front page article gleaned from the Southern Property Advertiser under the heading 'Record Surge in Prices' who are, I'm sure you'll agree, fully qualified to comment on the state of the property market in an unbiased and responsible manner. It says:
House prices surged by a record amount last month as the property boom continued. Halifax's monthly survey showed house prices jumped 4.7 per cent in October, the biggest recorded monthly rise. The rise pushed annual house price inflation to a massine 30.6 per cent with the average property price now £122,377. Martin Ellis, chef economist at Halifax, said: "Last month's record rise in prices underlines the continuing strength in the UK housing matket as the low level of interest rates and fallen unemployment drives up demand. (And this is the part I particularly like - ed.) Affordability remains very good too. Mortgage payments represent 15 per cent of gross earnings for a typical new mortgage borrower, one of the lowest percentages since 1984."
How much renewed vigor and determination those excited young boys and girls in Hampshire must take from such an article.
ROLL UP!, ROLL UP! EVERY ONE A WINNER! |
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the sheer madness of this whole subject
by PG
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#1000845
of 3278
16 Nov 2002
10:31 AM |
Before I start, I'd like to state that I am certainly no economist, and prior to discovering this forum, I did consider myself fairly 'on the ball' with regards to what is/was likely to happan to UK Interst Rates and the UK Housing Market in the immediate short term future (i.e. 2-5 Years). I now realise that I essentially know nothing, certainly nothing worthy of comment in this forum, but what really scares me is the fact that 95% of my peers understand even less than I do, and they are unfortunately the ones taking out interest only mortgages at up to 4-5 times their annual salaries, those that can't get a bank to loan them the money using normal income/mortage calculators are going the self-cert route i.e. it's OK Mr Mortage Lender, I can honestly meet these payments (provided the interest rates don't move up by much).
I must confess, my property has just gone on the market, and I was considering a fairly large jump up the ladder (large by my standards anyway), my rationale being:
(i) I want to move.
(ii) If I don't do it now, the gap will widen.
(iii) I run my own business, so if push comes to shove, I could always pay myself more (business is quite good - at the moment)
(iv) I'll fix my interest rate for 5 years, at least that way I have some form of protection.
The house only went up on Thursday, but after visiting this forum, I'm considering taking it off again, battening down the hatches, and shoving some spare cash under the mattress just in case the banks go under (added for dramatic effect).
I hope you can all sleep at night  |
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reply to amazed
by sparkey
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#1000844
of 3278
16 Nov 2002
09:04 AM |
Don't really want to get into a long argument here and fill up the poll, but here goes:
"are lending institutions that dumb to ..."
Most (85%+) morgages are still variable rate. Of the few fixed rate morgages that are sold, most are for only a few - 5ish - years.
On a more general comment, recent financial history (20 years) is more about cock-ups, stupidity, losing money etc.
Remember, in the early 90s, Barclays nearly folded due to it's bad debts - mainly housing.
[Between you + me: Most financial institutions are not as clever - or safe - as they think ;-)]
I predict a large fall in property prices. Why:
1) Huge cut-back in corporate investment.
Most of the expansion we've seen since 95ish will go. Capital and debt is no longer cheap; current profits just don't cover the cost of capital.
I also predict a HUGE restructuring of the financial services - THE main employee in the south. I don't just mean city jobs, I mean all those 1000+ employees companies spread across the region. These jobs are top of the income food chain, each one supports 1 to 3 other jobs (the baker, butcher+ candlestick maker)
2. Rise in inflation.
Japan's deflation has more to do with pork-barrel politics. Companies are propped up to avoid unemployment.
There is a certain amount of political 'interference' in corporate UK. But the insitutions are not opaque enough to allow something like Japan-90s. Oh, we also just don't have the money.
Remember, interest rates were a political 'plaything' during the last slowdown. The real interest rate during the 89ish to 92ish was negative!
This time it's different - the Bank has explicit inflation targets - 1% either side of 2.5%
The UK does have a strange trait that manages to produce high inflation AND low growth.
I'm not sure that trait has gone.
The UK normally relies on a currency collapse - sorry, re-rating - to bail it out of whatever mess it's got itself into. If this occurs, inflation will go up.
Remember, stirling is just a piddly little side-show in the greater Dollar-Yen-Euro show. Without (the little) North Sea oil - we are nothing!
No one can predict the future. The financial institutions are no different. Companies and individuals should always expect the unexpected. The housing market + debt levels just do leave any room for any sort of set-back. It will be grim :-( |
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My family and other animals
by jack straw
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#1000843
of 3278
16 Nov 2002
03:55 AM |
Drunks Understand Martini Bravado (dumb)
I tire of your petulance; you stick on rhetoric and fail to grasp fundamental issues.
“He occasionally stumbled over the truth, but hastily picked himself up and hurried on as if nothing had happened”
Churchill On Stanley Baldwin
The NASDAQ has had high movements in one day both down and up, within the last 3-4 months and obviously is a more liquid market than housing. To query the specific dates is pure semantics and proves you fail to grasp the fundamentals again –
“What rubbish, what offal”
Julius Caesar
Your attempts to cloud the issue by adding further exchanges are both pointless and ill founded. Clearly we do not mark to market house prices in the same way as the NASDAQ, as the volatility is much lower,
“Something is rotten in the state of Denmark”
Hamlet
My asset liquidity theory is based on fundamentals, and if you require google to understand this then for shame, as
“He never broke any mans head but his own, and that was against a post when he was drunk” (on martini)?
Henry V
Sadly for you, your band of sycophants appears to have diminished to zero. They have realised it is against god to “worship false idols”. In contributing to this forum we are attempting to achieve a lively debate, however your opinion appears to be,
“You taught me language, and my profit on’t / Is, I know how to curse!”
tempest
you are caliban, “A most poor credulous monster!”, I believe trinculo calls you in act 2 of the tempest.
I would suggest we stick to the subject as we tire of your invective. 70% house price losses are clearly laughable. Milton Friedman stated,
“The quality of a economic theory is determined by its predictive ability”
This shows that all your economic theorising is flawed. No chart you have viewed has such a trend for you to follow, I suggest you are reviewing your holiday snap of the Grand Canyon, and it is up side down!
Unfortunately google can provide the information, however the analysis is down to the individual. It cannot help you there, my absolon – millers tale - chaucer, pride comes before a fall
In summary you appear to neither walk the walk nor talk the talk. When committed to tangibles you have stated interest rates will rise, fall and stay the same. House prices will drop 40%, 70%, and 50% with a 20% over reaction. My only advice is to follow the yellow brick road and ask the wizard of oz when you arrive what to think. Because, because, because, because, because of the wonderful things he does.
Immortal Gods! How much does one man excel another. What a difference there is between a wise man and a fool.
Terence, Eunuchus |
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Modeling myopia
by rev.hk
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#1000842
of 3278
16 Nov 2002
01:20 AM |
Andy B,
The line you have been taking is a well known one. It isn't so much a winning argument as a tautology. The Federal Reserve has recently pushed out a couple of Discussion Papers using your argument to justify US property market behaviour since 2000. Even they have to admit that real estate prices can only continue to climb as long as everyone believes they will continue to climb. That's not exactly a strong vote of confidence.
Academic models often get it wrong because they try to infer the future from a truncated set of historical variables. The forces that shape the present are often slightly different from the past and it takes judgement and experience to see through the fog.
What models don't include is the fickle nature of people. History is littered with examples of long runs of debt accumulation being followed by strong market sell-offs without much warning from the models. Some modelers get it right, but there are very few success stories that I can remember.
I'd like to know if your model predicted the last crash in UK real estate prices in 1989? Both in terms of timing and magnitude.
Hoogstraten,
Nice to have you back. I though we'd lost you for a while as you composed your latest thumper. You should be proud of your contributions and the fact that Curious would give his eye teeth to be as witty and interesting as you are. Keep up the light relief.
r. |
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Sparkey
by Amazed [even more !]
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#1000841
of 3278
15 Nov 2002
10:51 PM |
I do not think so - are lending institutions that dumb so as to lend on long term fixed deals of 5.5 % for example if it was that easy for interest rates to shoot up [never mind about the uncompetitiveness of UK Plc in Europe]
So, with that, are you now prdicting rises in property prices due to higher levels of inflation ? Please clarify your position. |
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?
by sparkey
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#1000840
of 3278
15 Nov 2002
09:45 PM |
8% - easy:
Pound falls 10%-20$ against a basket of currencies.
Inflation rises - due to capacity/output falling (producers rediscover price increases).
Question:
What is the average UK interest rate over the last 10 years?
Remember - we are the UK, not Germany. We do not have the low-inflation 'reflex' yet! |
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Chaos
by JJ
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#1000839
of 3278
15 Nov 2002
08:44 PM |
Hoogstraten ,
I'm so glad you enjoyed my post.
It is shame you don't understand chaos theory - one of the biggest findings in science.
However, you obviously missed the point of the post entirely.
Never mind. |
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Housing
by Amazed !!!
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#1000838
of 3278
15 Nov 2002
08:39 PM |
| Sparkey !!! Hold on there - interest rates up to 8 %. Now you really do want to see UK plc go down the pan don't you and the bust in property to fall. Explain yourself with some rationale will you now please !! |
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housing will follow the economy ...
by sparkey
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#1000837
of 3278
15 Nov 2002
08:31 PM |
Me again,
Cards on table: I think the housing market will fall. The fall will be in the same real terms as previous falls (probably more) but there will not be high inflation to sugar the drop in real terms.
Let's back away from concentrating on a single figure - house prices - and try and look at the wider UK economy.
I don't the problem is FTB being priced out of the housing market, more that the UK economy is being priced out of the world economy!
OK:
Will we see deflation?
Hmm, the UK economy is more famous for inflation. In fact, following the RPI figures (2.3 and rising) I think we are moving more towards stag-flation.
Debt levels?
Not just morgage debt, but credit cards, car loans, store cards, loan shark ...
I am totally speechless about the level of debt being piled on by people! I'm not some victorian-bran eating prude, but the levels reported in the official figures leave me shocked + worried. Remember, unless you have a rapidly increasing income then todays debt is tomorrows repayments!
Morgage capital repayments vehicles:
Yes, I'm talking about endowments here!
How many people who took out morgages between 1985ish to 1998ish have endownments?
Most of them.
How many endowments will fail to pay out? 95%++
By how much will the policy miss? I guess 60%++
Morgage payments:
People seem to be getting hung-up on the level of interest rates. The element to work about is income to morgage payment. People will struggle if interest rates go up. Poeple will struggle if they lose their jobs - remember this will be first slowdown without interest repayments underwritten by the state.
My guess - interest rates might go up to about 8%
Employment? - up a LOT!
Just look at those 'top of the employment ladder' jobs going. Just wait for AMP to shutdown Pearl next week ...
I think the UK domestic economy is going to end up somewhere between HK + Argentina: high debt/collapsing income, currency shock/payments problems - remember, the more the pound falls, the more inflation will rise. |
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by ftmonitor
FT Administrator  |
#1000836
of 3278
15 Nov 2002
07:47 PM |
| Posters are going to have to treat one another with a lot more respect than has been shown here lately, or a lot of posts will simply disappear. Focus on the topic at hand, not one another. |
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The return of tourettes syndrome
by Hoogstraten
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#1000835
of 3278
15 Nov 2002
07:14 PM |
DrunkOnMartini states:
“At last, a post from Hoogstraten in which he hasn’t disqualified what he has said by using insults – welcome to the adult world!”
I unreservedly apologise to the forum for my temporary lack of judgement – I promise it won’t happen again. In my defence, I can only say that I wasn’t feeling at my best when I took DrunkOnMartini seriously.
Norman Normal said:
“Some of these posts [referring to your yours truly, Mr Hoogstraten himself] read like the rantings of a sarcastic, domineering schoolteacher. This used to be a good forum, but I don't think I'll bother reading the posts any more.”
The bile that Norman throws at schoolteachers is almost pathological, but it is easy to speculate on why he despises them so. I think Norman should show more understanding towards schoolteachers – I would imagine that it would not be easy to teach mental defectives. As for Normans claims that Hoogers is sarcastic, I can only reply that your masterpiece contributions have been sorely missed.
sho_ryuken said:
“Maybe we could achieve that if people stopped replying to the like of "Van Hoogsraten" with his oh-so funny user name. Or better still, maybe the administrator could cut out his "contributions" which only serve to distract from any sensible discussion.”
Thank you for your unsolicited reply to my contributions. You are another contributor that does not read my postings, but has actually read my postings, and doesn’t want anyone to reply to my postings, but then promptly does reply to my postings. I find this paradox curious. Suffice to say, Hoogers does not shirk his responsibilities to clear the misfits from the forum wherever possible.
Slapper says:
“Gareth dear, lets not be too deviant. Even if your gentle future came to pass, it would hardly justify rushing out to buy a house right now, would it? Methinks a sharp slap on the bottom may be preferable to a dull, drawn-out nagging pain...”
In reply to Slapper:
Rushing in this manner will seldom achieves a good result for both parties – one party will invariably be left feeling dissatisfied. I suppose it depends on which party you happen to be as to your satisfaction level.
Your position leaves you wide open, and completely exposed – I suspect this isn’t the first time this has been the case? You could consider the situation in a cold and calculating manner, rather than in the hot and bothered state you appear to have got yourself into. Your inherent point seems to be based on the idea that what goes up, must come down. I think that you may be confusing property with other things? Do the fundamentals indicate a “sharp slap on the bottom may be preferable to a dull, drawn-out nagging pain…?” I suppose this depends on where you stand (for example, how you value properties at the moment). This dull pain you speak of is not necessarily painful for both parties (it is possible the purchase of the property may have been some time before).
Rev,hk says amongst other things:
“…. I don't read this forum much now and have even less interest now that you [Hoogstraten himself!] have arrived. …. - aside from the total absence of reasoned arguments for a sustained increased in UK property prices and Island Blighty weathering the global debt-deflation storm. It has so far, but the cracks are all there - including the UK's **** record on productivity growth.
Not long ago you were the champion of banks continuing to lend in a falling market - in order to avert an even sharper fall in asset prices. Now you are confirming that banks do act prudently in a falling market.…..Enjoy the dark rainy winter. It's lovely here today as it will be for the next three months. Sun, 28 degrees with mid-range humidity and clear blue sky. I'm off hiking over the hills and beaches of the big island. What are you doing?"
Rev.hk’s mails are extremely difficult to respond to, as every sentence somehow contains more inconsistencies than words. In brief:
1. Global debt deflation storm – this does not exist. Only Japan has deflation. Nor is global debt in the midst of a “storm”.
2. The UKs alleged low productivity growth would not cause a property crash.
3. I do not think the property market is falling – you invented this.
4. Most interestingly, you mention the weather overseas. Commiserations regarding your apparent extradition. I would have thought your case for asylum was strong in a literal sense? Keep up the hiking – it should enable you keep ahead of the men in white coats and big nets for some time. Finally, what I am doing now is replying to you - thank you for asking, I understand that the leap of logic to work this out is complicated to some! Just think of it - if you are on Mars now, you might just have raised the average IQs of both planets….
JJ introduces the idea of chaos theory, in regards to freak waves, to justify his underlying “glass half full” theorems. He may be correct in the most trivial of ways. Unfortunately, this argument is in practical terms the most useless contribution to the forum made so far. Imagine if Newton and Einstein had simply decided that the world was chaotic, so it was of no use to write theories and make predictions? This forum would as a result be empty. |
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Maybe only a little overvalued right now - depending on your confidence in the economy over the coming years!
by Si
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#1000834
of 3278
15 Nov 2002
07:09 PM |
Knowledge is Power:
'Question: is there any economic justification for the massive rises in prices?
Answer: no, not when UK inflation as a whole is around 2%!'
I have to disagree a little with this, as the economy has, until the last few years, justified the ongoing increases, and with a clear lag between corporate profitability reductions hitting people in the street (aided by credit and house prices) then, with low interest rates, I'm afraid that, yes, it seems that short-term speaking, current house prices are there because the economy can support them, with some few exceptions of amateur investor-lunacy. This may just be a question of semantics, but the economic background to current house prices (high well-paid employment, high/cheap credit availability, cheap debt servicing costs, and a confidence that this will continue) may be about to shift with a deteriorating economy. Then what is currently maybe only slightly above fair value would become very over-valued. Of course personal and corporate debt-levels cannot increase forever.
This has all been said before, and I guess the crux of the argument is whether or not significant parts of the market would see people forced to sell up (or get reposessed) because of an inability to pay the mortgage if the mortgagee lost his/her job or tennants (who, on losing their job may go home to live with Mum, or share with friends to save money, thereby reducing rental-demand; at least that's what I'd do if I suffered a loss of income). If this is at the same time as reduced consumer confidence, then there may be some forced sellers - maybe very few - and even fewer potential buyers, who on seeing things cool off think they may as well hold off, get a bigger deposit and buy in a nicer areas a year or two later, and carry on sharing or living in a rented studio-flat or whatever while they wait. Myself and a few others are already taking this attitude, so I am an interested party. IF prices fell a little because of this, and people remained unconfident for years about their future employment prospects, then it would feed off itself (as asset-corrections have done in the past) and there would be a house-price crash, as well as a collapse in retailing and I suspect the whole economy (as I don't know what would be left to keep people in well paid jobs). If enough decent employment remained in the economy then this would be enough to stave this scenario off, and we could see a 'flattening' or a minor and relatively safe correction, with established residential areas seeing little transaction volume being little-effected (as always), and some negative-equity in poor areas where people bought out of desperation. Considering the debt-levels of the 'bleeding edge' of first-time-buyers , which is increasing as graduate-debt is hitting £12k these days, together with poorer job-prospects, my money's on a larger collapse. And, yes, many many people who've paid off all/most of their mortgages will be fine, but that's not the point, if there are some forced sellers and even less willing buyers then prices will clearly fall.
I think that if you believe that the rest of the economy can play catch-up with consumer and corporate debt, then the country could get away with it. As 'K is P' has pointed out, this doesn't look very likely to happen, but I welcome debate on this.
Thankyou all for keeping this forum on the boil. I don't care about winning any argument, I just wish to be more informed as I am clearly an interested party myself (being a potential FTB). Time will, of course, reveal all. |
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