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| The UK housing market: a bubble about to burst? |
To Jack Straw - That Old Chestnut
by Rob G
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#1000947
of 3278
 20 Nov 2002
05:54 PM |
I wish people would stop dragging out that tired old statement about monthly outgoings on mortgages being 'affordable' as if this was a good thing.
For newby buyers, that's the biggest red herring around, and it's a trap being used to ensnare them in mysery for years to come.
With interest rates at a record low, that's hardly surprising, is it?
It's nothing to celebrate when at the current point in time they are only likely to go up and back in the last boom they were incredibly high and only likely to fall in the longer term.
The ratio of salary to house prices is the ONLY ratio of any importance in the longer term.
Monthly 'affordability' driven by interest rates can change in the blink of an eye. Salary levels are unlikely to do the same. |
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Downturns
by Engineer
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#1000946
of 3278
20 Nov 2002
05:29 PM |
Rob G, I think you know my position by now.
To build on your comment about negative being positive, a number of commentators have argued that recessions or downturns are a necessary part of a capitalist system, and I would tend to agree with them.
Take the example of the dot com boom. Effectively a lot of money was mis-allocated to companies that were not really "technology" businesses in my opinion, but rather poorly organised sales outfits using a different (newly available) channel. As a consequence, some other more established and probably more important but less "exciting" businesses were neglected during that period. The market in general was distorted in a number of ways, and some of these distortions are still in the process of being resolved. In fact, the housing market boom is probably at least partially related to the dot com boom.
Similarly, the easy "gains" possible from owning a highly leveraged property in recent years are probably causing a variety of distortions in the marketplace. Why bother to work if purchasing a property using borrowed money can result in better returns? Clearly this is not sustainable, and it does appear to be a pyramid scheme as you suggest. As with most pyramid schemes, the last to get in will be the ones to suffer the most when the fun comes to an end. You would have thought people would have learnt from the end of the 80's, but this time it's different ;-) Of course its different, but people will still get burnt in the same way!
Matt, are you for real? You want to try and keep making money from property, but complain about the estate agents that have played a role in increasing the returns from property in recent years! There wouldn't be any cause for a correction if there hadn't been a boom in the first place. Unfortunately, its not possible to eat your cake and have it indefinitely. |
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kip - FYI
by Jack Starw
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#1000945
of 3278
20 Nov 2002
05:17 PM |
Thank you for your message. I will look into your points.
In summary -
"Better a witty fool than a foolish wit."
- Shakespeare |
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To Jack Straw
by Knowledge is Power
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#1000944
of 3278
20 Nov 2002
05:09 PM |
To Jack Straw,
Please could I ask 3 things of you:
1) Read my posts no: 919, 922, and 928.
2) Provide a source for your data (I have, every time). Without it, it is meaningless, invalid, and cannot be used to support your argument.
3) Stop quoting! |
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Coleridge - "At length did cross an Albatross"
by Jack Straw
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#1000943
of 3278
20 Nov 2002
05:00 PM |
One must remember that when the surfer rides the wave fifty feet to the shore, the informed individual realises that the waves are created miles away from this action.
“Any intelligent fool can make things bigger, more complex, and more violent (like a crash). It takes a touch of genius - and a lot of courage - to move in the opposite direction.”
- E. F. Schumacher
Analysing the life span of a wave, by its success and failure, in the last fifty feet of its life is pure folly. But sadly this is a symptom of a marginally informed society new labour has made us. To talk of a pure short-term dip, in housing prices, this is semantics and it is clearly folly to not recognise it. Mid to long term capital appreciation will remain strong and the benefits of house holding out strip the rental market.
With regard to current prices I would like to identify the following -
“It is not the horse that draws the cart, but the oats.”
- Russian proverb
All the doom mongers on this board cannot bring about a crash. But,
“No pressure, no diamonds.”
- Mary Case
Demand severely falling away is the only method. As figures from East Anglia prove the boom is not over. Secondly, value can be added to the housing market by infrastructure improvements. These said improvements, at a micro economic level, can appreciate housing prices in any housing environment.
In the UK housing market, one can see that
The corporation of London has forecast a shortfall of 459,000 homes in the capital over the next 12 years.
The UK Govt predicting a shortfall of over 1 million homes in the next ten years.
That there is potentially still a sufficient demand within the housing market to maintain housing levels and certainly there will be in the future.
“If everybody's thinking alike, somebody isn't thinking.”
- Anonymous
Secondly in real terms the amount of an individuals income consumed by mortgage payments is still lower than the 80’s.
Year %
1970 15
1975 17
1980 19
1985 20
1990 27
1991 23
1992 19
1993 18
1994 18
1995 19
1996 17
1997 19
1998 19
1999 18
2000 19
2001 19
People decry – “oh its too expensive” – but house payments are still 45% below the high of 1990, as a percentage of income. One must remember that mortgages are awarded on people’s ability to pay and not current house prices. While mortgages are being offered and people are buying why will prices drop????? And remember we are in a winter now and not spring/summer. Therefore to argue its slower than six months ago is purely rhetoric, this is always the case.
In summary, to the doom mongers -
“If everything is coming your way then you're in the wrong lane.”
- Anonymous
Oh and I’m more than happy to talk literature with you kip – but only on the appropriate forum |
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thought it was clean, sorry monitor, back to the chat
by Matt Spence
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#1000942
of 3278
20 Nov 2002
04:40 PM |
Rob G me old china,
Not looking for blind optimism....just looking for a bit of sense. From your well heeled comments, your refferring to the masses who are shaking in their boots about your predicted crash. Are you not shaking? Do you live under a bridge or do you actually own a home. Probably own it outright, Flaming lambourghini lodge perhaps.
If we endure another property crash I will hold you and the other city slickers responsible for any losses I incur. How long do we let the financial mismanagement of our economy and major companies go on. It is not difficult to run a business, however I am constantly amazed at how often intelligent articulate people at the top of industry and our governments cannot get it right. I on the other hand I will get it right and continue to make money out of property. Be shrewd, do not listen to estate agents or city commentators who have only a poor track record. Stick to the basics. Its all about demand. Think carefullt about the location, if you get that right you will always have a demand for the property regardless of the market. It will always have value and you will always be able to sell it. Perhaps we should put all the estate agents and city boys and girls into a room together cos if you look at the history books, they have alot in common. They are the only groups of people who consistently manage to preside over huge downturns in their industry (and have the same dress sense) |
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Polarity
by Rob G
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#1000941
of 3278
20 Nov 2002
04:35 PM |
Engineer,
Wouldn't you say that negative can sometimes be positive if it steers you away from making a big mistake?
There are a lot of FTB's out there who are reading this forum who need to understand things aren't all rosy out there at the moment.
The people who bought in the last year are up the creek without a paddle any way you look at it, but it's not too late to stop the rest from joining them. |
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BOOM
by Engineer
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#1000940
of 3278
20 Nov 2002
04:26 PM |
Matt, I understand, all these negative people can really get you down. If everyone hadn't been so negative for the past 5 years, imagine how well we'd be doing now...
Jeff, if something looks like a boom, smells like a boom and feels like a boom, then as the saying goes, it probably is a boom ;-) |
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Monitor Note
by Monitor_CS
FT Administrator  |
#1000939
of 3278
20 Nov 2002
04:14 PM |
Rob G, Jeff Morgan and Knowledge is Power are referring to a post of Matt's now removed.
All posters are reminded that personal comments and inappropriate language are not allowed here - they don't add to the discussion in any way and will usually be deleted without comment. |
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ROFL!
by Rob G
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#1000938
of 3278
20 Nov 2002
04:11 PM |
Matt, you poor misguided thing.
And what would you like to hear from us exactly?
That everything is going to be peachy-creamy?
You obviously neglect to observe that we are, in our own way, gently leading you in the direction of the truth.
Unfortunately I fear you came to the wrong place if you want to hear people blithely talking up the market and soothing the nerves of those, like yourself I suspect, who obviously are shaking in their boots at the thought of the Damaclean Sword dangling above their heads fashioned from their own foolish haste to join the housing pyramid scam, whose foundations are unfortunately built on a sinking economy.
I'd suggest you perhaps go and talk to the nice young girls and boys at your local Estate Agent instead. I'm sure they have many words of wisdom and reassurance to offer. Better hurry though, as they'll be signing on athe the Job Centre in a few months... |
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No
by jeff morgan
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#1000937
of 3278
20 Nov 2002
04:06 PM |
Matt - wow! I object though, I'm definitely not an alien.
Rob and Engineer - what boom?
I guess the reason there's discussion is because some people don't believe there will be a price crash. To repeat my prediction, I'm suggesting a 10% - 20% fall so I'm not in the optimists camp - but I'm not an unreconstructed pessimist either. |
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To Matt ( i agree - within reason)
by Knowledge is Power
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#1000936
of 3278
20 Nov 2002
04:03 PM |
Matt;
The reason why I'm so interested is I am a potential FTB. But I fear that unlike many in my postion, I have tried to look at all the facts before deciding to buy. (this includes consolodating & reducing debts, saving a healthy deposit & assessing job security).
Having done this, and infact continuing to do this, there is no way I will buy at the moment. I'm not trying to scare the market or talk it down. There is a big difference between scare mongering & being aware of all the facts.
I think others will come to the same conclusions, but it will be too little to late. It think the market has or is peaking right now. Which is the worst possible time to buy. |
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Cheap house!
by Engineer
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#1000934
of 3278
20 Nov 2002
03:57 PM |
Jeff, I reckon you're right.
It doesn't look as though they've taken part in the boom either, though, making this kind of irrelevant... |
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To Matt
by Rob G
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#1000933
of 3278
20 Nov 2002
03:54 PM |
Well Matt, if you have a few grand of your own folding that you're prepared to invest, there is apparently a small valley in South Wales going for a song.
"How green is my money, boyo?"
As for myself and anyone else out there who has their head securely mounted, I think we'll pass for the time being... |
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Prices
by Jeff Morgan
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#1000932
of 3278
20 Nov 2002
03:40 PM |
Rob G, there's a guy selling houses in South Wales for £100 each just now.
I reckon their prices will probably not join in this great crash. |
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