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| The UK housing market: a bubble about to burst? |
The Dark Lord are you serious!
by Knowledge is Power
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#1000992
of 3278
 22 Nov 2002
01:37 PM |
Ok so what's London got then that differentiates it from the rest of the UK:
1) Government & all the associated departments & civil service
2) The Financial Markets
3) Banks
And not much else!
So let’s analyse this eh!
1) Can’t do much about this one, but I’d of thought Wales & Scotland would be offended by your comments.
2) Have a look at the top 100 UK companies in the FTSE. Are they all located in London? No? Sorry was that a no I heard? Without the M4 Gateway & the heavy industry of the north there would be no financial markets!
4) Um, who gives the banks their money? THE WHOLE of the UK!
London is congested, expensive, polluted. It is not the be all and end all. The whole of the UK is reliant on London, and London is reliant on the whole of the UK. To say anyone outside London doesn’t matter is an ignorant fool! |
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'Normal People'
by The Dark Lord
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#1000991
of 3278
22 Nov 2002
01:25 PM |
Rob G:
Are you not mistaking the term 'normal people' for 'little people'. Why do people outside London matter ?
London powers the rest of the economy, the rest of the huddled masses simply clutch onto our coat-tails and consume our taxes.
Let them eat cake.
*Bubbles* |
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House Prices
by The Dark Lord
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#1000990
of 3278
22 Nov 2002
01:19 PM |
My Dearest Happy Mango,
I can only be impressed by your selfless attitude toward the working classes ... long may they labour.
I'm happy to take your extensive property portfolio off your hands to relieve you of the enormous burden of guilt you must be carrying.
Property prices are of course going to fall ... price growth cannot exceed income growth long term (ceteris paribas) - adjustment has already started, and I am looking forward to cherry picking from the stampeding herd.
In the meantime I have a jet on the runway, and a lovely bottle of veuve I must get back to.
*Bubbles* |
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Rents Falling in London
by Rob G
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#1000989
of 3278
22 Nov 2002
01:09 PM |
Stuthepoo:
Rents falling in Docklands is no yardstick for the rest of the country.
They are falling because there is an oversupply of relatively expensive rental accommodation at a time when a large number of formerly highly paid city workers are being laid off or leaving the country.
London is a special case. I'm more concerned with 'normal people' in the rest of the country.
As I was saying; if property becomes generally unaffordable to FTBs and investment companies buy up all of the available housing to rent as you suggest, rents will eventually go up as people become resigned to the fact they will never be able to buy. |
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Recession Looming
by Rob G
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#1000988
of 3278
22 Nov 2002
01:03 PM |
I'd not say that the housing boom is preventing a recession. It is only delaying the inevitable.
If the BoE really thinks that sustaining the current apalling spending spree to try to skip over the global turn-down then it is mistaken. If anything, it will only act to deepen the plunge when we finally run out of steam. The choice is between a milder but longer recession now or a far deeper (and possibly even longer) one 6-12 months from now.
When all of our trading partners are hitting the floor all around, do they really think we will still be sitting pretty?
Short term political cowardice is going to have terrible economic effects over the next 5 years.
With pensions in a complete mess, the last thing we need is for the whole country to start accumulating debt hand-over-fist.
As far as government is concerned, there is only one solution - release more land for building and do it quickly. This will act both to stimulate industry, enable the population to become more mobile and cool the housing market without having to increase interest rates. |
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Jack Straw: House prices are hurting us, they are not a good thing for everyone!
by Knowledge is Power
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#1000987
of 3278
22 Nov 2002
11:32 AM |
Jack Straw,
I believe you may misunderstand the direction I am taking with regard to my arguments and fundamental beliefs. I do feel that, as things stand (and I’m really talking about the South East here, house prices are overvalued. If nothing changes, i.e. if house prices continue to rise, or stagnate, the South East is really going to run in to trouble. Firstly, I fear that the high technology industry that is so prevalent in this area will relocate. It will be impossible for these firms to increase the wage packet sufficiently to compensate for the cost of living. Industry as you are probably aware is suffering, and apart from some aspects of the service sector doing well, the local economy is teetering on the edge of wage cuts, reduced turnover, reduced demand etc.
Coupled with this, there is the problem of affordability not just for commercial workers, but for the public sector too. Nurses, fire men, council workers will leave the area. They have no choice, the goal posts have moved to far & there is now little incentive to “battle the storm” and attempt to stay in the area. This again will have a negative impact on the region, which is directly attributed to the cost of housing.
Furthermore, family life will intrinsically change. I would go further to say that it has already done so. As an earlier post of mine demonstrates, more wives/mothers are working part time. This is NOT I would say to improve family life, but to meet the rising costs of living (and house prices). More often than not, this wage will be negated through child minder costs. Thus the only real benefit is to meet mortgage lending criteria & to spread the risk of redundancy across 2 instead of 1 wage packets.
So what’s the bottom line to all this. Well, pushing aside the house price to earnings figures & interest rate debate (which has been well covered and unarguably demonstrates that house prices have rised in proportion to earning), I believe that the effect of house prices in the South East is crippling. The longer things continue, the further people will stretch themselves (not just FTB, but people who are using mortgage equity withdrawal to support the increased costs of living – e.g. fuel, food, debt reduction, and other associated costs).
I do not own a house, my Fiancée and I rent, in the hope that with our good jobs, and rising salary we will a) cancel our debts, and b) save a significant deposit for use in a future date. Be it a nice deposit on a house, or two one way tickets to somewhere warm sunny and cheap to live!
The underlying message here is this. Would you rather have high house prices where people are stretching themselves, hurting the local environment and society at large – or – realistic pricing more in line with earnings, to allow new generations to establish themselves in the area & maintain and develop its prosperity?
I think it is reaching the point where prices will stagnate & possibly fall, but whether this in itself will reduce house prices sufficiently I don’t know (no one does). But, the government is responsible for this area and to an extent what happens to it. Building more houses is good, supplementing income and reducing taxation on public sector workers will also help, increasing tax on second homes is excellent as is the suggested raising of stamp duty. However, I do not feel that the government is doing enough, there is much more to do. Unfortunately they are not prepared for the radical reshaping of economic, social, and industrial structures needed to establish a solid foundation of growth and success for this area in the future. It’s a massive task, they are making a start, but realise this Jack Straw; it is consumer spending & house prices that are keeping the economy form going into recession. It is in their interests ( and a large majority of the population), for this boom to continue. Without it, we will go into recession.
But then again if you can get beyond the end of “boom to bust” that the government is aiming for and realise that large gains have always been followed by large falls then perhaps they have been putting of the inevitable. This is a flawed concept not just economically, but socially (as outlined above), it is putting off the inevitable. Much as I dislike the concept, a recession would have it’s benefits as well as it’s negatives. Remember the end of the eighty’s: look at the cars people had – Porsche 911’s, Ferraris well, 13 years on the same is here. The yuppie factor is back (now with a BMW badge) and it’s an ugly sight to see. I advocate a nice cold slap & harsh realisation that 1) you don’t get anything for free (something is sacrificed in order to get it), 2) we’re ripe for it & let’s hope that if and when it comes it helps restore the equilibrium that has been shifted so far.
House prices should crash, the look like they will, and bring it on I say! |
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housing market
by Happy Mango
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#1000986
of 3278
22 Nov 2002
10:06 AM |
Being a communist I do not believe in the private ownership of property. I feel you capitalist house owners get all you deserve.
Workers will not be badly hurt by this, but bourgeois middle class will be.
The Bible Acts 4:34 - 5:11.
"Neither was there any among them that lacked: for as many as were possessors of lands or houses sold them, and brought the prices of the things that were sold, and laid them down at the apostles' feet: and the distribution was made unto every man according as he had need."
The Happy Mango |
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response to AHP #1000981
by Singapore D
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#1000985
of 3278
22 Nov 2002
08:27 AM |
You mention "a few job cuts"...all the major banks (the City of London's largest employers) are making job cuts. Merryl Lynch recently announced 15,000 job cuts. The bank for which I work has cut one-third of their London staff in M&A. Every day recently the FT has carried stories of other job cuts, all of them in the thousands.
These are more than "a few job cuts". We are already seeing houses at the top end of the market in central London coming down in price. If thispattern of job cuts continues on other industries, then the retreat may become a rout and we will see a repeat of negative equity. What goes up must come down, and this may be the pin that pricks the bubble. |
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What a bargain!
by stuthepooh
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#1000984
of 3278
21 Nov 2002
10:51 PM |
Rob G
You say:
“So do you really believe that in a world where purchasing is no longer an option because of the high price of housing that this will not lead to an increase in rents?
Of course it will.”
Oh please: look around you. Many people are currently being priced out of the market by high prices. What is happening to rental yields? They are falling. Not only are YIELDS falling, but NOMINAL rents are falling:
Take Canary Wharf for example. Rents for 2 bed flats are 10% lower now than they were 4 years ago. Look at Central Melbourne: after a similar substantial rise in property prices to London, rental yields are 3.5% whilst interest rates are 6/7%. A good deal for renters or what?
QED |
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Interest rates
by stuthepooh
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#1000983
of 3278
21 Nov 2002
10:41 PM |
Hoogy
Are governments being fiscally profligate globally? Congress is more focused on a balanced budget today than days of yore. The Maastrict treaty has European borrowing restrained for the time being (they should be running bigger deficits at this point in the economic cycle). And remember that government debt must grow faster than economic growth for the ratio of gov debt/GDP to increase. Some would argue that leading countries governments are unusually prudent by historical standards, hence a weakening of demand for long term money.
A credit crunch has indeed been occurring in the money markets. Observable spreads in the markets have increased significantly recently. However, these are spreads of corporate bonds over the benchmark gilt or treasury bill for the relevant maturity. These spreads have increased as faith in blue chip corporates has fallen in response the Worldcom, Enron Railtrack et al and represent the additional risk premium that the market charges to hold this debt. Government debt has continued to become cheaper across the yield curve as short dated rates have fallen (however long term rates have not fallen as much as short term rates – hence a steepening of the yield curve)
Governments issue all zero risk debt (what company has a credit rating as good as a responsible developed government?). However, as the capital markets mature, corporates are claiming an ever higher proportion of long term debt.
Fixed term mortgages are linked to interest rates in the interest rate swaps markets, essentially part of the risk free money markets as the contracts are backed by AAA international banks. These markets are somewhat insulated from the effects of worsening credit spreads and therefore have fallen with the yield curve. Hence today you can get a 5 year fix for 4.45% (Bristol&West) whereas 6/7 years ago it would have been over 10%
Regards
Pooh |
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AHP / Jack
by Lulu the Cat
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#1000982
of 3278
21 Nov 2002
10:26 PM |
Hello All,
In response to AHP, for the umpteenth time, forced sales are not necessary for prices to fall! All we are talking about is the value of property. Plenty of people in the early nineties experienced a fall in the value in their home, and in some cases negative equity, without actually being evicted or reposessed by their mortgage lender - that doesn't mean the value of their house did not fall and that the UK did not experience a property recession!
Jack Straw, can you please use square brackets when you 'enhance' your quotations with your own opinions.
Ta,
Lulu |
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If this is a bubble then don't we need a pin to burst it?
by AHP
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#1000981
of 3278
21 Nov 2002
09:07 PM |
| While I believe that the market is highly over valued I can't see how its going to suddenly crash when people can still pay the loans they have. The City is seeing a few job cuts at the moment but not in great enough numbers to suddenly force large numbers of people to have to sell. If people don't need to sell then there is no need for them to except a lower price and then why would the prices crash? So what will be the pin? |
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KIP zzzzzzzzzzzzzzzzzz
by Jack Straw
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#1000980
of 3278
21 Nov 2002
07:12 PM |
kip,
I wait with bated breath for your response to my arguments. I feel we are secure and it is purely envious wanna bes who wish to enter the market. These people envy our great gains that wish for a drop in house prices to enter the market, blindly hoping that prices rise after they buy. Livermore is quoted as saying in “Stock Operator”,
“Never trust a Gambler they always lose… I am an investor and never lose”
Capitalists succeed where the day traders fail!
“He looked at foreign affairs (or house prices) through the wrong end of a municipal drainpipe”
Churchill On Neville Chamberlain |
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Andy B. - interesting point to be made
by Jack Straw
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#1000979
of 3278
21 Nov 2002
07:00 PM |
| I feel if we follow the approach of rev and martini. We will never reach number 1000 posting, thats far too high. I think if we follow their approach the number will reduce by 33% over the next 2 years. |
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Posting Boom
by Andy B
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#1000978
of 3278
21 Nov 2002
06:56 PM |
looking back I have noticed we are in a posting boom:
#200 john Adam - 8 Aug
#400 Rev.HK - 28 Oct
#600 Hoogstraten - 9 Nov
#800 FT.Mon deleted - 15 Nov
Clearly a boom so do a suppose the #1000 will come up tomorrow or will the site be shut down?
Charting! Who will get the 1000# ? I expect it will come quicker than we think - given human nature.
I have looked back and noted that Rev.HK suggested (#200) a drop in prices of 33% in one to two years and 25% in the next two years. Please can you clarify if this is for the the full market or just London? I am begining to realise that nearly everone agrees London is over priced?
Good night
Andy B. |
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