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| The UK housing market: a bubble about to burst? |
Jeff Morgan response
by The Grand inquisitor
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#1001075
of 3278
 26 Nov 2002
12:07 AM |
If interest rates are discounting future expected inflation then we might indeed suspect that nominal prices/sales are not expected to rise as fast so profits may not either without reductions in costs.
Lower interest rates for leveraged companies may deliver some of this, some of this might also come about though wages/wage increases lower pay, or exchange related adjustments to these costs.
But perhaps lower interest rates are stimulating consumption so much that increased production will stimulate the demand for their factors and the inflation rate will pick up again and lead to adjustments to the price for forgoing consumption.
On raising cash against equity- the money is drawn on unrealised present and expected gains. Does it also show a paradoxical preference for cash rather than the asset against which it is drawn? Or for some form consumption/saving over saving in the form of property equity. |
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rob g - bad maths
by Jack Straw
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#1001072
of 3278
25 Nov 2002
10:02 PM |
Perhaps you should make that more clear.
Perhaps most people don't have your level of intelligence  |
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Quick and Dirty Calculation
by Hoigby
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#1001071
of 3278
25 Nov 2002
09:56 PM |
I thought I would do a quick and dirty calculation to see how much of the increase in house prices over the last 5 years has been down to:
a) the fall in REAL interest rates; and
b) the increase in earnings over this period.
I won’t go through the arithmetic, but I estimate a maximum of about 6% a year has been due to these factors.
House prices have actually increased at about 14% in England & Wales over this period. So my question to the bulls out there is simple:
What SUSTAINABLE factors have driven the additional 8% per year increase in house prices?
By the way, this equates to about 47% since Nov 1997 AFTER the fall in real interest rates AND the increase in earnings. I wonder what else is moving the market to this degree, and whatever it is, I’d love to know why 46% of you (looking at the poll results) believe it to either be sustainable, or for the market to hold on to a gain of such magnitude?
Btw, I'll give you 1% pa of the increase due to demographics as a starter (any more than this must be supported by hard evidence!)... |
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Bad Maths
by Rob G
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#1001070
of 3278
25 Nov 2002
09:32 PM |
Read it again Jack.
I said if they bought a house after a year for £200k and in that time it had dropped in price 20% (i.e. from £250k)
Hence a £50k saving. |
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jacks back
by Jack Straw
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#1001069
of 3278
25 Nov 2002
08:18 PM |
Homeowner,
Lets suppose one were to wait a year to buy a place for £200k and in that time prices had risen 20%.
£40k will pay an awful lot of rent... – 20 % of 200k is 40k not 50k – 50k is 25%
Of course, that's the 'gamble' isn't it?
What would create this scenario?
Well there are pushes from a number of areas to cut interest rates further adding more fuel to the furnace. Also last month saw record mortgage applications – another trigger to further rises - Hi demand. |
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Renting?
by Rob G
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#1001068
of 3278
25 Nov 2002
07:24 PM |
Homeowner:
Lets suppose one were to wait a year to buy a place for £200k and in that time prices had dropped 20%.
£50k will pay an awful lot of rent...
Of course, that's the 'gamble' isn't it? |
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I heard Mr Wonka say this about UK property
by Happy Mango
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#1001067
of 3278
25 Nov 2002
06:22 PM |
There's no earthly way of knowing,
Which direction we are going.
There's no knowing where we're rowing,
Or which way the river's flowing.
Is it raining?
Is it snowing?
Is a hurricane a blowing?
Not a speck of light is showing,
so the danger must be growing.
Are the fires of hell a glowing?
Is the grisly reaper mowing?
Yes! The danger must be growing,
For the rowers keep on rowing.
And they're certainly not showing,
any signs that they are slowing.
signed
Happy Mango
A. Umpa Lumpa |
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schoolboy error
by sho_ryuken
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#1001066
of 3278
25 Nov 2002
06:10 PM |
I have come back to this forum after a while and I notice that the playground atmosphere has not abated.
Congratulations to Rob G for being one of the last remaining people to be speaking any sense whatsoever.
Can someone please answer the point raised by Martini - if insitutions like the Bank of England and the OECD think that the UK housing market is overvalued, what makes you armchair economists think you know any better ?? And if you do know better, why have we got Eddie George and Mervyn King in charge of the BoE and not you ?? Sensible comments welcome, but I am sure I will get a tirade of name-calling back in return.
Oh, and "Dark Lord", any self-respecting schoolboy would tell you that the correct form of the ablative absolute is "ceteris paribus". Paribas is a French bank. I am surprised none of the other schoolboys posting on this forum have pointed that out to you yet.
"*Bubbles*" |
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my thoughts
by Happy Mango
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#1001065
of 3278
25 Nov 2002
05:56 PM |
Umpa Lumpa, do bitty do,
I’ve got another riddle for you,
Umpa lumpa, do bitty dee,
If you are wise you'll listen to me.
House prices are high,
We all agree,
But will there be a price fall,
Only time will see.
Umpa Lumpa, do bitty do,
I’ve got another riddle for you,
Umpa Lumpa, do bitty dee,
If you are wise, please listen to me.
The BoE are are the key,
Their rate policy will see,
If house holders are in heaven,
Or in hell they will be.
Umpa Lumpa, do bitty dar,
Tolerance will go twice as far,
A less serious attitude will benefit you,
Like the Umpa Lumpa,Happy Mango do. |
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Housing
by Homeowner [for sure]
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#1001064
of 3278
25 Nov 2002
05:15 PM |
To Rob G 1037. I also sleep soundly at nights - with a house and mortgage paid off !! If you are renting, are you really sleeping THAT sound as you would like us all to believe ?
Buy and take the risk - in the end it always works out better then renting. You own you see. Rent you no-own you see.
The secret is not to overstretch. |
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Extradry and Andy B
by Jeff Morgan
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#1001063
of 3278
25 Nov 2002
04:45 PM |
I've been following your postings with interest, and the recent posting from extradry (#1055) finally triggered me to ponder a couple of questions.
First, there seems to be a bit if a disconnect in my appreciation of your argument. It seems to me that the ability to service the borrowing is perhaps the most important determiner of whether someone should buy a house, or hang on to one. After all we all need somplace to live whether we rent or buy, so demand is assured. And everyone has to eventually make the decision as the whether they can afford a mortgage based on their view of the future payments required.
That long preamble is why is ask - why should a recession (even therefore with low inflation, a depression) affect someones' ability to pay interest - unless it compromises their ability to earn? Surely there's a link missing here, is it me that is missing it?
Second, you mention a 'credit crunch' and also mention reduction in interest rates. What is to prevent people taking out more credit on their credit cards instead, to fund their wants? I guess Banks could reduce credit limits but it seems to happen rarely so unless their behavious alters I can't see that as a barrier. Such actions would, I believe, be irrational - but then irrationality seems to have been the norm for the last 5-6 years without much to check it.
Also, as I wrote in a previous post, people exchanging equity in their property for cash makes me really uneasy, as it appears to make money out of nothing and [forgive me a quote] - 'Nothing can come of Nothing. Speak again'.
Any thoughts for me? |
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To Former Reader
by Knowledge is Power
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#1001062
of 3278
25 Nov 2002
04:18 PM |
I will moderate my postings further in future.
With regard to the Media that's an interesting one. Infact I'd advocate that most newspapers are inflamatory, jumping at the smallest story or slightest change. The Times is very bad for this.
I actually find most Newspaper house price articles extremly weak. They will normally quote the same bits of news, and rarely comment further on the views of economists/analysts etc.
But, having said all that, the power of the media is impressive. Remember there are many out there who's factual information on house prices derives almost entirely from the media. Thus if the Sun (arguably the most read paper in the UK) printed a front cover saying "sell your house now whilst you can, prices are set to nosedive" there would be a massive movement in the market.
All in all. If you want the most accurate info, get the purest data you can (find out where it comes from & why it may differ to other index, and draw your own conclusions.
I'd advocate that hometrack's price index is one of the most up-to-date & should be considered above other ones (such as halifax).
Let's face it, it's in the Halifax's interests for house prices to keep rising (and guess what, their data does not account for +£1M houses - an area that is being hit the most at present).
Choose what you want to belive, but be careful who you get the "truth off"! |
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naf' flaming
by (Former) reader
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#1001061
of 3278
25 Nov 2002
03:56 PM |
I used to enjoy this discussiuon list. Unfortunately, factual arguments are turning into too much personal controversy, and it is becoming rather boring. Can you guys limit flaming and give more space to opinions or facts actually related to the house prices?
For example, what do you think is the power of media to cause a house price crash (e.g. full front page claiming that "House price slump started", as exhibited by one of the lower quality papers last Saturday)? Or, why is it generally claimed that house prices start to drop at the higher end of the market? |
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More on cause and effect!
by Extradry Martini
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#1001060
of 3278
25 Nov 2002
03:41 PM |
| I notice that the number of people in this forum saying that house prices are at fair value has not abated since both the Bank of England and the OECD (!) have said that the price levels of UK real estate is very worrying. I also notice that the tone has deteriorated further into puerile name-calling. Are these two observations correlated in fact by any chance? |
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Out of the mouths of babes
by The Dark Lord
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#1001058
of 3278
25 Nov 2002
03:16 PM |
| "I'm not going to engage in petty nit-picking and semantics with you. If you don't have any valid arguments of substance, please don't bother responding to my postings." |
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