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| The UK housing market: a bubble about to burst? |
Xmas break
by niggle
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#1001093
of 3278
 26 Nov 2002
04:15 PM |
Knowledge is power:
Thanks for your welcome.
I think you have mis-quoted me - it was not me who said that there must be both buyers and sellers to make a market.
You seem to be focussing on the reducing affordability arguement causing slow-down:
This again is an ever-present concept. Each generation this century have said similar words many times before. And at various points in the economic "cycle." The facts at the moment however are that the cost of borrowing is as cheap as its ever been in living memory... and it could even get a little cheaper yet. Surely this goes to the heart of the affordability question and in my view simply helps to explain why property appears to be highly valued at present.
The general perception or presumption appears to be that we are in or have just seen the crest of a "boom" in the market. I question this view on the grounds stated in my previous post. I explained that we had a correction or bounce back from the stagnation in the early nineties. That accounts for a fair chunk of the gains we have seen in recent years. What is left is not that extraordinary when set against historic growth over and above inflation during the last century. All the fundamentals point to further growth.
I dont deny that a war in the Middle East would seriously undermine economies, but in times of crisis, where are people to safely put their cash? Again I point to history and if its not into gold or oil, its property!
The pensions "crisis" will result in fundamental social evolution over the coming decades, and there is a shift towards the private from the public rented sector - witness all the investors who recently piled into property. When did your local council last build a council house? - Investors feel its the safest place for their cash at the moment. - Adds support to the market. Investors only constitute about 5% of the market movers in the last year, so even if all investors stopped investing in property, the supply is still short of the housing demand.
Sentiment may change a little and minor factors will compete for the attention of newspaper headline writers, but please dont lose sight of the underlying important factors.
If Saddam or George jnr start dropping bombs, stand by for global market corrections. If they dont, spread your risks, but include a healthy chunk of property in your pension provisions, and you will be OK.
The property market is taking a break for Xmas - thats all. |
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A niggle, by God!
by Jeff Morgan
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#1001092
of 3278
26 Nov 2002
03:49 PM |
Rob G. #1084, I didn't realise that willingness to buy or sell was a prequalification for this forum. It would seem that, if true, contributions would be a biased sample.
The reason I take part is to temporarily get my mind off the tasks I am currently engaged in at work (excitement of a contract negotiation and deployment of procedures). It gives me a rest so I can go back to the fray refreshed. A lifeline to sanity indeed! |
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Niggle
by Andy B
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#1001091
of 3278
26 Nov 2002
03:41 PM |
Draw strength from the following postings:
#995
#960
#873
#859
However for a sensible counter consider:
#1005
Regards,
Andy B.
To answer your query on data try the ODPM.gov this is where the government report the official data on housing for the UK - collated through various sources.
You are right that the deposits are rising - they have doubled in the last 7 years as a % of price but they have been higher before.
Regards,
Andy B. |
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Costs
by Judge Dredd
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#1001090
of 3278
26 Nov 2002
03:31 PM |
And by the time you've paid stamp duty on the one you're buying and estate agent fees on the one you're selling, plus new curtains in the new house and maybe a survey and perhaps a generous fee to a firm of solicitors, it costs £50,000 just for the privilege of moving house. So if you can increase your mortgage by, say, 100k, 50k of that goes on costs.
Quite how Gordon thinks he makes houses more affordable by putting a tax on their purchase is beyond me. The man is genuinely stupid. Yes, it takes buyres out of the market - by making it too expensive for people to buy. |
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Welcome to the debate niggle
by Knowledge is Power
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#1001089
of 3278
26 Nov 2002
02:55 PM |
Niggle,
in a previous post you state:
"There can only be a housing market if there are sellers as well as buyers."
This is very true. However;
1)house prices can fall when very few people are selling (i.e. now in London/SE as an example)
2)Without buyers, there is no housing market.
Now this is the real issue here. FTB will/are being priced out of the market. Therefore, the only people available to buy are 1) people moving up the ladder (i.e. new families), and 2)people moving down the ladder. Now focusing specifically on the first group, they are finding it harder and harder to move up the ladder (the relative distance between prices has risen) example
small house to big house (£100k to £200k) in say 1995
add 100% growth to 2002 (for illustration purposes)=
£200k to £400k
In '95 the gap was £100k, but now it's £200k to move up.
These aren't the correct figures, but this is what's happening. ITS GETTING HARDER FOR EVERYONE TO BUY & MOVE ONTO AND UP THE LADDER.
So, eventually (if prices keep rising above inflation/wage rises as you suggest), no one will be able to buy a house. It will not be possible. It is physically impossible!
So getting back to the point you say, and I repeat;
"There can only be a housing market if there are sellers as well as buyers."
The boom can't last, and stagnation would be a VERY lucky escape indeed! |
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Focus
by niggle
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#1001088
of 3278
26 Nov 2002
02:34 PM |
Rob G
What really matters is the supply of building land to the market, as you rightly say.
We have all heard the government promises to build more housing, and I too can see the developments going on in the South East - but as many previous posters have already pointed out, the actual number of houses being built each year now is the lowest its been for years. Even if the government gets its way and overcomes all the NIMBYs and actually builds all the houses it wants to, it will still take 2 decades to fully materialise. The demand for somewhere to live is ever present, and this underpins the whole property market constantly.
As regards the number of empty properties - this is also ever-present, and I see no forthcoming substantial change to this part of the market.
The main focus should be on the fundamentals, ie the supply is not meeting the demand |
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Moving?
by Rob G
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#1001084
of 3278
26 Nov 2002
02:18 PM |
Jeff:
'[I know most people in our area are like us because the number of sales is so small, period on period. In fact mostly there are too few sales to allow an 'average' to be calculated, three being the minimum in any peiod. We have lived here for 17 years, have no mortgage and no intention of moving].'
Which begs the question; why do you spend so much time in the forum, Jeff?
[Colour changed to italics]
[This message was edited by Monitor_CS on 26 Nov 2002 at 02:26 PM.] |
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Spurious
by Rob G
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#1001083
of 3278
26 Nov 2002
02:11 PM |
Niggle:
'The property market cannot simply be compared to other commodities for one fundamental and simple reason: You can make more widgets, but you cant make more land.'
Well you can make more land actually. I think the Dutch would agree with me on that point.
However, assuming that to be impractical in this country, I believe we're talking about available building land and more pertinently more houses.
There can always be more building land and more houses. The government has already committed to this by reforming local planning departments. They are also increasing building density regulations on planned developments for land which is already in the hands of building companies.
Don't think for a minute that we already have all the houses that will ever be built.
Remember also that there are 500,000 empty properties which can be forced into use by increases in the relevent taxes - e.g. council tax.
There are plenty of brown field sites ripe for redevelopment. Have you seen the amount of ex-industrial areas in the South being developed as flats?
I've never seen anything like it.
Of course your argument assumes buyer confidence can be maintained. Which it won't.
The difference between a Picasso and a house is liquidity. You can shift a painting, a bar of gold or a Bentley a lot faster than any house.
Is the housing market representing fair value when a mobile home in a flood zone is being sold for the price of a Ferarri? I think not.
[Colour changed to italics]
[This message was edited by Monitor_CS on 26 Nov 2002 at 02:24 PM.] |
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Steady but strong growth
by niggle
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#1001082
of 3278
26 Nov 2002
01:57 PM |
This is my first ever post to a newsgroup, but I felt compelled to give my view because some others appear to be getting confused over the basics:
The property market cannot simply be compared to other commodities for one fundamental and simple reason: You can make more widgets, but you cant make more land. Therefore, in one sense, comparisons are more appropriate when drawn against fine art - No more Picasso paintings are being made, so we are stuck with a finite supply. This inevitably means a sustainable average appreciation well in excess of inflation, assuming a continuing demand exists. Look at the price of a Picasso!
There is also more stability in the Property market than most others because people require somewhere to live and it makes sense to live in a house whilst watching it appreciate. This demand is fairly constant. Even if a house does not appreciate for a while, few people sell up - they still need to sleep somewhere, and on the whole people are content with this.
Another factor I recently learnt from an estate agent friend was of a trend now very prevalent in Surrey: In recent years, with increased property ownership and personal wealth in general, many first time buyers are now substantially helped with their deposits by their parents.
Does anyone have any figures on the increasing extent of parental support for first time buyers getting onto that first rung?
I would guess there is still substantial room for this trend to grow in the future
One final point: There is a view that the stagnation in the nineties followed a bubble caused by the government - end of MIRAS doubling up etc. As is usual in markets this resulted in a correction but it was more visible than most in the property market. (Because of the inherent stability in property, most corrections are masked by the relentless march of inflation). Like any pendulum, it swings both ways and I believe that the first few years of the current "boom" were mainly a "rebound" from the poor public sentiment towards property in the early part of the last decade.
There is a natural cooling of the market at this time of the year (look at last December), but there is still pleantly of room for growth. Don’t let a seasonal slowdown lead to belief that the end is nigh!
The market today is closer to representing fair value than it has ever been: There is less interference from government following B of E independence in setting base rates. Perhaps property has been actually undervalued following the correction 10 years ago
The central question posed cannot be answered until the median property growth line is established - and this must be substantially above inflation. Property has appreciated better than most forms of investment for decades and it looks set to continue
I predict moderate (but above inflation) sustainable property growth for the short, medium and long term futures. |
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value and Price again
by Jeff morgan
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#1001081
of 3278
26 Nov 2002
01:31 PM |
In the last posting on value and price I forgot to say that the calculations were based on a requirement by the owner to sell.
The rent is paid and gone, the 'loss' or 'gain' is paper until a sale. No requirement to sell, no loss (or gain).
Come to my area where the average sale price of a detached house in the August - October period was just over 1.3 Million pounds (RICS figures). Make an offer of 780,000 pounds (40% down) for one of the houses and see how many takers you get. Come back next year, and next year, and... see how many takers you get.
In our area a significant number of people are like us, with little or no mortgage compared to the ability to pay, so interest rates don't matter. We only need enough to pay council tax, insurance and running repairs.
[I know most people in our area are like us because the number of sales is so small, period on period. In fact mostly there are too few sales to allow an 'average' to be calculated, three being the minimum in any peiod. We have lived here for 17 years, have no mortgage and no intention of moving].
There can only be a housing market if there are sellers as well as buyers. The 'price' of a house will be determined by whether the owner wants (or needs) to sell at that price. If the owner thinks the offer is too low then, irrespective of the newspapers or anyone else's view of 'value' - no sale.
And what percentage of owners 'have' to sell? Because, in a market where buyers are only prepared to offer 'market value' (whatever it is) those who 'have' to sell are the market. |
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Price and Value again
by Jeff Morgan
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#1001080
of 3278
26 Nov 2002
01:09 PM |
Rob G, #1068 (to Homeowner) the difference between value and price is important in making those comparisons.
I live in my �200,000 house which I bought last year for �180,000 - whose 'value' is �200,000 but whose price is undetermined until I sell it or...
I live in the �200,000 house, paying rent (let's say at 3% return for the sake of argument) and use �6000 to do this.
If I, the owner, sell for �160,000 then I have lost �20,000 compared to �6000.
If I had bought 3 years ago for �150,000 I would have gained �10,000 as opposed to having paid �18,000 (three years rent).
It does make the point about the risks for current first-time buyers (as I mean them) much more clearly, when you compare price rather than value. |
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Nippon what of Japanese property?
by The Grand inquisitor
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#1001079
of 3278
26 Nov 2002
11:58 AM |
I recall a visit to Japan... Tokyo in 1995. All the hustle and bustle of a real metropolis by day, but quiet by night.
Rents/Prices etc. too expensive to live anywhere near the centre of town. Most commuting or living in company dormitories. Supply heavily resticted an demand therefore pushed out to margins. I recall what I thought outrageous figures thrown at me for 1-2 bedroom apartments.
6 years later I had a conversation with a Japanese guy with holdings in Japanese property all now held at a large loss. He made one observation on which you might like to comment. Property markets were not being encouraged to clear because of various factors not the least of which were local property taxes based on property valuations, inheritance tax and distribution idiosyncracies, and powerful bank/company holdings of property. |
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Japan & deflation
by Nippon
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#1001078
of 3278
26 Nov 2002
10:53 AM |
Dear Jeff Morgan and Extradry Martini,
Please click the link for a discussion of deflation in Japan and how it might appear elsewhere or not. It's a Fed paper and very thorough.
http://www.federalreserve.gov/pubs/ifdp/2002/729/default.htm |
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Housing
by Householder
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#1001077
of 3278
26 Nov 2002
07:06 AM |
To Singapore D It will never go down from circa £225k to £47.5k. You have missed out on a bargain [as far as housing is concerned] Think an asset I am sure that would have been paid for.
Bad luck !! |
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Prices, circa 1991
by Singapore D
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#1001076
of 3278
26 Nov 2002
05:43 AM |
I remember all those years back, in 1991, my girlfriend and I were looking for a place to live in London. We looked here, we looked there, and finally saw an ad for a one-bedroom flat. We went to see it...the previous owner had painted the walls gloss black and red (!), and there were Metallica posters on the walls.
But under the grime you could see the place was very well designed and built, with a balcony, and very centrally placed. We thought about it long and hard, and finally decided we could'nt afford it.
The location? The Barbican
The price? 47,500
I saw the same place advertised the other day.
The price? 225,000
What goes up must come down...it's the one thing you can be absolutely sure of. |
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