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| The UK housing market: a bubble about to burst? |
That's no bubble....
by No More Boom and Bust
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#1001299
of 3278
 04 Dec 2002
12:06 AM |
.. that's the Goodyear Blimp!!
She's gonna blow!!! |
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Show offs
by JMK
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#1001298
of 3278
03 Dec 2002
11:12 PM |
| Practical men who believe themselves to be quite exempt from any intellectual influences,are usually the slaves of some defunct economist." |
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Fangs for the lesson
by Mr Britain
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#1001297
of 3278
03 Dec 2002
10:00 PM |
Well done go to the top of the class for pointing out to me that “MIRAS stands for Mortgage Interest Relief at Source” did any one here not know that.
I should have elaborated but I was of the opinion that every man and his rabid dog new how MIRAS brought about the 1980’s property boom and subsequent crash. OK just for you I will explain.
Many years ago a person was entitled to MIRAS on the first £30k of their mortgage. Couples could both claim MIRAS of £30k each if the mortgage was £60k+ but the chancellor (Niglel Lawson) of the exchequer announced that he would soon abolish this right for the second applicant for all new loans taken out after a certain date. So in effect couples ran out to buy property before the dead line ended.
I Don’t see myself as a rabid dog but more of a guide dog leading the blind like you.
[This message was edited by ftmonitor on 04 Dec 2002 at 02:46 AM.] |
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MW
by The RealFakeElvis
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#1001296
of 3278
03 Dec 2002
09:44 PM |
You never know, he might be referring to the abolition of dual MIRAS relief in August 1988 that concentrated a stampede into home ownership that caused an unsustainable price increase. A bit like the M.O.N.E.Y. I.L.L.U.S.I.O.N. that’s caused the current unsustainable price increase.
[This message was edited by ftmonitor on 04 Dec 2002 at 02:45 AM.] |
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Mr Britain
by MW
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#1001295
of 3278
03 Dec 2002
09:27 PM |
I placed a number of sources in my posting, justifying and highlighting issues.
I cannot respond to anything that lacks a reasonable amount of due diligence and work. Any comment placed ,without the above, is purely as an emotional response and not through rational, reasoned logic.
I must also remind you that
MIRAS stands for Mortgage Interest Relief at Source. Please qualify further how the abolision of this leads to a housing boom.
Or are you like a some form of rabid dog, whose only role on this site is to attempt to bite any one else who posts. I presume we are to blame your owners for your sins.
[This message was edited by ftmonitor on 04 Dec 2002 at 02:44 AM.] |
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Rip of UK
by Mr Britain
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#1001293
of 3278
03 Dec 2002
09:10 PM |
Maybe privatising the Bank of England has created this boom in the same was as abolishing MIRAS created the last housing boom and after all Banks love to lend money if people are so stupid as to borrow above there means. When these people do default then maybe Banks will need to raise lending rates to 5% above the base rate.
Trusting the Halifax or Nationwide figures is like trusting a used car sales man even if they both make a profit and remember these guys love it when you get down on your luck. They simply help you by putting you on a new loan charging you higher interest rates and admin fees.
What Knowledge is Power said in his article made a lot of s sense and is well worth reading |
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It’s a market for God’s sake.
by The RealFakeElvis
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#1001292
of 3278
03 Dec 2002
08:59 PM |
With the average asking price at £150,000 and the average salary at £20,000 everyone who want to be in, is probably now in. What happens next? A select few of them with the appetite do the equity = debt hokey cokey for a while longer then, as the transaction volume drops and equity release dwindles, the consumer boom falters. Those jobs that have been propped up by this fade away and we’re back in 1991.
All the bulls here spouting Hayek and Friedman know very well that low nominal rates are having the same effect on house buyers as alcopops have on women. “Are you sure it’s debt? It doesn’t taste like debt.” Expect the same number of hangovers and unwanted pregnancies. |
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MW
by Mr Britain
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#1001291
of 3278
03 Dec 2002
08:52 PM |
Maybe you would like to remind me and other members of the “investments recommended by Mr Britain” or are you talking about Belgium ?
[This message was edited by ftmonitor on 04 Dec 2002 at 02:42 AM.] |
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Sorry John but you said
by Mr Britain
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#1001290
of 3278
03 Dec 2002
08:46 PM |
2 things would act as a trigger to a collapse:
1 sharp rise in interest rates, very unlikely;
2 sharp rise in unemployment - very unlikely.
John did you forget to mention a few other important factors.
3 FTSE goes up so BTL Sell property and invest proceeds in say tulips
4 Taxes reach the same values as in other parts of Europe
5 We go to war and London get a Bio-Attack so closing the LSE
6 Confidence dented due to deflation (Ask Japan)
7 Ageing population so who needs a 4 bed property (very long term)
8 Another winter of discontent sparked by the fire men’s dispute.
9 Having been sucked in by the banks they decide to stop competing and start making a profit.
On the last point you may have noticed that many investors moved there money from DOT.COM’s and put it into safe havens such as the banking sector. As a result they seemed to have bucked the trend of the FTSE for a while but like the housing market time soon catches up and now they are on the down side. |
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On behalf of Jack Straw
by MW
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#1001289
of 3278
03 Dec 2002
08:21 PM |
To Rob G and all the rain dancers,
Together we will educate the meek to the principles of house price increases, or to quote you.
“ Regardless of how cheap a loan appears, nobody will borrow to buy into a sharply falling market.”
Again last month we had house price rises, against all doom mongers hopes.
Headlines November 2002
Monthly Index (seasonally adjusted) Q1 1993=100 232.3
Monthly change (seasonally adjusted) 2.0%
Annual change 25.5%
Average price in November £115,761
Source – FT link to Nationwide
I presume Ill have to give you that point, since there is a direct correlation to your theories and actuality – although it is an inverse relationship. This again proves that although the more cowardly people are leaving the market we still surge on. Housing is not considered a capital investment by all, some people view it as a place to lay ones head, and thus the market cannot be treated as some form of basic homogenous financial instrument. You cannot chose to exist outside a house (or flat or bungalow or house boat to save any pedantic reference to this point) whereas you can chose not to have stocks. Secondly, in the main, all houses are different and cannot be grouped.
The Halifax and the Nationwide in articles in this very FT, which I’m sure you read if you are on this forum, are predicted double digit rises in prices next year.
“The Nationwide will unveil its forecasts for next year in two weeks' time and is expected to predict increases of about 10 per cent. The Halifax said it expected double digit house price inflation in 2003”
Article by FT staff 3rd Dec - House prices jump by 25%
Now on the basic premise that you can’t dispute these figures and statements, since they are based on fact. Now arguing that these are vested interests, as you probably will, is naïve and proves you have no real understanding of the market. The main reason the UK has 4 of the largest 10 banks can be seen as being down the mortgage market. Now have previous crashes sent any bank to the wall – NO! But has it given us 4 world leaders – YES! Risks in housing are negligible compared to the Latin American, or AIDS ridden country, investments recommended by Mr Britain.
When we look at BTL returns of 6%, on current prices in London, we will get 12k on a 200k place. If we used Rob G and Martini's theories of a 70% drop this return would now rise to 20%. If we review a place in Hull where returns are 15% now, we get 3k pa on a 20K place. If these prices drop 70% our return now becomes 50%. Clearly cheaper to buy than rent - pushing prices up.
Of course this would never happen. Money would flood into the UK property market long before that happened, to take advantage of these "super profits".
Mr Straw keeps on discussing affordability, and in the Nationwide's monthly figures we can see the following example,
“For example, someone borrowing £100,000 today at the average interest rate prevailing during the mid-eighties, of just under 12%, would have to make repayments of £995 per month, which, as shown in the chart below, would initially be equivalent to 50% of average gross income. In contrast, today mortgage rates are at around 5.5% and the monthly repayment on the same £100,000 loan would be £606 per month, or initially 30% of average gross income”
http://www.nationwide.co.uk/hpi/hpindex/monthlymenu.htm
Lets have a look at why this could possibly be the case. Someone, Helen, queried Jack Straw on the policies of Hayek. An interesting idea since the idea of an inherent interest rate is possible, but the level is not set in stone. Many factors can change the inherent interest rate, market force product inflation/deflation via new sources of produce or prevention of monopoly pricing, and thus this theory can be used to justify any policy. It certainly can be used to prove that there is no doom on the horizon, as economic fundamentals are far stronger than the 80’s.
An economist quoted in today’s FT, John Butler - UK economist at HSBC, stated,
“The housing market remained buoyant at a time when global uncertainties had increased.
"That makes the UK vulnerable, a vulnerability that has been encouraged by the Bank of England. We believe house prices and consumer spending will slow next year, but the threat of a crash has increased. However, crashes typically need a trigger
FT 3/12/02
Now I presume to Helen and sho_ryuken I presume this is a bust, the fact that we may have a slow down and there might be a trigger to a crash. A slow down cannot be considered a bust, but I’m not getting into that whole debate again – please refer to Mr Straws previous posting.
Lets be honest interest rates have some bearing, but it’ll take more than a 25 or 50 bp raise to change our position. But only time will tell.
Vijay, an interesting addition to the forum.But there is a problem comparing national average salaries to London property. This is like comparing apples with oranges. Your must compare london average salary to london prices and national salaries to national prices. But you have made an interesting point which can be developed by improving the validity of the review. But you must also consider what percentage is true debt also if you are to get a true reflection of the current market.
I think current debt rates are about 72% of value. Therefore nationally we'd expect to see a price, at 3.5 times, of £121,500. The nationwide survey highlighted earlier gives us a national average price of £115,761. Thus making a mockery of Jojo's theories on prices being 8 times salaries.
In summary I would like to highlight the following inconsistency –
Rob G
”And please, no quotations. I really can't be bothered reading them.” – I won’t read quotes
“I think you'll find that the reason for my links to the *factual statistics* from the lenders is for the very reason that they are real and proven” – but I do read quotes, and you must read mine!
And to say that I look from my window everyday to watch the doom mongers do their rain dance. Their sweating and gyrating, I’m sure, will not be for nothing. After all if you dance until it rains you will be right, whether that’s 1 day or 1 million days. But me I’ll stay on the inside letting houses to these bethern and making money off their backs.
Cheers lads 
[This message was edited by ftmonitor on 04 Dec 2002 at 02:40 AM.] |
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personal attack on anyone who thinks the caps fits
by JoJo
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#1001288
of 3278
03 Dec 2002
08:09 PM |
Vijay -
not so much "technicalities and complex economics", more showing off, I think. |
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Conversation is much better today
by Mr Britain
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#1001287
of 3278
03 Dec 2002
07:57 PM |
Sorry but this bit written by Indecisive was so good I copied it
The synical side of me suggests that Tony Blairs' secret bid to become the president of Europe has one important pre-requisite. The Euro, for us to get into the Euro we need to adjust the value of our currency, hence the 'planned' forthcoming house market collapse to shake things up a bit.
Well Said I’m 100% with you so please don't sue for (c)Copyright |
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bubble
by vijay
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#1001286
of 3278
03 Dec 2002
07:34 PM |
Hi all
pls look at this fascinating article
www.newscientist.com/news/news.jsp?id=ns99993124
I think this forum is getting a bit bogged down in technicalities and complex economics.
my view and the view of everybody i know is that houses are overvalued and will reach their right level. as to when and by how much I suspect nobody knows. The difference in opinion is as to whether the market has reached its peak and what will happen after that.
The figures I have come up with are:
average salary say 25K
2 people jointly buying at say 3.5 times their income equals to say 175K. in london average semi costs about 250+ I believe that low inflation and low interest are a double edged sword. While it has increased affordability it has also meant that debt level will not be eroded by inflation. This will reduce consumption levels. As soon as people realise this, i expect the market to stagnate and start going downhill for a long time. if this coincides with owners having to dispose of properties to fund retirement then we will have a slump in house prices for a very long time indeed. if it happens earlier then there may well be a sharp correction.
I am certain I will get a lot of disagreements. Keep them coming
vijay |
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David T
by Andy B
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#1001285
of 3278
03 Dec 2002
06:49 PM |
I am afraid, leaving the London/SE issue to one side, I agree with your % analysis for the rest of the UK and I believe it is backed up by statistical data and economic theory. (so differ with you there - see postings from a few weeks ago )
Sorry I couldn't argue more.
Bye,
Andy B. |
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KIP - regraded - 'Not a bad chap'
by Andy B
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#1001284
of 3278
03 Dec 2002
06:37 PM |
KIP,
I have just read your posting and totally agree with your view of the Halifax figures.
Clearly all this debate has gone totally un-noticed by the Halifax 'experts'.
I am going to join the forum on G Brown's pre-budget!
BTW - I hope I am wrong on this debate because having a mortgage of only 1.5 times basic salary I can afford to buy up - just can not find anything decent - bearing in mind I already have all the basics eg 4 beds, detached, good schools (beacon status etc), garage, kids play room etc etc.
So on that note I leave the forum and let you all prove me wrong - you are welcome to join me in the other forum on the state of the UK budget.
Regards,
Andy. |
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