Rates of 10% 'needed to control housing boom'
Is there a bubble looming in UK housing?
Despite rate rises in recent years the housing prices have been on rise and continue to rise. Average house price has rose to GBP 200 k according to latest Halifax reports.
Martin Weale, director of the National Institute of Economic and Social Research, says that implementing quarter-point rises "here or there" will not be enough to control rising prices. He thinks that the rates need to rise to at least 8% to have any meaningful impact on rising housing prices.
Is the current housing market in the UK overheated and is it better to stay away from the market at the moment for investement purpose? What if it for the primary residence purpose?
Or considering the buyont UK economy Brown predicts strong economy and events in London (2012 Olympics) - would the housing party go on for few more years before stagnating.
UK - Housing Bubble ???
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HAKUNAMATATA
- Posts: 403
- Joined: Sat Mar 03, 2007 4:09 am
UK - Housing Bubble ???
BEING AN INVESTOR WHO BOUGHT PROPERTY EARLY I WOULD SAY I BOUGHT AT THE RIGHT TIME AND AM REAPING THE FRUITS,BUT CAN'T SELL BEOFRE IT ALL CRASHES.
But the time now is to sell, i certainly can sell my house where i live which has appreciated from 250k bought in 2003 to 400k today, but then i couldn't buy anything this size for cheaper or would have to move into rental accomodation, which would be a very good move economically, but I'd rather be comfortable where i am than take the hassle of shifting like a hippie.
My property portfolio has jumped from an investment of £450k to £1.25mil in value,thats a gain of 800k and would make me pay a C.G.T OF £320K@40%, NOW THAT IS HUGE. Although, my yield now stands at 3 % i am happy, its mortgage free . The only way i would sell my portfolio is to become tax domicled(live away from UK for 3 years) and that way i would make a good return.
This was my personal view now comes the crunch if this MARKET IS GOING TO CRASH?....I personally don't think so...10 years back the UK economy was bouyant when house prices picked up and world economy was in tatters.
Uk benefited further from the world economy boom and is today become one of the most attractive places to invest, with INDIA the second largest investor in the UK after USA.
But the time now is to sell, i certainly can sell my house where i live which has appreciated from 250k bought in 2003 to 400k today, but then i couldn't buy anything this size for cheaper or would have to move into rental accomodation, which would be a very good move economically, but I'd rather be comfortable where i am than take the hassle of shifting like a hippie.
My property portfolio has jumped from an investment of £450k to £1.25mil in value,thats a gain of 800k and would make me pay a C.G.T OF £320K@40%, NOW THAT IS HUGE. Although, my yield now stands at 3 % i am happy, its mortgage free . The only way i would sell my portfolio is to become tax domicled(live away from UK for 3 years) and that way i would make a good return.
This was my personal view now comes the crunch if this MARKET IS GOING TO CRASH?....I personally don't think so...10 years back the UK economy was bouyant when house prices picked up and world economy was in tatters.
Uk benefited further from the world economy boom and is today become one of the most attractive places to invest, with INDIA the second largest investor in the UK after USA.
-
HAKUNAMATATA
- Posts: 403
- Joined: Sat Mar 03, 2007 4:09 am
UK - Housing Bubble ???
ACCORDING TO JAMES FERGUSON....I AM QUOTING HIM NOW....
house prices: a crisis of affordability
By most measures, UK house prices have doubled in the last five years. They are now unarguably expensive. Halifax claims that house prices are about 5.5 times incomes, compared to the previous record of 4.5 times set back in 1989-1990. That peak marked the start of a seven-year stretch of falling real prices, so it may look a pretty bad omen for the future of the housing market.
However, as the bulls rightly point out, with houses it?s not just about price. People who aren?t using the proceeds from a previous house sale largely finance their purchase with debt. Consequently, the real driver is not the relationship between house prices and after-tax incomes, but between the monthly payments and after-tax incomes. Interest rates were much higher ? more than three times higher ? back in 1990, so we?ve nothing to worry about today.
Or so the argument goes. But even so, affordability is increasingly being recognised as a problem. ?Mortgage payments for someone on average earnings now take up around 42% of take-home pay, compared to 32% three years ago,? says Fionnula Earley, chief economist at Nationwide, quoted in The Sunday Times. If the newspapers and dinner parties of South West London are anything to go by, this statement has rather put the cat among the pigeons.
However, Fionnula Earley is being somewhat disingenuous in taking a three-year view. No one, including myself, was especially worried three years ago, not least because by these sorts of calculations the numbers weren?t particularly scary. But that?s not to say that they have suddenly become worrying overnight. Last year, by my calculations and using the same assumptions as Nationwide, average mortgage payments took up an even higher 43% of take-home pay. How so? Even though house prices and wages were both 4%-5% lower last year, interest rates were actually 0.25% higher.
So for all the headlines and the sudden realisation, in reality affordability has not got any worse over the last 12 months ? indeed it has got a tiny, marginal amount better. But it still looks like a frighteningly large proportion of income is being spent on servicing mortgages. According to Capital Economics, we are now, as a nation, spending more than 20% of disposable income servicing all our various debts, including mortgages and credit cards. This proportion was exceeded only once on record and
that was ? you guessed it ? back in 1989-1990.
UK house prices: understanding the statistics
However, as Disraeli wryly noted, there are lies, damn lies and statistics. A closer look at the numbers reveals an even more disturbing picture. First, bear in mind that when the likes of the Halifax tell us average house prices are 5.5 times earnings, what they actually mean is that the average house they lent a mortgage for cost 5.5 times the average earnings of their customers. Nationwide at least use national average earnings data, but they have a very low exposure to the South East and virtually nothing in London, so their number for national average house prices could be understating the true figure by as much as 20%.
For the most comprehensive house-price data, we can look at the national Land Registry, which shows that in February the average house price in England and Wales was £192,745. If you take a more up to date, but still fairly comprehensive survey, we get numbers like £203,080 from the FT for May and £217,580 for asking prices in July, according to Rightmove. I?m going to be conservative and take the Land Registry number, but bump it up by about 2.5% as a reasonable approximation for price rises since. So on that measure, today?s national average house price is £197,500, or seven times the national average income (about double the long-run average).
From that, I calculate that a 100% mortgage on the average house requires 49% of the average income to service it. House prices are currently on close to 9.5 times after-tax disposable incomes. The only thing keeping this sustainable is interest rates of 4.5%, which are at almost a 50-year low. Low rates allow people to afford house prices that are such large multiples of their incomes, but as we?ve already seen, prices have now got so high that even with such low rates, mortgage payments are close to being as unaffordable as they?ve been. Just imagine what would happen if inflation caused rates to rise significantly from here.
But hold on a second. As I said earlier, interest rates at the 1989-1990 peak were three times higher than today. Yet house prices at seven times earnings are still only 55% more than the 4.5 times earnings they reached back then. So surely the situation was worse then than it is now? If houses were only two-thirds the price, but the cost of debt was three times higher, then monthly outgoings back then should still have been about double today?s as a proportion of income, shouldn?t they?
UK house prices: the effect of interest rates
But that?s not the case ? the situation is much worse today than it looks at first glance. This is where we come to a strange quirk of the mathematics of compounding. You may quite reasonably think that if rates are one-third of what they were in 1989-1990, mortgage payments (on the same sized debt) would also be only a third. But you?d be wrong ? they?re actually about half.
This is so counter-intuitive that it?s best illustrated by a factual example.
Today, with base rates at 4.5%, interest-only mortgage rates are about 5%. Once you include the repayment of the loan principal, annualised repayments on a standard 25-year mortgage work out at about 7% of the original loan amount. This is a 40% premium to the repayments on an interest-only mortgage (where, of course, the payments are only meeting the interest, not repaying the principal).
On the other hand, the 1989-1990 base rate hit 15%, so the interest-only rate at that time might have been about 15.5%, yet a 25-year mortgage rate, including repayments, would only have been 15.84%. Bizarrely, when rates are high, the compounding effect results in a dramatically lower requirement for the repayment portion, resulting in this case in a monthly payment premium of just 2.2%. This is the true scandal of endowment policies sold during the late 1980s and early 1990s: not that they suffered shortfalls, but that they were allowed to be sold at all in a high interest- rate environment, when interest-only mortgages offer almost no payment-discount to repayment mortgages.
This means that back in 1989-1990, the only other time, by most measures, in the last 30 years when the housing market looked even more overbought than today, mortgage payments on the average house would theoretically have taken up 71% of the average salary. This compares to 49% today. You might think this leaves people with some breathing space, but unfortunately there are at least two factors we have to take into account.
Uk house prices: other pressures on homebuyers
First, we have so much more unsecured debt today than we?ve ever had before. So we must add in the service burden of this debt to the mortgage obligations before we can see the true strain the household sector is under. On top of that, we haven?t even seen the effect of all those student loans coming through on the next generation yet. Is it any wonder that the average age of the first-time buyer is now ten years older than it was a decade ago and that half of them require help from parents or grandparents with deposits or loan guarantees? Not really, when you consider that these days the 10% deposit is pretty much equivalent to the average person?s entire post-tax annual earnings.
Second, and rather more mysteriously, back in 1990 people had already responded in a logical and easily anticipated way to such a hostile housing-market environment. Mortgage approvals had already dived to less than half the levels of two years earlier, as willing new buyer numbers dried up sharply. In fact, mortgage approvals started diving into negative territory on this basis as early as mid-1988, as soon as interest rates jumped to 12% and mortgage payments reached 57% of average income.
Yet today, mortgage approvals have recovered after a rare drop and are running at a marginally higher level now than two years ago. Why, therefore, are people coming back into a market that is looking so expensive on a historical basis and which must be stretching their finances to the limit? The answer may lie in the mystery of the boiling frog.
Charles Handy, visiting professor at the London Business School, wrote in his 1989 book, The Age of Unreason, that a frog put into hot water leaps out, but one placed in cold water that is slowly heated keeps adapting to each small incremental increase in temperature until it is boiled alive, never able to realise that the environment is turning so hostile. Back in 1988, interest rates leapt from 9.5% to 12% in a matter of months. House buyers quickly noticed they were going to be in hot water if they didn?t react.
But not this time. Interest rates have risen, but marginally, from a low point of 3.75% at the end of 2003 and, indeed, the last move was a drop from 4.75% to today?s level of 4.5%. Instead, this time the pressure has almost all come from the rise in house prices themselves. Every month people who are not in the market feel they are being left behind. The market hasn?t corrected, they reason, so it isn?t going to. Time to get back in.
Uk house prices: squeezing discretionary income
So here we are, looking at a good (housing) that looks expensive on all historical comparisons, has been rising in price faster than wages for a decade and yet seems to be experiencing a resurgence in demand. When the price of potatoes during the Irish famine went up, if you remember, the number of potatoes bought increased, but their increase in price used up the discretionary income that had allowed people to indulge in other things. What are people foregoing today?
Most people buying houses now justify the expense by assuming that their house will in some way become their de-facto pension. This is despite the compelling evidence that most people need both a house to live in and an income to live off in retirement. Unfortunately, for today?s home buyer, there is precious little discretionary income left to finance such things as a pension plan.
As house prices have risen, people haven?t bought fewer of them. Instead, they?ve applied for more mortgages and chased house prices to new heights, letting their pension provision and other savings slide. Our official household savings ratio of 5% has halved since the mid-1990s. Not only that, but the way we measure the savings ratio exaggerates our savings compared with other countries. At first glance, that 5% may not look too terrible besides the US?s ratio, which is now slightly below zero ? ie, US consumers are drawing down their savings to keep spending.
One example of putting all eggs into the housing basket is the way that in the last five years house prices have gone up so much more than UK equities, another measure of the country?s economic health. Stocks, of course, are the obvious alternative way in which people will save for their retirement. However, whereas house prices have run out of steam recently ? they?re only growing about 1% faster than the rate of wage growth ? stocks, even after recent falls, are growing about three times as fast.
UK house prices: the economy as a whole
House prices have so far achieved the Bank of England?s soft landing. Even so, this so-called ?soft landing? has already knocked UK GDP growth down quite sharply from the 3.75% rate of mid-2004 to 2.3% now. Of course, the interesting question is: why did UK housing ?soft land? (at least so far) and does that mean it won?t now have a crash? The UK economy/housing market certainly slowed sharply, but so far there?s been no recession/crash ? and the outstanding reason why not appears to be the big increase in public-sector employment.
There has been virtually no growth in private-sector jobs for the last five years, whereas the public-sector payroll has grown more than 20% since 1998, to 7.9 million jobs. If Gordon Brown had not played so
fast and loose with the nation?s chequebook, then the extra 1.4 million (rather unproductive) public-sector jobs that he?s created might instead have gone onto the unemployment statistics and UK unemployment would not be 1.6 million (5.3% of the workforce), but instead three million souls, or 10% of the workforce.
In the last 30 years, unemployment has only gone above 10% twice: in the immediate aftermath of the two full-blown recessions of 1980 and 1991. So it looks pretty likely that this big expansion of the public
sector is what has so far saved the UK from a ?normal? credit-fuelled housing crash/recession. It remains to be seen whether such an inherently unproductive solution merely postpones the inevitable, or can actually save the day.
House prices have not yet followed the script. At first, mortgage applications dived. Yet although house-price growth was briefly negative in real terms, house prices have never gone down. Prices and market activity levels are now popping back up as buyers get sucked back in.
However, house prices have risen to levels where the debt-service burden is almost unbearable, at least based on the evidence of what the UK economy could bear from the past. Furthermore, there are good reasons why the bursting of this particular debt-fuelled housing bubble has not immediately led to the usual vicious circle of rising unemployment and recession. Unfortunately, with zero growth in private-sector employment, this economy and its housing bubble is now being supported entirely by the public sector.
And public finances are not as robust as they were. Including the Government?s public finance initiatives, public sector net debt, which was less than 30% of GDP four years ago, is due to go up above 40% of GDP for the first time since 1994 ? thereby breaking one of Gordon Brown?s self-imposed rules. But then he doesn?t plan to be at the Treasury much longer does he? Cometh the hour, slinketh away the man.
house prices: a crisis of affordability
By most measures, UK house prices have doubled in the last five years. They are now unarguably expensive. Halifax claims that house prices are about 5.5 times incomes, compared to the previous record of 4.5 times set back in 1989-1990. That peak marked the start of a seven-year stretch of falling real prices, so it may look a pretty bad omen for the future of the housing market.
However, as the bulls rightly point out, with houses it?s not just about price. People who aren?t using the proceeds from a previous house sale largely finance their purchase with debt. Consequently, the real driver is not the relationship between house prices and after-tax incomes, but between the monthly payments and after-tax incomes. Interest rates were much higher ? more than three times higher ? back in 1990, so we?ve nothing to worry about today.
Or so the argument goes. But even so, affordability is increasingly being recognised as a problem. ?Mortgage payments for someone on average earnings now take up around 42% of take-home pay, compared to 32% three years ago,? says Fionnula Earley, chief economist at Nationwide, quoted in The Sunday Times. If the newspapers and dinner parties of South West London are anything to go by, this statement has rather put the cat among the pigeons.
However, Fionnula Earley is being somewhat disingenuous in taking a three-year view. No one, including myself, was especially worried three years ago, not least because by these sorts of calculations the numbers weren?t particularly scary. But that?s not to say that they have suddenly become worrying overnight. Last year, by my calculations and using the same assumptions as Nationwide, average mortgage payments took up an even higher 43% of take-home pay. How so? Even though house prices and wages were both 4%-5% lower last year, interest rates were actually 0.25% higher.
So for all the headlines and the sudden realisation, in reality affordability has not got any worse over the last 12 months ? indeed it has got a tiny, marginal amount better. But it still looks like a frighteningly large proportion of income is being spent on servicing mortgages. According to Capital Economics, we are now, as a nation, spending more than 20% of disposable income servicing all our various debts, including mortgages and credit cards. This proportion was exceeded only once on record and
that was ? you guessed it ? back in 1989-1990.
UK house prices: understanding the statistics
However, as Disraeli wryly noted, there are lies, damn lies and statistics. A closer look at the numbers reveals an even more disturbing picture. First, bear in mind that when the likes of the Halifax tell us average house prices are 5.5 times earnings, what they actually mean is that the average house they lent a mortgage for cost 5.5 times the average earnings of their customers. Nationwide at least use national average earnings data, but they have a very low exposure to the South East and virtually nothing in London, so their number for national average house prices could be understating the true figure by as much as 20%.
For the most comprehensive house-price data, we can look at the national Land Registry, which shows that in February the average house price in England and Wales was £192,745. If you take a more up to date, but still fairly comprehensive survey, we get numbers like £203,080 from the FT for May and £217,580 for asking prices in July, according to Rightmove. I?m going to be conservative and take the Land Registry number, but bump it up by about 2.5% as a reasonable approximation for price rises since. So on that measure, today?s national average house price is £197,500, or seven times the national average income (about double the long-run average).
From that, I calculate that a 100% mortgage on the average house requires 49% of the average income to service it. House prices are currently on close to 9.5 times after-tax disposable incomes. The only thing keeping this sustainable is interest rates of 4.5%, which are at almost a 50-year low. Low rates allow people to afford house prices that are such large multiples of their incomes, but as we?ve already seen, prices have now got so high that even with such low rates, mortgage payments are close to being as unaffordable as they?ve been. Just imagine what would happen if inflation caused rates to rise significantly from here.
But hold on a second. As I said earlier, interest rates at the 1989-1990 peak were three times higher than today. Yet house prices at seven times earnings are still only 55% more than the 4.5 times earnings they reached back then. So surely the situation was worse then than it is now? If houses were only two-thirds the price, but the cost of debt was three times higher, then monthly outgoings back then should still have been about double today?s as a proportion of income, shouldn?t they?
UK house prices: the effect of interest rates
But that?s not the case ? the situation is much worse today than it looks at first glance. This is where we come to a strange quirk of the mathematics of compounding. You may quite reasonably think that if rates are one-third of what they were in 1989-1990, mortgage payments (on the same sized debt) would also be only a third. But you?d be wrong ? they?re actually about half.
This is so counter-intuitive that it?s best illustrated by a factual example.
Today, with base rates at 4.5%, interest-only mortgage rates are about 5%. Once you include the repayment of the loan principal, annualised repayments on a standard 25-year mortgage work out at about 7% of the original loan amount. This is a 40% premium to the repayments on an interest-only mortgage (where, of course, the payments are only meeting the interest, not repaying the principal).
On the other hand, the 1989-1990 base rate hit 15%, so the interest-only rate at that time might have been about 15.5%, yet a 25-year mortgage rate, including repayments, would only have been 15.84%. Bizarrely, when rates are high, the compounding effect results in a dramatically lower requirement for the repayment portion, resulting in this case in a monthly payment premium of just 2.2%. This is the true scandal of endowment policies sold during the late 1980s and early 1990s: not that they suffered shortfalls, but that they were allowed to be sold at all in a high interest- rate environment, when interest-only mortgages offer almost no payment-discount to repayment mortgages.
This means that back in 1989-1990, the only other time, by most measures, in the last 30 years when the housing market looked even more overbought than today, mortgage payments on the average house would theoretically have taken up 71% of the average salary. This compares to 49% today. You might think this leaves people with some breathing space, but unfortunately there are at least two factors we have to take into account.
Uk house prices: other pressures on homebuyers
First, we have so much more unsecured debt today than we?ve ever had before. So we must add in the service burden of this debt to the mortgage obligations before we can see the true strain the household sector is under. On top of that, we haven?t even seen the effect of all those student loans coming through on the next generation yet. Is it any wonder that the average age of the first-time buyer is now ten years older than it was a decade ago and that half of them require help from parents or grandparents with deposits or loan guarantees? Not really, when you consider that these days the 10% deposit is pretty much equivalent to the average person?s entire post-tax annual earnings.
Second, and rather more mysteriously, back in 1990 people had already responded in a logical and easily anticipated way to such a hostile housing-market environment. Mortgage approvals had already dived to less than half the levels of two years earlier, as willing new buyer numbers dried up sharply. In fact, mortgage approvals started diving into negative territory on this basis as early as mid-1988, as soon as interest rates jumped to 12% and mortgage payments reached 57% of average income.
Yet today, mortgage approvals have recovered after a rare drop and are running at a marginally higher level now than two years ago. Why, therefore, are people coming back into a market that is looking so expensive on a historical basis and which must be stretching their finances to the limit? The answer may lie in the mystery of the boiling frog.
Charles Handy, visiting professor at the London Business School, wrote in his 1989 book, The Age of Unreason, that a frog put into hot water leaps out, but one placed in cold water that is slowly heated keeps adapting to each small incremental increase in temperature until it is boiled alive, never able to realise that the environment is turning so hostile. Back in 1988, interest rates leapt from 9.5% to 12% in a matter of months. House buyers quickly noticed they were going to be in hot water if they didn?t react.
But not this time. Interest rates have risen, but marginally, from a low point of 3.75% at the end of 2003 and, indeed, the last move was a drop from 4.75% to today?s level of 4.5%. Instead, this time the pressure has almost all come from the rise in house prices themselves. Every month people who are not in the market feel they are being left behind. The market hasn?t corrected, they reason, so it isn?t going to. Time to get back in.
Uk house prices: squeezing discretionary income
So here we are, looking at a good (housing) that looks expensive on all historical comparisons, has been rising in price faster than wages for a decade and yet seems to be experiencing a resurgence in demand. When the price of potatoes during the Irish famine went up, if you remember, the number of potatoes bought increased, but their increase in price used up the discretionary income that had allowed people to indulge in other things. What are people foregoing today?
Most people buying houses now justify the expense by assuming that their house will in some way become their de-facto pension. This is despite the compelling evidence that most people need both a house to live in and an income to live off in retirement. Unfortunately, for today?s home buyer, there is precious little discretionary income left to finance such things as a pension plan.
As house prices have risen, people haven?t bought fewer of them. Instead, they?ve applied for more mortgages and chased house prices to new heights, letting their pension provision and other savings slide. Our official household savings ratio of 5% has halved since the mid-1990s. Not only that, but the way we measure the savings ratio exaggerates our savings compared with other countries. At first glance, that 5% may not look too terrible besides the US?s ratio, which is now slightly below zero ? ie, US consumers are drawing down their savings to keep spending.
One example of putting all eggs into the housing basket is the way that in the last five years house prices have gone up so much more than UK equities, another measure of the country?s economic health. Stocks, of course, are the obvious alternative way in which people will save for their retirement. However, whereas house prices have run out of steam recently ? they?re only growing about 1% faster than the rate of wage growth ? stocks, even after recent falls, are growing about three times as fast.
UK house prices: the economy as a whole
House prices have so far achieved the Bank of England?s soft landing. Even so, this so-called ?soft landing? has already knocked UK GDP growth down quite sharply from the 3.75% rate of mid-2004 to 2.3% now. Of course, the interesting question is: why did UK housing ?soft land? (at least so far) and does that mean it won?t now have a crash? The UK economy/housing market certainly slowed sharply, but so far there?s been no recession/crash ? and the outstanding reason why not appears to be the big increase in public-sector employment.
There has been virtually no growth in private-sector jobs for the last five years, whereas the public-sector payroll has grown more than 20% since 1998, to 7.9 million jobs. If Gordon Brown had not played so
fast and loose with the nation?s chequebook, then the extra 1.4 million (rather unproductive) public-sector jobs that he?s created might instead have gone onto the unemployment statistics and UK unemployment would not be 1.6 million (5.3% of the workforce), but instead three million souls, or 10% of the workforce.
In the last 30 years, unemployment has only gone above 10% twice: in the immediate aftermath of the two full-blown recessions of 1980 and 1991. So it looks pretty likely that this big expansion of the public
sector is what has so far saved the UK from a ?normal? credit-fuelled housing crash/recession. It remains to be seen whether such an inherently unproductive solution merely postpones the inevitable, or can actually save the day.
House prices have not yet followed the script. At first, mortgage applications dived. Yet although house-price growth was briefly negative in real terms, house prices have never gone down. Prices and market activity levels are now popping back up as buyers get sucked back in.
However, house prices have risen to levels where the debt-service burden is almost unbearable, at least based on the evidence of what the UK economy could bear from the past. Furthermore, there are good reasons why the bursting of this particular debt-fuelled housing bubble has not immediately led to the usual vicious circle of rising unemployment and recession. Unfortunately, with zero growth in private-sector employment, this economy and its housing bubble is now being supported entirely by the public sector.
And public finances are not as robust as they were. Including the Government?s public finance initiatives, public sector net debt, which was less than 30% of GDP four years ago, is due to go up above 40% of GDP for the first time since 1994 ? thereby breaking one of Gordon Brown?s self-imposed rules. But then he doesn?t plan to be at the Treasury much longer does he? Cometh the hour, slinketh away the man.
UK - Housing Bubble ???
I don't think there will be any house price crash in the UK as long as interest rates are at affordable level. If you look at the huge immigration in this country from all over the world and shortage of housing, there will always be demand in this little island.
UK - Housing Bubble ???
Punjabi - I have a feeling that globally Central banks have had enough. Liquidity will tighen in all regions and as they washed the world with liquidity in last few years - they are now going to squeeze it across.
So one needs to be careful. The way rates have been increasing...somewhere the flux point will be crossed. Last legs of bull run always surprise most but once the downward spiral begins no one is spared. All the logic of demand and supply given in booming periods is set aside and the liquidity takes over before you know. The issue with some of bull runs in last few years it has been largely moment driven and not just growth driven. Growth has been there but not so much to support the astronomical rise in prices.
faster one runs harder one falls..
So one needs to be careful. The way rates have been increasing...somewhere the flux point will be crossed. Last legs of bull run always surprise most but once the downward spiral begins no one is spared. All the logic of demand and supply given in booming periods is set aside and the liquidity takes over before you know. The issue with some of bull runs in last few years it has been largely moment driven and not just growth driven. Growth has been there but not so much to support the astronomical rise in prices.
faster one runs harder one falls..
UK - Housing Bubble ???
[URL="http://newsvote.bbc.co.uk/1/hi/business/6549299.stm"]Up or down?
Are there warning signs of a housing market crash? [/URL]
[QUOTE]
Whether the UK housing market booms or goes bust is as about as hot a conversation topic as you can get.
No surprise really.
After all, for millions of Britons their property is not just a roof over their heads it is a passport to financial security and even a pension.
Anything that endangers the seemingly never-ending rise in house prices is always news.
For the past decade - as far as property owners are concerned - all has been sunny.
On Tuesday, the Office of National Statistics (ONS) said that UK house prices had risen by 204% in the past decade compared with a 94% increase in average wages. In the past year alone, prices according to both Halifax and Nationwide have risen by about 10%, way above most analyst forecasts
Global bubble?
But there is a doomsday scenario; if you are a homeowner with a large mortgage that could well be beginning to play itself out.
Some suggest the long-predicted crash could finally be on the cards.
"In the past 10 years a global bubble in house prices has developed and it is now bursting," says Jonathan Davis, a chartered financial planner and spokesman for website housepricecrash.co.uk.
"In the US, we see a credit crunch as lenders restrict the money they lend to mortgage borrowers.
"If lines of credit are closed off people are not able to afford high house prices. This ultimately leads to falling demand and falling prices.
"The result? Prices are falling faster in the US than at anytime in history. "This is already slowing US growth and will inevitably hit the UK as well. When the US catches a cold we tend to catch one as well," Mr Davis adds.
Are there warning signs of a housing market crash? [/URL]
[QUOTE]
Whether the UK housing market booms or goes bust is as about as hot a conversation topic as you can get.
No surprise really.
After all, for millions of Britons their property is not just a roof over their heads it is a passport to financial security and even a pension.
Anything that endangers the seemingly never-ending rise in house prices is always news.
For the past decade - as far as property owners are concerned - all has been sunny.
On Tuesday, the Office of National Statistics (ONS) said that UK house prices had risen by 204% in the past decade compared with a 94% increase in average wages. In the past year alone, prices according to both Halifax and Nationwide have risen by about 10%, way above most analyst forecasts
Global bubble?
But there is a doomsday scenario; if you are a homeowner with a large mortgage that could well be beginning to play itself out.
Some suggest the long-predicted crash could finally be on the cards.
"In the past 10 years a global bubble in house prices has developed and it is now bursting," says Jonathan Davis, a chartered financial planner and spokesman for website housepricecrash.co.uk.
"In the US, we see a credit crunch as lenders restrict the money they lend to mortgage borrowers.
"If lines of credit are closed off people are not able to afford high house prices. This ultimately leads to falling demand and falling prices.
"The result? Prices are falling faster in the US than at anytime in history. "This is already slowing US growth and will inevitably hit the UK as well. When the US catches a cold we tend to catch one as well," Mr Davis adds.
UK - Housing Bubble ???
UK house prices are moving up relentless...despite several hikes in the interest rates, affordability issues and so on....
House prices 'still accelerating'
House prices 'still accelerating'
UK - Housing Bubble ???
Yes! i've put the property in market last week already got offers 25% more than i paid 1.5 years ago.
b2b;26606UK house prices are moving up relentless...despite several hikes in the interest rates, affordability issues and so on....
House prices 'still accelerating'[/quote]
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HAKUNAMATATA
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UK - Housing Bubble ???
The situation is like this everyone who bought is making a profit, but once you cash in your house or flat what can you buy to replace it.
Unless u down size or migrate or get somnething slightly better in a worse area with bad schooling,medical and surroundings.
Another issue is the HIPS which was suppose to hit the market on the 1st of june and postponed to august now. These reports cost about £500 and to avoid paying these charges you need to put your property up for sale before they come into force. This has caused a slight increase in the properties flooding into the market,hence a slight cooling off due to excessive supply, but this is short term......prices will continue to roar unless we see rates raised to 7%.
Another factor, London has become a financial hub of the world ,placed favourably geographically,gone are those days of boom and burst, people woRking for companies in Japan, US etc etc live in London.
Bottom line is demand outstripping supply.
I also feel, the mayor is making this city into a place where you will need a certain amount of money to qualify to live here. Congestion charge, now they are talking about weighing how much rubbish you throw,about charging you for every mile you drive,how much water you drink.....whats next??how many times one uses goes to the loo??
PLANS TO JOIN THE EURO?:confused:
Unless u down size or migrate or get somnething slightly better in a worse area with bad schooling,medical and surroundings.
Another issue is the HIPS which was suppose to hit the market on the 1st of june and postponed to august now. These reports cost about £500 and to avoid paying these charges you need to put your property up for sale before they come into force. This has caused a slight increase in the properties flooding into the market,hence a slight cooling off due to excessive supply, but this is short term......prices will continue to roar unless we see rates raised to 7%.
Another factor, London has become a financial hub of the world ,placed favourably geographically,gone are those days of boom and burst, people woRking for companies in Japan, US etc etc live in London.
Bottom line is demand outstripping supply.
I also feel, the mayor is making this city into a place where you will need a certain amount of money to qualify to live here. Congestion charge, now they are talking about weighing how much rubbish you throw,about charging you for every mile you drive,how much water you drink.....whats next??how many times one uses goes to the loo??
PLANS TO JOIN THE EURO?:confused: