House prices the truth

[SteveGibson]

Originally Posted by dingbat

Oh yes it is. It's simple economics.

It would have been "simple economics" if the population of the UK had doubled over the last 10 years... but it didn't.

I've not cited it as the only one but certainly one of the reasons prices in London will not fall

But they did fall... while the population was increasing.

Massive foreign investment and low rates of interest too.

Assuming these things continue. But, with interest rates at 0.5%, there's really only way for them to go: up.

We're not talking about stocks, bricks and mortar have always appreciated over time.

Property tends to outperform inflation by approx 1% p.a.. If you factor in the money homeowners spend maintaining their properties, it's about 0%.

And, that's in normal times. We're immediately after a bubble and prices haven't dropped down to previous levels yet. So, it's perfectly plausible that there'll be a drop that'll wipe out that 1% p.a. for the next 10-20 years.

(i.e. that it could take 10-20 years just to catch up with the old market high)

People will always need somewhere to live.

But they don't have to own that place.

First time buyers have been left behind long ago. It didn't stop the price increases.

Because it was all based on speculation.

The only way house prices can continue to rise is if the government can re-inflate this burst bubble and keep it reflated.

What's more likely, IMO, is that the government will have to slash the deficit, unemployment and iterest rates will rise and property prices will plummet.

Steve

[oldeagleeye]

All these graphs mean nothing as I have said before it is the relationship between income and house prices. Thrown off course in recent years by the buy to rent brigade. Many will have burned their fingers now. Others will have found out that it ain't that easy being a small landlord. A friend of mind had just repossesed a flat. Everything the kitchen - bathroom smahed to pieces and even wiring was ripped out of the wall. Needless to say. He is getting out now and when that market dries up we will return to normal trends. One of them being a house of flat is not just and investment. It should be viewed as a home where all the money that you would have paid in rent you get back linked to inflation.

What difference does it make then if a £200K house drops by £50K in the short term if it would cost you just as much to rent as the mortgage payments -none.

Come to think of it - what is the stock market all about. These sudden highs and lows have little to do with the companies profitability. They are about dealers in the City all pushing the prices up one week and down the next - and in between earning big bonus payments for watching a graph with two lines running through it called collar & cap.

BTW. In any event graphs can be tottaly misleading. I have seen huge hikes and lows in share prices on many a graph. The real difference can be less that 50p a share but don't it look dramatic on a graph.