House prices the truth

[StephenW]

If we assume for the moment that there won't be a hung parliament and a guilt strike that still leaves the inflation to come as the result of all the QE. What do members think about that and how soon will interest rates have to increase simply because of inflation?

One possible bit of good news, new government is said to be planning corporation tax cuts to help the recovery. See: http://www.spectator.co.uk/coffeehouse/5583678/tory-corporation-tax-plans-become-clearer.thtml

 

[directmarketingadvice]

If we assume for the moment that there won't be a hung parliament and a guilt strike that still leaves the inflation to come as the result of all the QE. What do members think about that and how soon will interest rates have to increase simply because of inflation?

There might not be inflation, there might be deflation.

IMO, there should be deflation, but with the government willing to do anything to fiddle the economy, it could go either way.

(and, as a result, it's very difficult to make confident, long-term decisions about money)

Steve

 

About time our economy was based on reality and not crystal ball philosophy.

Confidence is a very dodgy measure of a company/market IMHO.

Earl

 

[lockie]

A reason why i think prices could still rise is because many banks although repossessing properties they are not putting them up for sale as they are in major negative equity.Many are renting them out adding to the lack of property for sale thus pushing up prices.

If there is a lack of property prices rise which is what is happening in my local area.We moved this year and sold our house within 3 weeks and had a couple of offers in that time.My friend has just done the same thing and had to pay full asking price to get the property he wanted.

What about migration ? that must have an effect on prices as these people need to be housed.

Lack of anything results in increased prices.They dont make land anymore hence the value of a property because its built on it.

Perhaps it is a bounce but nobody really knows for certain they can only give an opinion unless you can buy hindsight these days ?

 

Lack of anything results in increased prices.They dont make land anymore hence the value of a property because its built on it.

true but there is masses of the stuff ,suitable for housing that is being artificially restricted by vested interests.

Greed of the land owners and there brown nosed Joe's is the major problem in this country not the cost of houses.

Earl

 

[thebigIAM]

... that still leaves the inflation to come as the result of all the QE. What do members think about that?


Whether there will be inflation or not depends on the behaviour of our banks. The govt has given them hundreds of billions of pounds to prompt them into lending again. Instead of lending, they have hoarded it. What happens if they decide to splurge it all at once?

A big mistake to put so much power in the hands of our banks. The government should have lent to businesses directly through vehicles where it has 100% control.

 

[Mpg]

Govt backed mortgage @1% above base rate. That'll free up some of our wages enough for us to get spending again. And the banks will have to pass on rates to customers.

Oh and it'll make the Govt some money..Bonus

 

[Gratis Guidance]

Govt backed mortgage @1% above base rate. That'll free up some of our wages enough for us to get spending again. And the banks will have to pass on rates to customers.

Oh and it'll make the Govt some money..Bonus

This is based on the idea that the banks care about their customers - the moment there is some money spare in the system, customers are going to spend it paying off their debt - and maybe increasing the value of the house they are in through DIY and extensions etc.

The banks are only interested in increasing profits - and with the government doing its best to remove risk from the financial markets, they will be soaking up any spare cash through increased taxes!

 

[Gratis Guidance]

There are millions of young people currently living in rented accomodation or with parents who would love to buy their own home, but have been locked out of the market completely. It is definitely in their interests for house prices to fall.


It is in society's interests for house prices to fall considerably. The ridiculous cost of shelter is the single biggest factor dragging this country back from being a competitive economy.

Cheap housing = competitive wage levels = competitive industry.

I totally disagree with this way of thinking.

There is no requirement for people to own their own homes - its quite a modern phenomena and certainly not something that other European countries do - these are the same EU countries who are already out of recession - not sure if its connected!

One of the things that happened in this boom was that the average age of 1st time buyers dropped like a stone. Back in the 70's, 1st time buyers were in the mid 30's and this was true all the way through to the end of the 90's. Suddenly, it became a requirement for everyone to buy a house as early as possible - and it was the expectation of most 22 year olds that they should be able to buy a house as soon as they were on the career ladder!

So, what caused the boom? Cheap credit was a big part of it, but so was the whole new range of buyers who traditionally would not have considered buying a house for another decade or so.

The result is that there are lots of rental customers who are unrealistically disheartened by what they see as an impossible next step - however, if they wait until they are in their mid 30's, they will find that they will have the financial strength to take that step - its all about being patient! That is what us older lot did!

 

I totally disagree with this way of thinking.

There is no requirement for people to own their own homes - its quite a modern phenomena and certainly not something that other European countries do - these are the same EU countries who are already out of recession - not sure if its connected!

One of the things that happened in this boom was that the average age of 1st time buyers dropped like a stone. Back in the 70's, 1st time buyers were in the mid 30's and this was true all the way through to the end of the 90's. Suddenly, it became a requirement for everyone to buy a house as early as possible - and it was the expectation of most 22 year olds that they should be able to buy a house as soon as they were on the career ladder!

So, what caused the boom? Cheap credit was a big part of it, but so was the whole new range of buyers who traditionally would not have considered buying a house for another decade or so.

The result is that there are lots of rental customers who are unrealistically disheartened by what they see as an impossible next step - however, if they wait until they are in their mid 30's, they will find that they will have the financial strength to take that step - its all about being patient! That is what us older lot did!

So you think its a good idea for the few youngsters that can afford it to help boost the income of the buy to rent crowd for 15 years or so.?

Back in the 60's and 70's rents were at a resonable level so most young people were able to afford to rent unlike today where it takes the combined income of 3 reasonably well paid kids to rent a half decent pad.


Earl

 

[Spongebob]

One of the things that happened in this boom was that the average age of 1st time buyers dropped like a stone. Back in the 70's, 1st time buyers were in the mid 30's and this was true all the way through to the end of the 90's. Suddenly, it became a requirement for everyone to buy a house as early as possible - and it was the expectation of most 22 year olds that they should be able to buy a house as soon as they were on the career ladder!

Sorry matey, but you are totally mistaken on this.

I bought my first house, a nice 2 bed terrace in Chester, in 1984 at the age of 24. Amongst my contemporaries, just about everyone I knew was doing the same. The thing to note though, is that most were single people buying houses on their own. I was earning around £10k at the time and my house cost £17k.

Going back a generation, my parents bought their first house in 1958 at the ages of 22 and 21. Again, this was a perfectly normal thing for well-educated newly wed working class couples to do at the time. All my parents' contemporaries were able to buy a modest house as soon as they got married.

Your assertion that until the 90s people didn't buy houses until their 30s is just plain wrong! In fact the average age of a first time buyer has gone up over the last ten years!

So, what caused the boom? Cheap credit was a big part of it, but so was the whole new range of buyers who traditionally would not have considered buying a house for another decade or so.

Totally flawed logic, as explained above. The reasons for the bubble were easily available credit and a mass public mania about buying property.

The result is that there are lots of rental customers who are unrealistically disheartened by what they see as an impossible next step - however, if they wait until they are in their mid 30's, they will find that they will have the financial strength to take that step - its all about being patient! That is what us older lot did!

I agree. Be patient - wait until house prices fall by another 40% or so in relation to wages!

 

[zimple]

I can't find how to insert an image to prove it but having just graphed Sir Earl's house price data from q1 of 1998 (when we bought) the similarity to spongebob's graph to the return to "normal" phase is remarkable.
Hold onto your hats indeed!

 

[directmarketingadvice]

This might be of interest:

Steve

PS If you take the trend from 1975 to 2000, the real increase was 38%, which is 1.3% p.a. above inflation.

(far less, if you subtract the cost of home maintenance over that quarter century)

If that trend had continued, 2009 house prices would be 30% lower than they actually are.

 

[dingbat]

I don't where you guys are but I'm in London. The prices fell end of 2008 onwards but they have been steadily going up since.

The bargains were to be had early 2009. I've been closely watching the market looking for property over a year now and you'll not get those prices again.

Jonathan Davies bases his speculation on tosh.

There are just so many people in London and so much demand. From the new migrants to all the ex-soviet billionaires still heavily investing. I don't see anything going down here, certainly not 30% like that idiot is talking about.

Maybe in the crappiest parts of the UK where developers are sat on too much land and empty new property you might see some prices fall but that's about all I forsee.

 

[lockie]

I don't where you guys are but I'm in London. The prices fell end of 2008 onwards but they have been steadily going up since.

The bargains were to be had early 2009. I've been closely watching the market looking for property over a year now and you'll not get those prices again.

Jonathan Davies bases his speculation on tosh.

There are just so many people in London and so much demand. From the new migrants to all the ex-soviet billionaires still heavily investing. I don't see anything going down here, certainly not 30% like that idiot is talking about.

Maybe in the crappiest parts of the UK where developers are sat on too much land and empty new property you might see some prices fall but that's about all I forsee.

I have to agree about how it is in london.We moved earlier this year as prices had bottomed out and now are rising bit by bit fueled by lack of properties for sale.I mentioned in a previous post about migration and considering london seems the first port for many its not surprising its also the first place to try and live in.

The other factor is the media changed its reporting and the moment it announced the small rises in the market all those who had sold up a few years earlier and been renting started looking for something to buy.Lack of properties and those able to get mortgages easily has added to the rises in london.

 

[vvaannmmaann]

I blame Sarah Beeny!

 

[directmarketingadvice]

Jonathan Davies bases his speculation on tosh.

There are just so many people in London and so much demand.

That's the theory that "there are more people, they have to live somewhere, so house prices must rise".

Not true.

It wasn't the increase in the number of people that caused UK house prices to double in real terms in just a few years. It was speculation driven by the idea that "whatever you pay, someone will pay more in the future".

That's the real supply & demand equation: "sellers v people able & willing to pay the prices".

It's quite easy to see why the left hand side of that equation will increase (people who can't afford to pay their mortgages when interest rates and unemployment rise) and the right hand decrease (people who can't get mortgages or, worse still, can afford to buy but are waiting because prices are falling again) if the rise in prices peters out.

Steve

 

[dingbat]

That's the theory that "there are more people, they have to live somewhere, so house prices must rise".

Not true.

Oh yes it is. It's simple economics. I've not cited it as the only one but certainly one of the reasons prices in London will not fall and continue to increase. Massive foreign investment and low rates of interest too.

It wasn't the increase in the number of people that caused UK house prices to double in real terms in just a few years. It was speculation driven by the idea that "whatever you pay, someone will pay more in the future".

We're not talking about stocks, bricks and mortar have always appreciated over time. People will always need somewhere to live. Given the crash in 89/90 and price lull since, the increase taken over that whole period isn't as significant.

The amount of landlords certainly increased and no wonder when they could get back at least in rent what they were paying in mortgage. The profits may have got much slimmer but any slack is taken up pretty fast.

That's the real supply & demand equation: "sellers v people able & willing to pay the prices".

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

Longer term rental may become the norm for many families.

 

Oh yes it is. It's simple economics. I've not cited it as the only one but certainly one of the reasons prices in London will not fall and continue to increase. Massive foreign investment and low rates of interest too.



We're not talking about stocks, bricks and mortar have always appreciated over time. People will always need somewhere to live. Given the crash in 89/90 and price lull since, the increase taken over that whole period isn't as significant.

The amount of landlords certainly increased and no wonder when they could get back at least in rent what they were paying in mortgage. The profits may have got much slimmer but any slack is taken up pretty fast.



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

Longer term rental may become the norm for many families.

People may be trying to increase the price of property,but that means nothing.

Fact is only half the number of homes sold this year to previous years.

Hence price has no relevance.Sale prices do .

Earl

 

[directmarketingadvice]

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.