We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Property will stay in the doldrums
carolt
Posts: 8,531 Forumite
http://www.ft.com/cms/s/0/43533408-acf6-11dd-971e-000077b07658.html
By the lovely - and usually correct - Merryn Somerset Webb.
"Earlier this week, a TV company called me with a question. When it interviewed me about property prices a few weeks ago, I said that it was entirely possible that house prices would fall 60 per cent before the current crash called it a day. Had I really meant it, and, if so, was I OK with the comment making it into the programme? I was. I don’t actually think prices will fall 60 per cent – 40 per cent would be more realistic – but given how far markets, and illiquid markets in particular, overshoot on both the way up and the way down it didn’t seem impossible at the time. After all, the auction houses were already saying that they see prices down not far off 30 per cent.
The next day, the Bank of England cut interest rates from 4.5 per cent to 3 per cent making me wonder if I should think about being a bit more optimistic about things. But, however hard I try, I still can’t see how the rate cut will make things much better for the housing market. For starters, it doesn’t help most of those looking for a new mortgage....
....The second thing to note is that regardless of what base rates are, if the banks don’t fancy lending they won’t lend – at any price. I was reminiscing with a colleague from my stock-broking days about how when we first arrived in Japan and found interest rates below 1 per cent, we couldn’t understand why everyone didn’t buy houses. Only later did we see that cheap mortgages were only available to a few risk-free customers – middle-aged men of a certain status and income level. Everyone else was excluded from the market: if they wanted to borrow money, they had to do so via the consumer finance companies at 20 per cent-plus.
Things aren’t quite that bad here yet but the banks are clearly more risk-averse than they have been for many years. The best deals on the market require deposits of 40 or 50 per cent and anyone with a remotely iffy credit rating hasn’t a chance of getting even the worst deals.
So the point stands: if you can’t get a loan, what difference does it make that base rates are the lowest they have been since the 1950s? We endlessly hear, not least from Gordon Brown, about how there is massive “pent-up demand” for property in the UK. But this isn’t a concept that makes any sense in economic terms: demand isn’t demand unless it is backed by cash.
In my household, there is pent-up demand for a bottomless bottle of Ren rose bath oil, for a brand- new VW Jetta (diesel) and for a very bling yellow diamond necklace. But is this demand going to push up the prices of these items? Of course not. Not unless someone dumps a pile of money to splurge on our doorstep. Which they won’t. These days no one dumps money on anyone’s doorstep.
And that, combined with the miserable sentiment across the market to say nothing of rising unemployment, is why, however low interest rates go, house prices aren’t going to stop falling."
By the lovely - and usually correct - Merryn Somerset Webb.
"Earlier this week, a TV company called me with a question. When it interviewed me about property prices a few weeks ago, I said that it was entirely possible that house prices would fall 60 per cent before the current crash called it a day. Had I really meant it, and, if so, was I OK with the comment making it into the programme? I was. I don’t actually think prices will fall 60 per cent – 40 per cent would be more realistic – but given how far markets, and illiquid markets in particular, overshoot on both the way up and the way down it didn’t seem impossible at the time. After all, the auction houses were already saying that they see prices down not far off 30 per cent.
The next day, the Bank of England cut interest rates from 4.5 per cent to 3 per cent making me wonder if I should think about being a bit more optimistic about things. But, however hard I try, I still can’t see how the rate cut will make things much better for the housing market. For starters, it doesn’t help most of those looking for a new mortgage....
....The second thing to note is that regardless of what base rates are, if the banks don’t fancy lending they won’t lend – at any price. I was reminiscing with a colleague from my stock-broking days about how when we first arrived in Japan and found interest rates below 1 per cent, we couldn’t understand why everyone didn’t buy houses. Only later did we see that cheap mortgages were only available to a few risk-free customers – middle-aged men of a certain status and income level. Everyone else was excluded from the market: if they wanted to borrow money, they had to do so via the consumer finance companies at 20 per cent-plus.
Things aren’t quite that bad here yet but the banks are clearly more risk-averse than they have been for many years. The best deals on the market require deposits of 40 or 50 per cent and anyone with a remotely iffy credit rating hasn’t a chance of getting even the worst deals.
So the point stands: if you can’t get a loan, what difference does it make that base rates are the lowest they have been since the 1950s? We endlessly hear, not least from Gordon Brown, about how there is massive “pent-up demand” for property in the UK. But this isn’t a concept that makes any sense in economic terms: demand isn’t demand unless it is backed by cash.
In my household, there is pent-up demand for a bottomless bottle of Ren rose bath oil, for a brand- new VW Jetta (diesel) and for a very bling yellow diamond necklace. But is this demand going to push up the prices of these items? Of course not. Not unless someone dumps a pile of money to splurge on our doorstep. Which they won’t. These days no one dumps money on anyone’s doorstep.
And that, combined with the miserable sentiment across the market to say nothing of rising unemployment, is why, however low interest rates go, house prices aren’t going to stop falling."
0
Comments
-
dan & chucky's imminent house price inflation theory is comprehensively trashed. He'll be gutted.Krusty & Phil Madoff, 1990 - 2007:
"Buy now because house prices only ever go UP, UP, UP."0 -
ad44downey wrote: »dan & chucky's imminent house price inflation theory is comprehensively trashed. He'll be gutted.
What is my house price inflation theory then????
0 -
Property will stay in the doldrums.
WOW - you don't say. That's what happens in a recession. That's because people lose their jobs and don't have any money....:idea:0 -
tell that to krusty, phil, etc. they believe prices are just about to go UP UP UPwintersunshine wrote: »Property will stay in the doldrums.
WOW - you don't say. That's what happens in a recession. That's because people lose their jobs and don't have any money....:idea:Krusty & Phil Madoff, 1990 - 2007:
"Buy now because house prices only ever go UP, UP, UP."0 -
http://www.ft.com/cms/s/0/43533408-acf6-11dd-971e-000077b07658.html
By the lovely - and usually correct - Merryn Somerset Webb.
"Earlier this week, a TV company called me with a question. When it interviewed me about property prices a few weeks ago, I said that it was entirely possible that house prices would fall 60 per cent before the current crash called it a day. Had I really meant it, and, if so, was I OK with the comment making it into the programme? I was. I don’t actually think prices will fall 60 per cent – 40 per cent would be more realistic – but given how far markets, and illiquid markets in particular, overshoot on both the way up and the way down it didn’t seem impossible at the time. After all, the auction houses were already saying that they see prices down not far off 30 per cent.
The next day, the Bank of England cut interest rates from 4.5 per cent to 3 per cent making me wonder if I should think about being a bit more optimistic about things. But, however hard I try, I still can’t see how the rate cut will make things much better for the housing market. For starters, it doesn’t help most of those looking for a new mortgage....
....The second thing to note is that regardless of what base rates are, if the banks don’t fancy lending they won’t lend – at any price. I was reminiscing with a colleague from my stock-broking days about how when we first arrived in Japan and found interest rates below 1 per cent, we couldn’t understand why everyone didn’t buy houses. Only later did we see that cheap mortgages were only available to a few risk-free customers – middle-aged men of a certain status and income level. Everyone else was excluded from the market: if they wanted to borrow money, they had to do so via the consumer finance companies at 20 per cent-plus.
Things aren’t quite that bad here yet but the banks are clearly more risk-averse than they have been for many years. The best deals on the market require deposits of 40 or 50 per cent and anyone with a remotely iffy credit rating hasn’t a chance of getting even the worst deals.
So the point stands: if you can’t get a loan, what difference does it make that base rates are the lowest they have been since the 1950s? We endlessly hear, not least from Gordon Brown, about how there is massive “pent-up demand” for property in the UK. But this isn’t a concept that makes any sense in economic terms: demand isn’t demand unless it is backed by cash.
In my household, there is pent-up demand for a bottomless bottle of Ren rose bath oil, for a brand- new VW Jetta (diesel) and for a very bling yellow diamond necklace. But is this demand going to push up the prices of these items? Of course not. Not unless someone dumps a pile of money to splurge on our doorstep. Which they won’t. These days no one dumps money on anyone’s doorstep.
And that, combined with the miserable sentiment across the market to say nothing of rising unemployment, is why, however low interest rates go, house prices aren’t going to stop falling."
Well that's a shame for YOY then, Carott. You'll NEVER be a homeowner will you?:p
Can I ask you WHY exactly you keep on harping about property prices falling....wouldn't by any chance be that you HOPE they will, is it????:D
You'll always get doommongers praying and hoping for huge crashes - but it ain't gonna happen. Price drops have ALREADY begun to slow down.............:T
In fact, it's only the horrible properties that are dropping significantly. The good ones hold their price much more. And the good ones are usually owned by people who have GOOD jobs and lots of equity in them - so they won't move until property shoots back up again.
But I'll keep my fingers crossed for you, Carol - maybe you'll find a run down hovel going for a bargain.0 -
ad44downey wrote: »tell that to krusty, phil, etc. they believe prices are just about to go UP UP UP
Nobody ever believed that - not unless your 12..:shocked:A journey of a thousand miles begins with a single step
Savings For Kids 1st Jan 2019 £16,112
0 -
Not strictly true I am afraid...the houses in my area which have seen the biggest drop (in the region of over 100K) ARE the most sought after nice houses.We made it! All three boys have graduated, it's been hard work but it shows there is a possibility of a chance of normal (ish) life after a diagnosis (or two) of ASD. It's not been the easiest route but I am so glad I ignored everything and everyone and did my own therapies with them.
Eldests' EDS diagnosis 4.5.10, mine 13.1.11 eekk - now having fun and games as a wheelchair user.0 -
pickledpink wrote: »In fact, it's only the horrible properties that are dropping significantly. The good ones hold their price much more. And the good ones are usually owned by people who have GOOD jobs and lots of equity in them - so they won't move until property shoots back up again.
And how will property shoot back up again?0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.2K Work, Benefits & Business
- 600.9K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards