HP expect the rate of decline to accelerate, Economist.

Reaper

I find it amazing that people are looking at that chart and coming to conclusions without anyone at all mentioning interest rates.

Yes the market has further to fall and yes there is a short term credit shortage, but in the end house prices are fundamentally determined by what people can afford.

Over the period of that chart base rates have been as high as 15% but now stand at 1% and may fall further (here's a chart if you want to look). If you want to know where house prices will settle you can't just look at income multiples in isolation. Historically speaking people are paying a pittance on their mortgages and if that continues then we won't be going back to x3.5 multiples when confidence and liquidity return.
EDIT: P.S. When I mean confidence returns I mean people think we have reached bottom - they don't need to see recovery

RDB

Quote:
Originally Posted by socrates
I am a BTL LL as some of you already know.

Although I do not listen to a lot of what Brit says.

I still do not think we should be on here boasting about this or that - I too have a mortgage that was £1100 pcm and is now £300 pcm - the rent has stayed the same £1200 (net of all expenses)

My biggest qualm is this - and I have not yet had anyone who can explain the economics behind it.

How can the market/economy sustain this type of difference (the £1100 - £300)

I sense there will be some massive correction or some new tax that will attack this.

I just cannot put my finger on it....


Its a good point.

Surely cutting the base rate so much has just made things worse in the long run. The short term maybe to delay mass repos, but its just delaying the problem and making it worse. The banking system is so close to failing completely so to cut the income by so much just seems crazy. How long can these low rates last?

Was it worth it to try and put off a repossession crisis like the UK has never seen before? Not if that crisis is going to be even worse the longer they delay it.

Cannon_Fodder

Reaper wrote: »

...but in the end house prices are fundamentally determined by what people can afford.

...If you want to know where house prices will settle you can't just look at income multiples in isolation. Historically speaking people are paying a pittance on their mortgages and if that continues then we won't be going back to x3.5 multiples when confidence and liquidity return.

You seem to think it would be a good idea, once the short term credit shortage is resolved, for everyone to assume that interest rates will remain "historically low" and borrow what they can afford at that level.

i.e. not allow for increases in interest rates.

Mmm....sounds like a plan to inflate, then burst, a future house bubble.


We do not know where interest rates will settle. Even if they are still low in a year or two's time - which is debatable, with the unknown effects of various financial stimuli - then when everyone jumps on that bandwagon, what is to say IRs will STAY that low, for a long, very long, time?


How about keep to 3.5 times multiple AND enjoy the low IRs while they last - that would be REALLY affordable, plus protected from future unknowns.

Reaper

Cannon_Fodder wrote: »

You seem to think it would be a good idea, once the short term credit shortage is resolved, for everyone to assume that interest rates will remain "historically low" and borrow what they can afford at that level.

No, I don't think it would be a good idea at all.

However the housing market is not a particularly rational place and I've noticed people seem to buy the best they can afford at the time without, sadly, thinking about future interest rates.

It's depressing but I'm not expecting people to learn from their mistakes.

treliac

Reaper wrote: »

However the housing market is not a particularly rational place and I've noticed people seem to buy the best they can afford at the time without, sadly, thinking about future interest rates.

It's depressing but I'm not expecting people to learn from their mistakes.

Which is why the proper measures need to be in place to prevent people from overstretching themselves, as far as can realistically be enforced.

matbe

Will people please stop posting oversized articles it keeps messing up my screen!!!!

RDB

The value of that graph is well worth the few people with old monitors having to scroll a bit. Most will have a good resolution that will fit in 1 page.


However that graph is for the USA. Has someone got one for the UK?

Also that predicted line goes down quite gently, this thread is called "HP expect the rate of decline to accelerate," so I think the line will be more straight down with a few uneven bits like Jan 09.

Anyone else care to guess what the graph will look like in the UK the next few years. Then we can see who was the most right.

ad9898_3

RDB wrote: »

Anyone else care to guess what the graph will look like in the UK the next few years. Then we can see who was the most right.

The same, with a 12-18 month lag.

RDB

ad9898 wrote: »

The same, with a 12-18 month lag.

Thats my point though, if you look at that line it doesnt accelerate it moderates.

At the moment prices are dropping about 2% a month here inthe UK. What the economist article is saying is that will steadily go up.

I think the line inthe UK graph will be going sharply down the next few yrs until it get to where it has always been, where it should be.

matbe

Im the most right as i have to keep moving there to see the damn thing.

Also how dare you say i have an old monitor i bought this four years ago flat screen all the rage.

Would you rather I mewed for the latest 27"?

This screen was bought with "real money" very mse I will have you know!