Proposed mortgage cap 'suicidal' say 'property experts'

Kenny4315

ad9898 wrote: »

keeping the construction industry happy

Why would it ? As house sale price that supports there business hits the floor. Why do you think so many houses like for example the one I currently live in where left abandoned (mine for 10 years), because if house prices weren't high enough and the costs of refurbishment made it uneconomic.

House builders aren't charities if they can't make money they won't build.

Really2

chewmylegoff wrote: »

why would the banks have to write down by trillions over night? they have to assess recoverability, not the market value of the security. the principle valuation criterion is default rate, not property price. .

So if house prices were £100K what would it do?

Tell me I am all ears?

Really2

lostinrates wrote: »

Don't they have a massively increasing population in China? (what I know about china I could write on a lemon pip.)

Do we not here? and a shortgage of housing?

chewmylegoff

Really2 wrote: »

So if house prices were £100K what would it do?

Tell me I am all ears?

annoy a lot of people who already owned houses. they'd probably riot.

wouldn't change the fact that they still owed money to the bank...

whathavewedone

Dopester the point is that if this is brought in and strictly enforced it will mean that property prices will crash 70% from peak almost overnight with no hope of recovery.

What that would mean for us is that we would not be able to remortgage for a very very long time. Which means we would be exposed to high interest rates for a very very long time. Which could lead to us losing our house because we have a big mortgage which we could not afford to pay at interest rates of 15%. We never thought we'd have to pay interest rates at that level because we thought we had a big enough deposit to protect us against negative equity. We also have 30k in savings but if this were to happen that would be a drop in the ocean and would be simply more money flushed down the toilet.

If people like us who have been cautious would be very exposed to being repossessed how many others would be repossessed? And how much money would the banks be owed if prices crashed by that amount? It wouldn't be in their interests either.

Do you get it now? That's the reason people are saying it would be catastrophic.

And that's why it won't happen, at any rate not without a loophole the size of Russia.

Oh and also because GB wants to win the next election. Believe me, the people who want this will be very much in the minority. The majority of FTBS wouldn't want to be tied to such restrictive lending criteria either.

ad9898_3

Kenny4315 wrote: »

If a 3 times cap were enforced the whole market would collaspe, and the government would be left with an enormous pile of sh8te on every level, currency, tax, national debt, employment, imports, infrastructure support, etc.

I don't understand this, why ? We are now in a situation where too much was borrowed and lent, it's caused the collapse of the system because people do not have the money to pay back these debts.

To me, it's no coincidence that the amount of unsecured debt in this country as increased in line with HPI, a huge swathe of the population can't even live day to day without CC's or loans.

As far as collapse goes, I disagree, if anyone bought before 2001 and didn't mew, they would be fine. Anyone who bought after this time with a substantial deposit would also probably be fine.

Kenny4315

chewmylegoff wrote: »

why would the banks have to write down by trillions over night? they have to assess recoverability, not the market value of the security. the principle valuation criterion is default rate, not property price.

The accounts have to present a true and fair view. Hence a collaspe in the market of the scale we are currently debating of somewhere in the region of 60% from peak, would need to be reflected in one giant motha rekcuf of a bad debt provision.

piggeh

Kenny4315 wrote: »

The biggest cost of construction is labour. Not land as a proportion of the total cost of each separate build, to buy a piece of land might sound expensive but on an estate/appartment block when divided by the total number units it isn't as much as you think. Why do you think so many Polish came over in the building trade ?

In development of existing buildings its and even bigger factor, as they are more complicated than new builds.

A complete meltdown in house prices and construction isn't just going to effect those working within the industry, it will spiral off into other sectors. Public sector spending depends on taxation, although Mr Clown doesn't seem to realise this. Tax revenues from income tax, VAT, stamp duty, inheritance tax, etc all which will get caned. Consumer goods demand will go down, as many related industries are effected, restuarants, gyms, cars, etc. In other words it will effect all aspects of salaries even those who think that a meltdown would be great, because they have a job in Currys selling TV's, which no-one can then afford, or an office in a unrelated field.

It would be good to see some figures for labour costs within a house build. Point taken on apartments. I just remember seeing land costs pre crash and with PP they would be excessivley expensive.

I think there's a myriad of reasons why the poles came over but probably because of excessive house prices pushing up bricklayer wages to unrealistic levels? Or because the Brits didn't want to get their hands dirty maybe..

It wouldn't be a 'complete meltdown', that's a bit of a hyperbolic expression. It would maybe induce a further reduction in a market already correcting itself, but wouldnt say a complete meltdown would be the correct term. The interdependability of most industries is well documented, but you cant prop up unrealistic spending forever, production needs to come back down to realistic levels at one point (and I know all too well being in the Automotive industry until recently). The Govt obviously benefitted as well during the asset boom and now I guess has the reserves to pump back into the economy to replace lost tax revenue... hmmm.... maybe..

ad9898_3

Kenny4315 wrote: »

Why would it ? As house sale price that supports there business hits the floor. Why do you think so many houses like for example the one I currently live in where left abandoned (mine for 10 years), because if house prices weren't high enough and the costs of refurbishment made it uneconomic.

House builders aren't charities if they can't make money they won't build.

Well houses used to built when they cost £500 each. Land prices are coming down inline with house prices, house builders could easily make a profit on a 3x cap, especially with the shoddy materials and workmanship that currently goes into new builds.

Conrad

It 100% will not come to pass, you Bank on it. Any Government introducing such would be writing thier own death certificate and Banks would be massively exposed to negative equity.