CITY AM--- Housing no longer overvalued

HAMISH_MCTAVISH

But for now we should focus on one of the most intriguing good news stories of the past few months: the end of the great collapse in house prices. I remember getting scathing emails three months ago when I argued the housing market had turned; but I’m more certain than ever that I called this right. House prices are edging up again, albeit on still low transaction numbers. The average house price/earnings ratio is down to 4.36, still slightly above the 1983-2008 average of 4.0 times but well down from the 2007 peak of 5.84.

Citigroup’s ever-interesting Michael Saunders has crunched all the numbers. He calculates that – assuming a 100 per cent mortgage, a product which is not exactly easy to find these days – the payments to buy an average house have halved to £6,700 per year (18.4 per cent of average full time male earnings) from £11,800 (34.3 per cent) in late 2007. This is well below the long-term average of 30 per cent and the lowest since 2002. Needless to say, this is unlikely to last, especially when base rates rise again, but affordability on this measure is excellent at the moment. Property is once again attractive to buy-to-let investors. The average rental yield on flats (5.1 per cent) is now well above the average 2-year fixed mortgage rate (75 per cent loan-to-value), which is 4.46 per cent. It is the highest gap since 2002-03.

It’s hardly all a bed of roses. The average deposit required of first time buyers is now 25 per cent, compared with a long-term average of 5-10 per cent. The average deposit paid by first-time buyers was worth 103 per cent of income in June, a record high, compared to the long-run average of 20-25 per cent. But the number of 90 per cent-plus loan-to-value mortgages increased in May and June. The number of prime products is up 14 per cent since February.

It is imperative that the public doesn’t get carried away again with the housing market. But the great bust of 2007-09 seems to have come to an end earlier than many had feared – and certainly earlier than we deserved.

http://www.cityam.com/news-and-analysis/Allister-Heath/vul1i1yz48.html

:beer:

More excellent news.

carolt

Can we have the link, please, Hamish - not suggesting for one moment that you might have selectively edited the article in question, or anything, but....

HAMISH_MCTAVISH

carolt wrote: »

Can we have the link, please, Hamish - not suggesting for one moment that you might have selectively edited the article in question, or anything, but....

Actually thats exactly what you're suggesting, but you'll find I inserted the entire housing segment intact.

Link now added.

inspector_monkfish

to be fair though, no-one reads City AM do they?

its usually only any good as an emergency umbrella if its raining in the morning.
sick and tired of the plebs at the station exits thrusting it in my face and going "Si-ee-aye-em??" :rolleyes:

carolt

Hate to criticise the guy, but neither his maths nor his logic are up to much. See:

"Citigroup's ever-interesting Michael Saunders has crunched all the numbers. He calculates that – assuming a 100 per cent mortgage, a product which is not exactly easy to find these days – the payments to buy an average house have halved to £6,700 per year (18.4 per cent of average full time male earnings) from £11,800 (34.3 per cent) in late 2007. This is well below the long-term average of 30 per cent and the lowest since 2002. Needless to say, this is unlikely to last, especially when base rates rise again, but affordability on this measure is excellent at the moment."

He appears to have based his calculations on the assumption that the person who has an 100% mortgage AND one which charges 'average' current rates, is saving money.

Which would be a great assumption - except that there aren't any 100% mortgages anymore. And if there were, they'd charge a huge premium.

So as a demonstration of why housing is now at affordable and at correct value, it kind of falls at the first hurdle.

carolt

HAMISH_MCTAVISH wrote: »

Actually thats exactly what you're suggesting, but you'll find I inserted the entire housing segment intact.

Link now added.

Hamish, Hamish - so young and so cynical.

Nonsense - I have an implicit faith in your integrity.

I mean, why wouldn't I?

Californication

inspector_monkfish wrote: »

to be fair though, no-one reads City AM do they?

its usually only any good as an emergency umbrella if its raining in the morning.
sick and tired of the plebs at the station exits thrusting it in my face and going "Si-ee-aye-em??" :rolleyes:

It's there for people who won't pay for the FT but don't want to carry the Metro about.

--C

Graham_Devon

Never even heard of City AM.

Just where do you get all these articles from Hamish?! You must be trawling the interweb for stuff.

Californication

Graham_Devon wrote: »

Never even heard of City AM.

Just where do you get all these articles from Hamish?! You must be trawling the interweb for stuff.

City AM is a free paper in London. You can grab a paper copy all over the City or Canary Wharf. (Cost may or may not imply value.)

--C

Graham_Devon

Californication wrote: »

City AM is a free paper in London. You can grab a paper copy all over the City or Canary Wharf. (Cost may or may not imply value.)

--C

Yer, but he's in Aberdeen! Their papers will be bigger and better.

ess0two

Graham_Devon wrote: »

Never even heard of City AM.

Just where do you get all these articles from Hamish?! You must be trawling the interweb for stuff.

Does that mean it should be readily dismissed?