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Debate House Prices
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Are residential property prices now fairly valued?
stueyhants
Posts: 589 Forumite
http://www.ft.com/cms/s/0/cf41f52c-f8d5-11de-beb8-00144feab49a.html?nclick_check=1
Interesting mix of views on residential property prices?
...Few examples, follow the link for more
Patrick Minford, Cardiff Business School
They have picked up and should continue to improve moderately in line with chronic excess demand.
David Blanchflower, former MPC member
No. It is hard to see how house prices can rise given the declines in earnings and reduced availability of credit. These are very thinly traded markets currently. Auction markets suggest much steeper price falls than the Halifax or Nationwide indices. I still expect to see peak to trough falls of at least one third, with potentially more because of overshooting. Seems unlikely that house price: earnings ratios can really be rising as many people are in part-time jobs, hours have been reduced and many firms have introduced wage freezes. And first-time buyers still can’t afford to enter the market.
Andrew Simms, policy director, New Economics Foundation
I think that property in the UK is still overvalued. London prices set the tone for the south-east (and further outward from there) and these, in recent decades, have been distorted by the salaries and bonuses reaped in the City of London. With the undue return of the bonus culture, even with the government’s proposed tax, there appears to be no sign that this distortion will go away.
Julian LeGrand, London School of Economics
Don’t know what would be a “fair” value. I think they will remain high as long as interest rates remain low.
Interesting mix of views on residential property prices?
...Few examples, follow the link for more
Patrick Minford, Cardiff Business School
They have picked up and should continue to improve moderately in line with chronic excess demand.
David Blanchflower, former MPC member
No. It is hard to see how house prices can rise given the declines in earnings and reduced availability of credit. These are very thinly traded markets currently. Auction markets suggest much steeper price falls than the Halifax or Nationwide indices. I still expect to see peak to trough falls of at least one third, with potentially more because of overshooting. Seems unlikely that house price: earnings ratios can really be rising as many people are in part-time jobs, hours have been reduced and many firms have introduced wage freezes. And first-time buyers still can’t afford to enter the market.
Andrew Simms, policy director, New Economics Foundation
I think that property in the UK is still overvalued. London prices set the tone for the south-east (and further outward from there) and these, in recent decades, have been distorted by the salaries and bonuses reaped in the City of London. With the undue return of the bonus culture, even with the government’s proposed tax, there appears to be no sign that this distortion will go away.
Julian LeGrand, London School of Economics
Don’t know what would be a “fair” value. I think they will remain high as long as interest rates remain low.
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Comments
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The current Wage multiples suggests they are overpriced.0
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Tee hee.
Love the thread title, OP. :rotfl::rotfl::rotfl:0 -
Fair for whom ?
I was hoping to flog my place to some 'muppet' from the smoke with more money than sense, for loads more than I can get nowadays :mad:, and spend all the profit on loose women, fast cars and vintage Bollinger !!!!
Totally UNFAIR !!!!!'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
stueyhants wrote: »Interesting mix of views on residential property prices?.
or have salaries not moved in line with house prices and you're underpaid...The current Wage multiples suggests they are overpriced.
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or have salaries not moved in line with house prices and you're underpaid...
I earn just shy of 3 x the average income with a large deposit and I will still find it difficult to get a decent house, but then I am looking in a nice area.
If everyone earnt more then houses would just increase in value due to restricted supply.0 -
so by default if enough people (60,000 transactions a month) with money or borrowed money chased a restricted supply of good quality housing - would that not cause HPI or prices not to drop?stueyhants wrote: »If everyone earnt more then houses would just increase in value due to restricted supply.0 -
so by default if enough people (60,000 transactions a month) with money or borrowed money chased a restricted supply of good quality housing - would that not cause HPI or prices not to drop?
I fully accept the demand and supply argument. Prices will naturally head up due to the inbalances. Cheap credit was just petrol on the existing fire.
Without the cheap credit price rises would have been smaller but nontheless would have crept up.
That said, it doesn't mean that in the short term 1-2 years prices aren't heading downwards due to the recession and debt problems. But I accept long term prices will go up and we will get 40+ year mortgages, sad but the only outcome when you have a limited supply.0 -
Whilst the economy is being supported by the government it is impossible to know what a fair value for a house is. Once the support stops we will know. It maybe todays price it may not be.0
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The current Wage multiples suggests they are overpriced.
Only if you believe that the wage multiples averaged during the three decades of the highest interest rates in history are "normal".
On two out of the three main measures for valuing houses, they are right around or below fair value, and so are not overpriced. Only on salary multiples do they show as being overpriced, and only then if you believe that 10% to 15% rates have any prospect of returning.
The long term average wage multiple is 4 times male full time salary. The average house is currently 4.3 times the average male full time salary.
The long term average percentage of after tax income spent on mortgage payments for new mortgage takers is 38%. It is currently only 30%, (and the rates most people actually get are little different today to what they were in 2007), and has been as high as 68% in 1990.
And the long term average mean for house prices is inflation plus 2.9%. We are right around this point today.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
There are so many things wrong with that post it's difficult to know where to start.
How can 1 man be so wrong?0
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