Property !!!!!! A Nation Hypnotised? Blog Discussion

vishpatel

inmypocketnottheirs wrote:

Can you really compare the US and UK housing markets, I think not. Infact the UK housing market I think is pretty unique. FIstly we have very limited spance (not applicable in the US), and a shortage of property (not applicable in the US).

Well if you don't think you can compare them, good for you. Glad you are doing your own thinking.

Doesn't stop me from doing mine - totally disagree! There is PLENTY of space in this country. The % of land that homes are built on is very small I think you'll find. Also, what shortage? If there was a shortage, would there not be an epidemic of homeless people, and loads of people having to live in the same house?

UK & US house prices have boomed for 1 reason, and 1 reason only. Cheap credit & money printing. There has been a limitless supply of money mortgaged out by banks in recent years. This wasn't the case in the past. Economic conditions have been such that paying back this debt has been manageable, but that can & will change eventually.

There will be a reversion to the mean relative to earnings, and then some IMO. I believe its going to be nasty.

BTW - if you disagree with this, then you must think that property will stay at its current level of affordability (or not!) relative to earnings, or will actually become less affordable. If so, what will be the drivers for this besides demand? Yes, I know demand for property is high now because of past performance, but the cash has to come from somewhere, and has to keep coming. Is the global economic picture going to be THAT stable and serene for next 25-30 years? Or will the banks just keep printing money?

Anyway, do your own research (thinking).

inmypocketnottheirs

vishpatel wrote:

Well if you don't think you can compare them, good for you. Glad you are doing your own thinking.

Doesn't stop me from doing mine - totally disagree! There is PLENTY of space in this country. The % of land that homes are built on is very small I think you'll find. Also, what shortage? If there was a shortage, would there not be an epidemic of homeless people, and loads of people having to live in the same house?

UK & US house prices have boomed for 1 reason, and 1 reason only. Cheap credit & money printing. There has been a limitless supply of money mortgaged out by banks in recent years. This wasn't the case in the past. Economic conditions have been such that paying back this debt has been manageable, but that can & will change eventually.

There will be a reversion to the mean relative to earnings, and then some IMO. I believe its going to be nasty.

BTW - if you disagree with this, then you must think that property will stay at its current level of affordability (or not!) relative to earnings, or will actually become less affordable. If so, what will be the drivers for this besides demand? Yes, I know demand for property is high now because of past performance, but the cash has to come from somewhere, and has to keep coming. Is the global economic picture going to be THAT stable and serene for next 25-30 years? Or will the banks just keep printing money?

Anyway, do your own research (thinking).

Conversely, I am doing my own thinking.

I am quite puzzled as to how you think there is such an availablity of land in the UK when compared to the US. Naturally, the precentage of land actually built on in the UK is relatively low, but you are not advocating that we live in a concrete jungle are you? The question is more like the low availability of land for building. The Government is actively encouraging the conversion of brown field sites for residential development because of the national shortage of available building land.

If there is not a shortage of property then why are prices so high?

For the first time, our population has exceeded 60,000,000. Surely the demand is only going to increase for housing and supply is already short.

vishpatel

inmypocketnottheirs wrote:

If there is not a shortage of property then why are prices so high?

For the first time, our population has exceeded 60,000,000. Surely the demand is only going to increase for housing and supply is already short.

Prices are high because of investment demand, and the availability of cheap credit. Blimey, I mentioned this in my post, and it looks like you chose not to read it anyway. As I said, property bulls tend to come out with the same old spin without backing it up.

Supply is not short! Just like previous housing booms, there has been huge amounts of new property built this time.

Are there large amounts of people living on the streets? Then I might agree that supply is short........

There is great demand for INVESTMENT property. This is exactly because of what Martin said in his blog - "A nation hypnotised...."

This "demand" will fade away quite quickly if/when prices start to fall.

EdInvestor

There has been a limitless supply of money mortgaged out by banks in recent years. This wasn't the case in the past. Economic conditions have been such that paying back this debt has been manageable, but that can & will change eventually.

I agree that the main reason for the price rises has been the much higher lending, based on much better ability to pay, because of much lower interest rates.

Vishpatel says this will change eventually.He may be right - he may be wrong. But this is the crux of the matter.

Supply and demand do have some effect at the margins - for instance period property in some areas commands a premium because it is regarded as desirable and there's a limited supply.Whereas in other areas there is currently a glut of new build flats, and you can negotiate plenty of discounts or freebies (which hide price cuts) as a result.

Various other aspects also underpin demand - such as BTL investment, formation of more single person households, babyboomers trading down for retirement etc, which tends to prop up prices at the bottom end of the market.

I do understand the frustration of the FTBs. Fortunately many of them can get help from the bank of Mum and Dad - I sometimes wonder how much of that BTL investment is actually FTB buying in disguise.

inmypocketnottheirs

vishpatel wrote:

P

This "demand" will fade away quite quickly if/when prices start to fall.

The point being 'if/when'....

savedup

HI

I agree 100% with your comments on this matter.

As a nation, we seem to have an unhealthy obsession with bricks and mortar - and we seem quite content to take on massive debts to fuel it.
Loans that take us the majority of our working lives to pay back, often involving both partners having to work like dogs, to earn enough to cover the bills etc.

What happened to quality of life ?

I paid my mortgage off last year (After 5 Yrs) and I am glad I am out of it - I really do worry about a lot of families out there, who have paid highly inflated prices for their homes, who will be hardest hit when this property bubble eventually bursts.

vishpatel

inmypocketnottheirs wrote:

The point being 'if/when'....

Errrrm no - your points were about the difference between the US & UK markets, and 'shortages' of property.

Make up your mind! LOL!

Chrysalis

savedup wrote:

HI

I agree 100% with your comments on this matter.

As a nation, we seem to have an unhealthy obsession with bricks and mortar - and we seem quite content to take on massive debts to fuel it.
Loans that take us the majority of our working lives to pay back, often involving both partners having to work like dogs, to earn enough to cover the bills etc.

What happened to quality of life ?

I paid my mortgage off last year (After 5 Yrs) and I am glad I am out of it - I really do worry about a lot of families out there, who have paid highly inflated prices for their homes, who will be hardest hit when this property bubble eventually bursts.

We certianly paying the price healthwise, the uk is the only country that has benefited fron longer life expentancy but the healthy life hasnt increased, meaning the amount of years we get as been fit to work before we fall into ageing illnesses is not improving whilst it is elsewhere. This is probably mainly down to our lifestyle, britian been longer working hours double jobs etc. and most people are doing this probably to just get by paying off huge mortgages and other credit as well as having to get by on low wage increases below the "real" inflation.

rest of europe eg. renting is by far more popular and it isnt seen as the in thing to do to buy a house.

EdInvestor

I paid my mortgage off last year (After 5 Yrs)

Of course this site has a whole forum dedicated to people who want to pay off their mortgage asap and regard this as a realistic aim. And a very praiseworthy aim it is too.

But I just thought it might be helpful to make an observation, one you might want to remember particularly if you're applying for a loan from the Bank of Mum and Dad

Back in the olden days, (yawn,I know) most people only started to make any serious dent in the amount of their mortgage around year 15 :eek: This was because interest rates and inflation were so high that mortgages were "front- end loaded" so that you paid back almost entirely interest, no capital, until nearly the end of the mortgage term.It was not impossible for someone moving to a new house and remortgaging after 5 years to find they owed more than when they started or has paid off a derisory amount like 50 quid..

Mum and Dad will be remember this. It's not impossible they also might have had a recent unpleasant experience involving an endowment which will not pay off their mortgage as well.[If you think about the above scenario you can see why endowments were an easy sell at the time.]

Parents in this situation may well marvel at the idea that lots of young people can realistically be mortgage free in a mere 5 or 10 years at a very young age these days, if they try really hard. They may feel that the young generation is actually not so badly off after all.

I just thought you lot ought to be aware of that.

Chrysalis

Edinvestor its lower interest rates on a higher capital tho. So the amoutn borrowed in realtion to income isnt any less, The difference is when you buy at low interest rates the payments if anything are likely to go up at some point in the medium future they will move closer to 7%. You then have a situation where the amount of paying back on the interest suddenly increases and the total debt is is huge proportion to what mum and dad had to pay.

You conveniantly forgot back then in the 70s people could buy a house on one wage it was not uncommon for just one of a couple to work and the other to stay at home, now days it needs 2 adults to buy a property both working full time and generally a single adult would get maybe a bedsit out of their salary.