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

kondormid

Houses are a good investment, however, that does not mean it is for everyone. The mortgage you take out to pay for the thing is not a good investment. As far as loans go a mortgage is pound for pound the best loan out their. There is two catches to this so called "good loan" though. Firstly it is big, very big. The second is what happens if you fail to repay it regular.

Lets not kid ourselves, their is property !!!!!! on TV that is excellent at showing us one side of the argument. Lets take for instance the one where they show house after house being bought at auction. Later they show these same houses after they have had a lick of paint and ask an estate agent to value them, profit! Well hoo haa its a rising market at the moment, there is nothing special about that.

However they are not showing you the full story at all. The house is up at auction, oh hang on why is that? Could it be that someone else stepped onto what they thought was a property ladder and found it was a property trap? You see they do not show you the previous owner, the fact the previous owner had all intentions of paying off the loan but then found that his/her circumstances changed and could not repay it. They fail to tell you that when this happens very often the house is just shoved up for auction and guess what, yes thats right, it is bought at a rock bottom price and you get to see someone do it up on TV.

18 months ago my son and I were in a hostel, we owned virtually nothing. The wierd thing was that the famillies that had previously owned a house spoke to me still like I was some kind of low life. It was really quite funny thinking back, how they would babble on about how they should not be in their, were they trying to say I should be because I had not owned an house I wonder?

I will never have a mortgage and because I can not afford to buy a house outright I will never own one. This is by choice but it is a pretty good choice. If I am offered a job 500 miles away for good money I can go, just up and go. If something happens to make the job market go into freefall then it WILL effect house prices. It is not rocket science.

Work it out, employment has been rising steady and we get good house price rises. It starts to steady off and we see the house prices steady off. What do you think happens when the employent figure starts to fall, when unemployment grows?

It is quite simple, first off you need to understand what happens in the "job market" you see contrary to popular belief the actual employment figure is not really that interesting. The interesting thing is what direction it is going in and how fast. When alot of people are taking on new staff it doesn't matter what the employment figure is as it is easy to find a job. However, when the employment figure drops and unemployment rises it means no one is taking on any more staff. It means that if you become unemployed, which is more likely when unemploymet grows, then you will find it hard to find new work.

So there you are, in the job center, un able to get a job, with a huge bill comming through your letter box each month asking where the banks money is. It doesn't matter though eh? because you have that investment, the house you bought. Only problem is that everyone else is in the same position, everyone wants to sell up and throw the "ball around their neck" known as a mortgage off. So the house prices fall, fall with the growth in unemployment.

The two are and always will be joined at the hips. If you think that unemployment will not grow then think again.

angstrom

It won't take interest rates to return to double digits to crash the housing market.

It's simple arithmetic:

The effect of a 2% hike in interest rates in itself is meaningless. It depends what the rate was before the increase.

A 2% hike on an 8% mortgage increases interest payments by 25%.
A 2% hike on a 5% mortgage increases interest payments by a 40%.
As I mentioned before, a 2% hike on a 4% mortgage in increases the interest payments by 50%.

To mention the US market, remember their interest rates have been as low as about 1%. I'd hate to be a poor soul who is now facing a 2% to 4% adjustment in their mortgage payments. Few people who are maxed out could afford this doubling of their interest payment without some form of knock on effect. Hence the US marking is going to go into pretty much free fall.

As has been said here, because interest payments are low, people are taking massive loans as a multiple of their income. It is these people who will be first to be kicked in the teeth as interest rates creep up.

Will house prices double in the next 10 years (in real terms) - I doubt it. As history has illustrated, the longer it takes for prices to rise to their peek, the longer it takes for them to fall to the trough. Though we won't see a crash unless interest rates go up significantly, we'll probably see a long run of decreasing prices. Remember to factor in inflation for the real reduction in house prices.

A shortage of housing - I'm not convinced. While I walk around, I don't see loads of people living outside queuing up to buy or rent a home. There are small developers converting large dwellings into smaller units. Where I live, there are builders knocking down houses and putting up 6 flats in the same space. Yes there are a large number of immigrants coming in but they somehow find a place to live, don't they? To take it to an extreme, if there was literally nowhere for them to buy or rent, I'd imaging they'd return home or try another country.

Save for luxury developments, most new dwelling sizes are built smaller and smaller. Therefore we can accommodate more people per square mile. Take a look at Japan if you think that 60 million inhabitants is too much for the UK.

ReportInvestor

angstrom wrote:

Save for luxury developments, most new dwelling sizes are built smaller and smaller.

Yes. This has been happening for a while.

Therefore we can accommodate more people per square mile.

A potential non-sequitor. Our family / living arrangements have also been / are evolving.

inmypocketnottheirs

vishpatel wrote:

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

Make up your mind! LOL!

It was you that quoted:

Originally Posted by vishpatel
P

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

Why should I make up my mind?

vishpatel

inmypocketnottheirs wrote:

It was you that quoted:

Originally Posted by vishpatel
P

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

Why should I make up my mind?

I was trying to discuss your original points, ie:

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.

I responded with:

vishpatel wrote:

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...."

At which point, you responded to my remark "if/when" prices fall.

What I'm saying is you didn't actually address the flaws I pointed out in your argument, and instead pointed out something else all together - something which is actually incredibly obvious. No-one knows whether prices will fall or not. DUH!

inmypocketnottheirs

vishpatel wrote:

I was trying to discuss your original points, ie:



I responded with:



At which point, you responded to my remark "if/when" prices fall.

What I'm saying is you didn't actually address the flaws I pointed out in your argument, and instead pointed out something else all together - something which is actually incredibly obvious. No-one knows whether prices will fall or not. DUH!

At the end of the day, it is a simple economic priciple of supply and demand. If demand exceeds supply, prices rise, if supply exceeds demand prices fall. At the moment, where I am sat it is the former. Perhaps where you are it is a different situation.

Dress it up how you like, see it how you want, but these are the simple facts. Confusing issues by comparing us with an incomaprable market achieves nothing.

QED

Chrysalis

funnily enough last week I noticed a paper had more headlines about how the market is booming more proganda, every slight rise now days results in news highlighting a booming market and any drops are ignored.

LizEstelle

As far as I can see, there are a number of matters which are indisputable and which would seem to point to an inevitable ongoing rise in house prices.

Firstly, this is an overcrowded, little island with an already huge population.

Secondly, we appear to be headed for a steady growth in that population fuelled largely by immigration, as has already been mentioned.

Thirdly, all these folk will need somewhere to live, whether rented OR bought.

Unless market economics performs some strange tricks in the near future, that scenario looks to me like a recipe for at least a steady rise in prices, if not more. People will either be buying outright or buying to let to the new immigrants.

The only two factors that stand a chance of countering this ALREADY built-in pressure would be:

1. A dramatic and sudden worsening of the world economic climate - in which case we are ALL in trouble, even if we rent rather than buy. Landlords will kick out non-paying tenants just as surely as lenders will seek repossession orders against non-paying borrowers.

or

2. The Bank of England may find some ingenious way to regulate mortgage rates specifically, independent of those applying to industry and commerce - a trick they've yet to show any sign of being able to produce.

As regards the 'psychology of property ownership', one suspects we are already way past the tipping point on that one. The 'dreadful' negative equity times we went through 15 years ago didn't even make a dent in it.

ManAtHome

LizEstelle wrote:

1. A dramatic and sudden worsening of the world economic climate - in which case we are ALL in trouble, even if we rent rather than buy. Landlords will kick out non-paying tenants just as surely as lenders will seek repossession orders against non-paying borrowers.

But isn't this what the thread was intended to be about? Regardless of how prices go, any big downturn in the UK or the world (which is bound to affect the UK) is more likely to impact people with too many eggs in one basket.

LizEstelle

It would impact EVERYONE, is the point. Property ownership is now becoming the norm so, yes, large numbers would be affected by an economic nosedive - but those renting would soon find themselves similarly in difficulties if they became unemployed.

The multi-millions who have mortgages are going to scream foul if the only people the state helps out in times of mass unemployment are the tenants of this world. Governments had better watch out.