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

vishpatel

inmypocketnottheirs wrote:

If we suffer an economic crash to that extent, it won't really matter, cos we will all be stuffed.

You just keep paying your rent in the meantime then!

What rent? I pay no rent....

Anyway, in such a scenario, the value of your home would start to depreciate and your mortgage payments would go up with higher rates.

For renters, more unemployment would mean less money about, and less demand from immigrants etc.. so I don't think rents would go up would they?! More like down. But I haven't looked at that close enough to say for sure.

vishpatel

ericthekidstoner wrote:

yeah... and there's always self certs!

my point was that banks could potentially decide to lend more than the current limits, which like you said, tends to occur with time as we now borrow more than the previous generations

One word - inflation.

You say it tends to occur with time... indefinitely? Can it not reverse? I believe there is a 'Credit cycle', and when more and more people can no longer afford to pay off their debts & mortgages, banks will start to become much more strict again. That all ties in with the economy again, and how much people are getting paid (if at all!).

ericthekidstoner

vishpatel wrote:

One word - inflation.

You say it tends to occur with time... indefinitely? Can it not reverse? I believe there is a 'Credit cycle', and when more and more people can no longer afford to pay off their debts & mortgages, banks will start to become much more strict again. That all ties in with the economy again, and whether people will be getting paid enough.

I totally with you about the cyclic nature of the economy. nothing is indefinite. empires rise and fall, as history shows.

but the max mortgage limit increase isn't just down to inflation because salary, loan size, house price have all risen due to inflation over time (admittedly at different rates)

vishpatel

ericthekidstoner wrote:

but the max mortgage limit increase isn't just down to inflation because salary, loan size, house price have all risen due to inflation over time (admittedly at different rates)

Thats not what I meant.

If mortgage sizes continue to increase to ever more ridiculous multiples, there will be too much money in the system. Thats inflation.

It means if you have assets, or money in the bank - you're actually getting poorer by stealth.

ericthekidstoner

vishpatel wrote:

Thats not what I meant.


If mortgage sizes continue to increase to ever more ridiculous multiples, there will be too much money in the system. Thats inflation.

fair enough, but its hardly a "ridiculous" level now. many countries mortgage a lot more than 3.5 annual salary bc the thats what their market dictate, even tho it may be saturated e.g. Hong Kong

people said it was impossible for crude oil to reach $50 a barrel not so long ago

the so called limit is really just a number chosen by people. it changes and usually goes up over time

ReportInvestor

vishpatel wrote:

re: parents remortgaging - There's only so much of this that can be done before all left is a huge mountain of debt and only the thinnest layer of equity holding it up.

From the 2001 Census:

In England 29 per cent [of homes] are owned outright and 39 per cent owned with a mortgage

That's 46% of homeowners who didn't have a mortgage - and their equity has maybe doubled since 2001?

In Wales there are even more outright owners.

vishpatel

ReportInvestor wrote:

From the 2001 Census:
That's 46% of homeowners who didn't have a mortgage - and their equity has maybe doubled since 2001?

In Wales there are even more outright owners.

So are you saying you believe total equity in UK property is growing faster than total mortgage debt?

I find that hard to believe considering the amount of home equity spending going on, and ever decreasing deposit sizes. Couple that with the slowing of house price inflation.

vishpatel

ericthekidstoner wrote:

fair enough, but its hardly a "ridiculous" level now. many countries mortgage a lot more than 3.5 annual salary bc the thats what their market dictate, even tho it may be saturated e.g. Hong Kong

people said it was impossible for crude oil to reach $50 a barrel not so long ago

the so called limit is really just a number chosen by people. it changes and usually goes up over time

The level of taxation in Hong Kong is a lot lower.

What you are suggesting is that houses will continue the trend of becoming less affordable as time goes on.... indefinitely?

I believe there will be a reversion to the mean in terms of affordability. Usually when that happens there is an over correction. Soft-landings are rare. But I guess we will see!

Personally, I place no timescale on this process. I don't consider any property affordable to me at present.

Everyone needs to decide for themselves what is affordable. Don't trust the Banks or Building societies to look out for you there!

ReportInvestor

vishpatel wrote:

So are you saying you believe total equity in UK property is growing faster than total mortgage debt?.

Since 2001, it has done, yes. You don't even need to turn on your calulator to see that.

The tide may or may not be starting to turn. I haven't got the figures to hand for that. But a year of rising house prices and the slowdown in equity release suggests to me that it hasn't.

ericthekidstoner

vishpatel wrote:

The level of taxation in Hong Kong is a lot lower.

What you are suggesting is that houses will continue the trend of becoming less affordable as time goes on.... indefinitely?

I believe there will be a reversion to the mean in terms of affordability. Usually when that happens there is an over correction. Soft-landings are rare. But I guess we will see!

nothings indefinite but i think that the affordability issue is often perceived as a dominating factor in setting house prices - imho it's not; the macro economy is much more influencial.

it'd be interesting to see when the over-correction will happen. so far it's been an under-reaction which says to me that despite the efforts of the banks etc., public sentiment and belief is still favouring a continued rise

where there's a will, there's a way!

joint mortgages (share to buy), help from parents, second jobs, hard-core saving... you name it, people have and will keep on doing it in the name of getting on the property ladder. if that kind of will power continues, the market will continue to be strong with a strong demand and potential sellers holding off hoping for larger profits - a double whammy in suffocating supply!