House Price Crash 3

Maddie

What's confusing me is that the BBC news website is still showing a link for the BoE's 8-0 decision in September when the latest vote was in fact 7-2, with the 2 new members wishing to increase rates.

It seems to me that someone is trying to 'hide' this decision, or am I just being silly?

F_T_Buyer

Market_Oracle wrote:

The fact is that house prices are still rising, and the reason is obvious, which is that they are still affordable. Regardless of wishful thinking, way back when economists were forecasting a sharp fall in the UK housing market i.e. 2001, was the time when they were the most affordable in decades, which is probably why they have risen so much since then.

It will take a rise in interest towards 6% to impact significantly on market sentiment.

The reason prices are still rising is because they can borrow more. It is as simple as that.

But do you honestly think it is sustainable? It isnt.

mystic_trev

F_T_Buyer wrote:

The reason prices are still rising is because they can borrow more. It is as simple as that.

But do you honestly think it is sustainable? It isnt.

Agreed - this is what's kept HPI alive. increase the amount people can borrow equals the (eventual) increase in HPI!

ManAtHome

Interesting chart Market Oracle - was there a bit of severe 'realigning' of the RPI calcs in 2002? Certainly looks like we're still in "encourage the !!!!!!s to spend" mode to the tune of around 1%.

tomstickland

I came to a similar conclusion when looking at buying last year (I have bought now). I realised that house prices would stay how they were or rise whilst people could still borrow the money. Sadly, loads of people borrow as much as they can regardless of whether they can really afford it or not.

meanmachine_2

In a few years' time when the economy DOES go into recession all of the homeowners on here will be scratching their backsides wondering where it all went wrong.

Two things: the average mortgage appears to be increasing by approx twenty THOUSAND a year.

In 2003 it was 80K, now it's, *gulp* £138K. In 2008 it could stand at £180K. By 2010 (crunch year) it might be £220K.

Very basically, every man and woman in the UK will be up to their eyeballs in debt, struggling to pay for basic accomodation. Result: recession.

Either house prices stop going up, or we hit recession. You can't have both.

Again I point out that US house prices are HALF as much as ours and still they're starting to crash.

If that doesn't make you think, nothing will.

But as I say, still a few more years before the whole market implodes.

It could well be v nasty.

Guy_Montag

House prices up 300% in 10 years (apparently). No reason why they couldn't drop that much too.

ManAtHome

Up 187% (nearly 3 times), but average pay up by less than 60%, but still a glowing example of how not to react to a "low inflation" environment (binge-borrowing?).

Could get sticky with increasing numbers of people wanting to retire early on the back of their property equity, and an allegedly large number considering retiring abroad (up to 30% of the over 50's in some surveys). My guess is that there will be a substantial attempted sell-off over the next 10 years, large lumps of tax and pension money going to Euroland, and increasing taxes in the UK to cover the shortfall (which we already have if you look at govt spending and liabilities).

ashm1

meanmachine wrote:

In a few years' time when the economy DOES go into recession all of the homeowners on here will be scratching their backsides wondering where it all went wrong.

But as I say, still a few more years before the whole market implodes.

It could well be v nasty.

Hi,

As the government uses the CPI rate as a target they aren't really interested in reducing house price growth directly. What goverment would make it's inflation target to crush housing growth ?

Goverment is opting to build houses. Think it was run by ODPM. Hmm that department was wound up!

IMO the BOE will probably raise rates quite fast and then maybe drop them later in 2007 if oil prices are back on track.

...house prices fall and then rise again in 2007 ?


Kind regards,

Ashley.

roswell

all things considered, house prices, real inflation (council tax bills energy etc) , high personnal debt. its all the ingrediants for a big bang all thats missing is the catalist (sp?) I dont think realisticaly you can see rapid interest rate hikes and then an increase in house prices more like race in interest rate + many people going bankrupt + tighter lending = long term house Value reduction its the nature of the houseing beast.

There is a reason why for the last 30 or so years that a mortgage was 3X single income or 2.5 X joint income, its because it worked and it rarely made people get into reposetion, Greed is what has caused the situation we now see, If banks werent greedy to make as much as possible they wouldnt have lent as possible and people wouldnt have paid as much as possible for property.