London's property boom over?

Emy1501

I suspect part of the issue with the US especially is their crash started before ours and they did not get the benefits of low rates to well into their crash. I also suspect that they do not have as generous welfare system as us plus their lenders are probably not as lenient as they are here.

Something like 8% of the mortgage market here are in distress with their mortgage at a time when rates are so low.

The reality is whilst there maybe more homes in the US and Ireland house prices in the UK are simply unaffordable here and therefore the market is going to carry on the way it is until they are made more affordable.

I suspect that inflation will be the one to do the trick but would not rule out more falls when the economy improves and rates rise.

chucknorris

I'm quite surprised how resilient London has been. We have some properties in London and recently 2 flats sold in 2 different blacks that we also own in, in Battersea.

In 2007 I would have estimated that the prices for my 3 bed flats in these blocks would have been about 325k and 375k. By 2008 I considered (without any hard evidence, just a hunch) that they had dropped to about 250k and 320k. However within the last 6 months two flats have been sold in those blocks, in the former a 3 bed (same condition and layout) for 315k and the latter a 2 bed (better condition) for 335k. So I think the current values are only about 10-15k below peak, but I have saved more than that from lower mortgage rates, with the prospect of further future savings too.

Graham_Devon

wotsthat wrote: »

I've been watching this thread hoping someone of a more bearish view might attempt to answer Hamish's question. I'll keep waiting.

How many times do you have to answer a question that's been asked for 3 years?

Hamish dissapears everytime an answer is put forward.

Very short overview of the answers given:

- In the US, you can hand your keys back and walk away. Thats a MASSIVE difference. Collosal difference infact. How much would prices have fallen here if everyone could simply walk away?

Is Hamish seriously trying to compare the two but ignoring this difference? Yes....and he does it again and again.

- In Ireland they obviously had a massive house building boom. It was a completely different policy. They were also under a completely different political system and regulation. They couldn't tweak their policies to benefit their problems, as we could and they certainly couldn't inject money into the banks as we could, with direct injection and direct intervention to the banks with the biggest housing issues (Northern Rock) AND tell them to halt reposessions.

I'm not going to go any further, as it's simply ignored every time.

Let's face it, Hamish will never get a credible answer to this one, when he's the one deciding whether it's a credible answer.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Very short overview of the answers given:

Oh this'll be good....

- In the US, you can hand your keys back and walk away. Thats a MASSIVE difference. Collosal difference infact. How much would prices have fallen here if everyone could simply walk away

?

False.

Only in 19 out of 50 states can you hand back the keys and walk away.

And some of the states where you cannot walk away have seen some of the biggest falls.

Is Hamish seriously trying to compare the two but ignoring this difference? Yes....and he does it again and again.

I'm not ignoring the difference. I've answered that point over and over again, yet you keep bringing it up.

- In Ireland they obviously had a massive house building boom.

Oh right.

A "massive house building boom" is why they have nearly one in five empty houses, and we have more like one in fifty.

So that is the difference then.:rotfl:

It was a completely different policy.

No kidding.

They built an oversupply of housing, we have a shortage.

Which is why their prices fell 50%, and ours didn't.

They were also under a completely different political system and regulation. They couldn't tweak their policies to benefit their problems, as we could and they certainly couldn't inject money into the banks as we could, with direct injection and direct intervention to the banks with the biggest housing issues (Northern Rock) AND tell them to halt reposessions.

Wow.

Just..... wow.

Never heard of NAMA then Graham?

You know, the Irish quasi-governmental agency formed specifically for the purpose of injecting 86 BILLION euros into the Irish banks with the biggest housing issues.

I'm not going to go any further,

Probably the best thing.;)

the_flying_pig

HAMISH_MCTAVISH wrote: »

Actually, I'll agree that you did give it a good try. And I think we can all accept that other factors will play some, probably very small, part.

I'll also say that when I first started posting it, there was one country (Spain) that did seem to be far less badly affected than it should, given the vast numbers of empty properties. However price falls there have since accelerated and it now fits with the other countries in the trend quite nicely.

Also worth noting that there is one country with a lower empty housing rate than the UK. Where prices (although dipping slightly now) remain firmly higher as a national average than they were in 2007. Which is of course Australia. And interestingly enough on a national basis they also have a similar population growth to current housebuilding deficit as the UK. So again that fits with the wider trend.

You don’t deserve a properly articulated response given how many times we're been through this & that you don't very carefully explain what your ‘theory’ is.

Anyway, just a few scribbled points.

(1) Early noughties Irish population growth was colossallyhigher than UK [or US]’s [look it up]

(2) Early ability of UK to [unlike Ireland] do ZIRPmassively influential;

(3) Northern Ireland a good example of why thedemand side [demand in an economic sense, i.e. critically influenced by availabilityof credit/funds] so key, broadly the same level of occupancy as rest of UK [proportionof empty houses consistently running at around 6%, i.e. vastly lower than US orIreland] but prices almost 50% down from peak [i.e. about the same as the restof Ireland, higher than US, vastly higher than rest of UK] – key difference atpeak [to rest of UK] was the colossal amount of speculative cash bubbling upfrom south of the border.

(4) Point (3) a good example of why ‘fall from peak’a very particular measure – why not focus on, say, price to income instead, ‘biggerthey are the harder they fall’ is indeed a reasonably plausible rule of thumb?

(5) Non-recourse mortgages common in theUS.

(6) No welfare state to speak of in the US, muchless an open chequebook HB policy;

(7) Etc.

Graham_Devon

the_flying_pig wrote: »

(5) Non-recourse mortgages common in theUS.

(6) No welfare state to speak of in the US, muchless an open chequebook HB policy;

These two don't count apparently, afterall, it's only 40% of states you can walk away from the mortgage (apparently), and 40% isn't big enough to have an influence and therefore written off as an irrelevance (I assume considering thats the basis of every response).

The welfare state is one he won't touch. If we include SMI, it's written off straight away as (another) irrelevance.

If we look at mortgage rates in the US, generally being fixed for the term, and the UK actually benefitting from lower base rates through their mortgage payments, it's (yet another) irrelevance.

Hamish will go on to put his argument forward again in 3 months time, and suggest empty homes is the be all and end all, and holds ALL relevance.

shortchanged_2

wotsthat wrote: »

Those figures are quite compelling. It's also an example of why it's not always a clear correlation between price and ability to buy.

I'd advise anyone who is just wishing prices lower (for the greater good of course) to take a trip to Spain. In the North I looked at a two bed apartment with stunning sea views, in a nice area and with garage parking. Not a single apartment had sold at around £62,000 - they were asking around £130,000 two years ago.

Then take a trip to Madrid. If you ever want to feel embarrassed to be European now's the time to go. It's Europe in 2012 and the clear level of homelessness is shocking. Prices have tanked, there are loads of empty properties around the country and yet people still can't afford to buy them.

Give me the UK's problems any day.

I've been watching this thread hoping someone of a more bearish view might attempt to answer Hamish's question. I'll keep waiting.

Do you know what the unemployment rate is in Spain at the moment?

the_flying_pig

shortchanged wrote: »

...And for Ireland, yes Ireland's property bubble was far bigger than the UK's as a whole. Growth in Irelands property prices were just ridiculous. As the saying goes the bigger the rise the bigger the fall.

This is actually a potentially interesting point, and andvs. Northern Ireland vs. rest of UK an interesting comparison is a useful way to get at it.
Let’s compare Northern Ireland to Ireland & the rest ofUK. Which of the two is it more like?



Price falls from peak? - Ireland

Price rises leading up to peak – Ireland [possibly not asextreme – would need careful checking]

Housing benefits – UK

Interest rates – an interesting one since I wonder how manyNI properties were snapped up by canny Eire ‘investors’ who would most likelyhave been borrowing from Irish banks? – shall we say ‘mix’?

Vacancies - UK.



So basically the NI price falls look distinctly Irish but manyother possibly key things about it looked either like the UK or a mix of UK& Irish. The only thing about the NI market [other than the falls] thatlooks Irish is well, the pre-peak increases. Makes one wonder if a ‘the biggerthey are, the harder they fall’ explanation isn’t after all the key thing. Unless,I suppose, a really counter-intuitively high proportion of NI buyers wereaffected by Irish interest rates. Obviously it’d be absurd to draw very strongconclusions from such one simple comparison but NI could be a very interestingcase study since it’s so like the UK in so many key ways. Or perhaps uncertaintyover the role of Irish interest rates muddies the waters.

HAMISH_MCTAVISH

the_flying_pig wrote: »

You don’t deserve a properly articulated response given how many times we're been through this & that you don't very carefully explain what your ‘theory’ is.

And I should probably note that you're a bit of a condescending twit, but I think it's evident to all so I won't bother.

Anyway, just a few scribbled points.

Oh goody....

(1) Early noughties Irish population growth was colossallyhigher than UK [or US]’s [look it up]

Of no relevance to the fact that even if they now placed every person on a social waiting list in one of the empty houses, they'd still now have a 23 year surplus supply of housing.

(2) Early ability of UK to [unlike Ireland] do ZIRPmassively influential;

Ireland had ZIRP too. The ECB has conducted a similar near-ZIRP policy to the UK and US.

(3) Northern Ireland a good example of why thedemand side [demand in an economic sense, i.e. critically influenced by availabilityof credit/funds] so key, broadly the same level of occupancy as rest of UK [proportionof empty houses consistently running at around 6%, i.e. vastly lower than US orIreland] but prices almost 50% down from peak [i.e. about the same as the restof Ireland, higher than US, vastly higher than rest of UK] – key difference atpeak [to rest of UK] was the colossal amount of speculative cash bubbling upfrom south of the border.

That makes no sense.

I've never denied that both credit fuelled speculation and a genuine supply/demand imbalance can cause prices to rise.

But once you remove the majority of credit, it's fairly obvious which was the case.

IN the case of Ireland, Northern Ireland, and the USA it was a speculative bubble.

In the case of the mainland UK, it was a genuine supply/demand imbalance.

In fact if anything Northern Ireland strengthens my case so I'm surprised you'd bring it up. It has the same interest rate policy, the same banks, the same QE policy, the same social safety net and SMI, and the same major media channels as the rest of the UK.

Yet prices there are down nearly 50%.

Obviously if QE, low interest rates, housing benefits and SMI were all that is holding up the UK market, then they'd be working in Northern Ireland too.

The fact that they're not is just more evidence that the UK didn't, on the whole, have a speculative bubble and the bigger influence by far is a supply shortage.

(5) Non-recourse mortgages common in theUS.

And yet some of the biggest falls have been in recourse states.

(6) No welfare state to speak of in the US, muchless an open chequebook HB policy;

Yet Northern Ireland has the same welfare state as us, but much bigger falls.

As I say, both a credit fueled speculative bubble and a genuine supply shortage will drive up prices.

The only way to tell for sure which is which is to remove the credit and watch what happens.

Which we've done, and the results are clear.

Graham_Devon

Getting annoyed with the opposition to your argument Hamish?

Bit too credible, so the insults start flying?