The best indicator of house prices

heirloom

Thrugelmir wrote: »

The fact that you think that the Euro problems will pass maybe........

"If the euro problems pass"

Thrugelmir

heirloom wrote: »

"If the euro problems pass"

"If" is not an option. How is more to the point.

HAMISH_MCTAVISH

heirloom wrote: »

I hadn't realised that there was a generation of young people that number more than the boomers, is that true?.

Yes.

We are currently in a trough between two generations.

There are 747,000 people age 35 today.

This number will increase every year until 2025 when it will peak at 992,000.

Then it will fall until 2037 when the next intergenerational trough occurs at 854,000, before rising again for the next generation.

There will never again in our lifetimes be as few people of FTB age as there are today.

FTB-s will never again in our lifetime have as little competition for housing as they do today.

See here for details....

http://www.neighbourhood.statistics.gov.uk/HTMLDocs/dvc1/UKPyramid.html

If according to some other post predicting 5x birminghams population increase in the next few years and with high inflation I also find it difficult to see prices dropping much also.

They certainly won't fall much. Stagnation for a few years, before the next boom arrives.

If the euro problems pass and lenders lighten up again I'd guess higher house prices is quite likely. Everything else is going up in price so why not houses? or am I missing something?

Inevitable.

Just a matter of time.

myhouse_2

HAMISH_MCTAVISH wrote: »

That's almost certainly what will happen.

For the next few years anyway...

But after that we'll see an almighty boom as the biggest house buying age generation in history, bigger even than the boomers, crashes into the biggest housing supply shortage in the last century.

With only one possible result, and it ain't falling prices....

Difficult to see, the future is....
I already see a big house buying generation totally unable to buy houses due to the high prices. That's why so many just stay at home with their parents.
The lending that sent prices through the roof is gone. House prices are only so high because of low interest rates. These are the 2 primary factors in the current market - it's only a matter of time before the latter changes.

HAMISH_MCTAVISH

myhouse wrote: »

I already see a big house buying generation totally unable to buy houses due to [STRIKE]the high prices[/STRIKE] Mortgage Rationing.

That's why so many just stay at home with their parents.

Fixed that for you.

The lending that sent prices through the roof is gone. House prices are only so high because of low interest rates.
.

Sorry, but that's just wrong.

It was the housing shortage which caused prices to rise in the UK.

We removed 65% of lending from the market, yet prices remain at 90% or so of peak. If it was lending which was the primary cause of price rises, then prices would be far lower today than they are.

And low interest rates didn't stop prices falling 40% or 50% in countries with a housing surplus, like the USA or Ireland.

For that matter, low interest rates didn't stop prices falling 50% in Northern Ireland, the one part of the UK that did actually see a speculative bubble with prices rising 100% in a little over a year.

So given all of the above, why is it you believe low rates which failed to prevent prices crashing elsewhere, and lending which ceased to exist four years ago, are preventing prices falling further here?

myhouse_2

HAMISH_MCTAVISH wrote: »

Fixed that for you.



Sorry, but that's just wrong.

It was the housing shortage which caused prices to rise in the UK.

We removed 65% of lending from the market, yet prices remain at 90% or so of peak. If it was lending which was the primary cause of price rises, then prices would be far lower today than they are.

And low interest rates didn't stop prices falling 40% or 50% in countries with a housing surplus, like the USA or Ireland.

For that matter, low interest rates didn't stop prices falling 50% in Northern Ireland, the one part of the UK that did actually see a speculative bubble with prices rising 100% in a little over a year.

So given all of the above, why is it you believe low rates which failed to prevent prices crashing elsewhere, and lending which ceased to exist four years ago, are preventing prices falling further here?

No, it wasn't lack of housing that caused a sudden boom in prices. It was uncontrolled lending. If you put lots of extra money into the market then prices go up. That's what happened in the UK. That's what happened in Ireland. That's what happened in Spain (the latter two of course DID have massive housebuilding programmes which certainly explain their faster collapse as more people got more indebted).

Yes, we removed the lending and prices are still stable - but volumes collapsed, because it was a house of cards built on cheap money.
Clearly the market is not normal. It's not even pre-bubble normal. It would be a brave man to suggest the danger of price collapse is over.

HAMISH_MCTAVISH

myhouse wrote: »

Yes, we removed the lending and prices are still stable - but volumes collapsed, because it was a house of cards built on cheap money.

Volumes collapsed in Ireland and America too.

It didn't stop their house prices falling 40% and 50% from peak.

So I'll ask again...

Why is it you believe low interest rates which utterly failed to prevent prices crashing elsewhere, and lending which ceased to exist four years ago, are preventing prices falling further here?

heirloom

I have a question Hamish, and I'm not taking the mick. but isn't there a limit to how high house prices can go reletive to earnings?

Isn't it about 4 or 5 times earnings that a typical family can afford? if wages don't rise then how high can they go? 6 times earnings? isn't that unsustainable? If wages rise by 5% a year then houses might rise by the same but it seems that wages are stagnant so shouldn't house prices remain stagnant? What I mean to say is it seems that house prices, reletive to earnings are stretched too far now and are far beyond the norm of 3 or 4 times earnings, How can they boom if wages don't increase or do you expect wages to increase? and if you do won't a boom just be in a kind of nominal terms relative to rising wages and cost of living? In that case it won't be so much a boom as tracking the cost of living. I don't know but what you said about an increasing population earlier seems plausauble but how do you square that with stagnant wages and the squeeze most people are in?

I don't know much about all this, far less than the rest of you guys but I'm interested in what you think and how you think it will play out. I'm retired and have a house with no mortgage, so for me it's just academic but I'm interested in your opinion.

Thanks in advance

HAMISH_MCTAVISH

heirloom wrote: »

I have a question Hamish, and I'm not taking the mick. but isn't there a limit to how high house prices can go reletive to earnings? Isn't it about 4 or 5 times earnings that a typical family can afford?

That's a surprisingly complicated question to answer.

The house price to average earnings ratio isn't a particularly good way of measuring how affordable house prices are. As it doesn't measure other factors at work in the housing market, for example....

-Dual income households.

-Existing equity.

-Interest rates.

-Taxation rates

-Other living costs (which change markedly over time, and indeed by income distribution)

A more relevant measure would be housing costs as a percentage of after tax income, but even that has problems....

And of course, going beyond that you really have to look at who is buying houses. If you only build a third of the houses you need for example, then only the top earning third of people need to be able to afford them.

But anyway, I digress....

There are places in the UK where house prices are 10 or even 20 times average local earnings. There are even places elsewhere in the world where house prices are 80-100 times average local earnings.

So it's obviously not the case that a hard limit exists on what is sustainable in terms of price to earnings. It's too blunt a measure and there are too many other factors at play.

It absolutely is the case that any given household can only afford to spend a percentage of their income on housing, and a percentage on other things. But you can't easily measure those either, as they vary a lot across income distribution.

if wages don't rise then how high can they go?

Wages are rising.

But more importantly, wages will rise more in the future. The current financial woes are temporary. Like all previous recessions, this too will pass.

what you said about an increasing population earlier seems plausauble but how do you square that with stagnant wages and the squeeze most people are in?

The income squeeze is temporary.

And again, when you only build a small percentage of the houses you need, then only a small percentage of people need to be able to afford them.

Thanks in advance

No worries.

myhouse_2

HAMISH_MCTAVISH wrote: »

Volumes collapsed in Ireland and America too.

It didn't stop their house prices falling 40% and 50% from peak.

So I'll ask again...

Why is it you believe low interest rates which utterly failed to prevent prices crashing elsewhere, and lending which ceased to exist four years ago, are preventing prices falling further here?

To answer your question, a number of factors.
I would say the appalling state of surrounding countries has allowed the UK to be considered a safe haven for funds. This of course has funded a mini boom on top of an existing bubble which hides an overall UK house price drop.
Lender forebearance, the govt being quick off the mark on reducing the deficit and thereby soothing market fears early on and a whole host of other factors.
But mainly IRs. Just because low IRs didn't prevent a drop in one country doesn't mean it wasn't a big factor in preventing drops here.

Whatever factors you may or may not agree with, there is simply not the money swilling around anymore to fund property at existing prices outside London and Oilland. If people simply can't afford to buy, those vendors who need to sell will set the new lower price levels.

Though the surveys indicate very little change in prices, a look at the main house selling sites shows a large percentage of properties at discounted prices and still not selling.