Government repressing house prices.

shortchanged_2

HAMISH_MCTAVISH wrote: »

It's complicated.

There are a number of things going on at the same time with these stats, and they don't mix adjust in any way.

1. The mix of FTB-s has changed since 2007, as higher deposits and mortgage rationing have excluded the lower earners who would buy lower priced houses.

2. The mix of properties for sale has changed since 2007 as fewer 1 bed flats and studios have been built over the last 5 years, and many of the existing ones are in negative equity and so cannot sell.

3. The geographic mix of people buying has changed, with more expensive areas like London accounting for a higher percentage of sales than they did in 2007.

4. The change in LTV will also change the above, on an ongoing basis. So the decrease in LTV from 2007 to 201 changed the ability of certain people to buy, and the increase in LTV since 2010, from 75% to 80%, has resulted in changed FTB behaviour again.

All of which adds up to say that if lending was relaxed to say 10% deposits and normal 3-4 times income mortgages with a tough stance on IO mortgages, house prices will fall seeing as earnings are down. Is that right?

Harry_Boyle

shortchanged wrote: »

OK going by the figures that you presented from the jackanory CML report from the 2010 figures. If 10% deposits were available or the norm then FTB's would need to take over a 3.7 times mortgage to pay those prices.

Now my question to you Hamish.

Does that mean that houses are overpriced?

What reference point are you basing your statement that houses are overpriced?

What I mean is that if I saw several similar houes on the same estate up for sale at £250k and one was up for sale at £300k with no reasonable reason why, then I'd say it was overpriced. The reference point would be the other houses on the estate that were up for sale at a much lower price.

I'm not having a go at you personally, I've seen the same suggestion by other people on other forums but I've never uderstood the meaning of the statement 'houses are overpriced'. Overpriced compared with what?

HAMISH_MCTAVISH

shortchanged wrote: »

All of which adds up to say that if lending was relaxed to say 10% deposits and normal 3-4 times income mortgages with a tough stance on IO mortgages, house prices will fall seeing as earnings are down. Is that right?

No.

It's not right.

MacMickster

HAMISH_MCTAVISH wrote: »

It's complicated.

2. The mix of properties for sale has changed since 2007 as fewer 1 bed flats and studios have been built over the last 5 years, and many of the existing ones are in negative equity and so cannot sell.

So are you suggesting that previous lending practices requiring smaller deposits have led to many previous first-time buyers now being trapped by negative equity?

Tancred

Harry_Boyle wrote: »

What reference point are you basing your statement that houses are overpriced?

What I mean is that if I saw several similar houes on the same estate up for sale at £250k and one was up for sale at £300k with no reasonable reason why, then I'd say it was overpriced. The reference point would be the other houses on the estate that were up for sale at a much lower price.

I'm not having a go at you personally, I've seen the same suggestion by other people on other forums but I've never uderstood the meaning of the statement 'houses are overpriced'. Overpriced compared with what?

There is also an issue with the word 'similar'. A 3 bed semi can quite reasonably be priced higher than others in the local area if it has more sq ft of space and a bigger garden, or that better location in the most sought after street. People often forget this when they make comparisons.

shortchanged_2

Harry_Boyle wrote: »

What reference point are you basing your statement that houses are overpriced?

What I mean is that if I saw several similar houes on the same estate up for sale at £250k and one was up for sale at £300k with no reasonable reason why, then I'd say it was overpriced. The reference point would be the other houses on the estate that were up for sale at a much lower price.

I'm not having a go at you personally, I've seen the same suggestion by other people on other forums but I've never uderstood the meaning of the statement 'houses are overpriced'. Overpriced compared with what?

Housing is still overpriced in relation to earnings. The massive boom over the previous decade has still not properly corrected.

Low interest rates give the impression that house prices are affordable at current levels.

DervProf

HAMISH_MCTAVISH wrote: »

So then the only way to keep HPI from happening is to keep preventing that million plus (and growing) people from buying.

Are there a million plus "spare" properties available for those people to buy ?

The way to prevent (I would prefer to see it being kept under control than simply "prevented") is to increase the amount of lending CAREFULLY, along with a proper and determined house building scheme.

So easy to cry out for "more lending", to either satisfy your craving for HPI, or in the belief that it will be better than what we have now. The end of the previous "boom" has given us an opportunity to at least make an effort to prevent the mistakes of the past. The problem seems to be, as usual, that the path of least resistance is the one we want to take.

Tancred

shortchanged wrote: »

Housing is still overpriced in relation to earnings. The massive boom over the previous decade has still not properly corrected.

Low interest rates give the impression that house prices are affordable at current levels.

The last 'correction' came in the mid 90s, but that didn't last long. What's happening now is a calming of the market rather than an outright crash.

DervProf

Tancred wrote: »

The last 'correction' came in the mid 90s, but that didn't last long. What's happening now is a calming of the market rather than an outright crash.

According to some, the market doesn't, or didn't need "calming".

http://www.youtube.com/watch?v=Eol_xRbTwn4

Harry_Boyle

shortchanged wrote: »

Housing is still overpriced in relation to earnings.

Again, I've seen this expressed previously but I have never understood where the reference point was. If you are wealthy then a 2 bed house in Hull might be less than 1 year's salary, whereas a 2 bed penthouse apartment in Knightsbridge might be 7 times salary. Is the penthouse apartment overpriced or is the wealthy person just not wealthy enough to buy in that exclusive area?

Similarly, someone who earns £8k a year might struggle to find any property they could afford to buy, does this mean that his/her earnings are too small or that house prices are overpriced in relation to his/her earnings?

I've also seen a reference point of average salary against average house price, but again this doesn't follow because it's unlikely that a first time buyer would buy an average house and so you have to factor in any equity already amassed in previous properties, which would be impossible to calculate.

I must admit I'm still struggling to understand where the reference point with this to enable anyone to say that house prices are definitively overpriced. Surely it all just boils down to personal opinion?