bloomberg housing-bubble-may-pop-entire-u-k-economy

Generali

AndyGuil wrote: »

The fundamentals over the next year are very much in favour of rises. This alone gives confidence in the direction of the market. I think usual cycles during the year have distracted from what will happen over a year forward from now rather than on a month by month basis. I would even go as far as predicting that this year the demand for property in London is higher in June and July than it has been in previous years ignoring the exceptional 2013.

When a crap two bed flat in Wimbledon costs half a million quid there are no fundamentals driving the market any more.

padington

Generali wrote: »

When a crap two bed flat in Wimbledon costs half a million quid there are no fundamentals driving the market any more.

The fundamentals for me are that expensive property is oversold but the cheap stuff undersold. 'Wimbledone' will go no where for a very long time. Tottenham, Enfield etc and everywhere outside London will keep rising way above income.

Generali

padington wrote: »

The fundamentals for me are that expensive property is oversold but the cheap stuff undersold. Wimbledone will go no where for a very long time. Tottenham, Wood Green, Enfield etc and everywhere outside London will keep rising way above income.

TBH it sounds like wishful thinking to me. Time will tell of course.

mwpt

Generali wrote: »

When a crap two bed flat in Wimbledon costs half a million quid there are no fundamentals driving the market any more.

I know a youngish couple who earlier this year paid £600k for a ground floor two bed maisonette which would have rented for around £1400-£1500. This wasn't quite Wimbledon but near enough.

With a 25% deposit (£150k!) a 1.5% repayment 2 year fix (30 year term), then repayments are £1677. People who are sold on the gospel of bricks and mortar in London might look at that and think it's a decent buy because with capital appreciation they'll be rich. I don't know where they think they'll upgrade to if capital appreciation continues for everyone though.

I don't know their financial circumstances, obviously couldn't ask, but people are paying these whacky prices for some reason. That investment would not make sense to me particularly because it's a big bet on low rates for a long time. If mortgages cost 5% instead of 1.5% that property would never sell for close to that amount.

mwpt

padington wrote: »

The fundamentals for me are that expensive property is oversold but the cheap stuff undersold. 'Wimbledone' will go no where for a very long time. Tottenham, Enfield etc and everywhere outside London will keep rising way above income.

Wood Green already looks expensive to me.

mystic_trev

I expect Crashy will be telling us how House prices are crashing in Aberdeen, which for some reason he thinks is a 'barometer' for the rest of the UK! I notice prices for the whole of Scotland are still up 6.4% yoy.

Where I am in the SE most Properties are advertised as 'offers over' and all the last sales I've tracked have been 'over' Properties are taking only 2 - 3 months from for sale to completion.

cells

Generali wrote: »

When a crap two bed flat in Wimbledon costs half a million quid there are no fundamentals driving the market any more.

you are looking at a flat and only seeing the bricks.
Try to think of them as an indexed linked perpetual bond.

In which case a lot of Englands housing stock is trading at 4-6%

ukcarper

mwpt wrote: »

I know a youngish couple who earlier this year paid £600k for a ground floor two bed maisonette which would have rented for around £1400-£1500. This wasn't quite Wimbledon but near enough.

With a 25% deposit (£150k!) a 1.5% repayment 2 year fix (30 year term), then repayments are £1677. People who are sold on the gospel of bricks and mortar in London might look at that and think it's a decent buy because with capital appreciation they'll be rich. I don't know where they think they'll upgrade to if capital appreciation continues for everyone though.

I don't know their financial circumstances, obviously couldn't ask, but people are paying these whacky prices for some reason. That investment would not make sense to me particularly because it's a big bet on low rates for a long time. If mortgages cost 5% instead of 1.5% that property would never sell for close to that amount.

But about £1000 of that repayment will be off the capital they borrowed and at the end of that 2 years they will have paid off £25k.

cells

mwpt wrote: »

I know a youngish couple who earlier this year paid £600k for a ground floor two bed maisonette which would have rented for around £1400-£1500. This wasn't quite Wimbledon but near enough.

With a 25% deposit (£150k!) a 1.5% repayment 2 year fix (30 year term), then repayments are £1677. People who are sold on the gospel of bricks and mortar in London might look at that and think it's a decent buy because with capital appreciation they'll be rich. I don't know where they think they'll upgrade to if capital appreciation continues for everyone though.

I don't know their financial circumstances, obviously couldn't ask, but people are paying these whacky prices for some reason. That investment would not make sense to me particularly because it's a big bet on low rates for a long time. If mortgages cost 5% instead of 1.5% that property would never sell for close to that amount.

At 2.9% yield that is probably not an average example. I think 4-5% gross yield is perhaps more the norm in much of London.

London home prices are expensive relative to wages but there is a lot of money in the world and that money is chasing 1% yield government bonds 2% yield corp paper and 3% yield shares so whats wrong with 4-5% gross yield property?

Generali

cells wrote: »

you are looking at a flat and only seeing the bricks.
Try to think of them as an indexed linked perpetual bond.

In which case a lot of Englands housing stock is trading at 4-6%

If I was looking at the sector as a perpetual bond I'd want to know what has changed to reprice the asset class and whether that change was permanent.