House prices at least 20% too high

Jonbvn

tomstickland wrote: »

Both extremes are equally tedious.
I'm somewhere in the middle, being a recent buyer, but someone who also thinks that prices are unrealistically high.

A trend I have noticed is for even mild questioning of house prices to receive semi-abusive replies from a small band of people who are determined that prices must not be questioned in any case. It strikes me that a certain mindset is present; one of fear. Allied with this is the hope that by shouting the loudest then their expectations will become true.

Thanks for adding "the voice of reason"

boyse7en

>but I can't believe people think there''s even an chance house prices will keep going up forever

Why not? If you look at house price trends over the last 50 years they have risen throughout, with drops along the way, but the average has been upwards. I don't know if figures are available for before that, but I'm willing to bet that if you went back 200 years you'll find that houses were cheaper then than they were 100 years ago.

mystic_trev

Ben Craster says he'll be drinking less beer this summer, and Christine Baines is cutting back on clothes and cosmetics. They're among the millions of Britons preparing for a mortgage crunch.
Craster, a London designer, and Baines, a company director from Knutsford, England, will have to arrange new home loans as fixed-rate discounts expire on mortgages they took out two years ago. The Bank of England has raised borrowing costs five times during the past year, increasing the average monthly mortgage payment by about 100 pounds ($200), according to the Council of Mortgage Lenders.
About 2 million discounts will end during the next 18 months, the council said. The wave of refinancing threatens to slow consumer spending, which has boosted U.K. economic growth almost every quarter for the past decade, and may hurt stocks of retailers such as Tesco Plc and Marks & Spencer Group Plc.
``We have a fixed-rate squeeze coming,'' said Alan Clarke, an economist at BNP Paribas in London. ``Consumers are going to bear the brunt of a slowdown.''
Britons are more willing than any other nation in the Group of Seven to finance spending with debt, piling up a record 1.3 trillion pounds in borrowing.

http://www.bloomberg.com/apps/news?pid=20601102&sid=ajbnu9l2U8XA&refer=uk

Guy_Montag

boyse7en wrote: »

>but I can't believe people think there''s even an chance house prices will keep going up forever

Why not? If you look at house price trends over the last 50 years they have risen throughout, with drops along the way, but the average has been upwards. I don't know if figures are available for before that, but I'm willing to bet that if you went back 200 years you'll find that houses were cheaper then than they were 100 years ago.

Inflation & improvement - 50 years ago no houses had central heating or double glazing, and a large number had outside toilets; then there's the extensions and conservatories; the damp-proofing and so forth.

izzybusy23

hearts wrote: »

The HPC website was set up a few years ago. House prices have at least doubled in that time so even if there is a crash soon, they were wrong. Should their site continue then they may eventually be proved right. But if you are a potential house buyer and you decided not to buy because of what they said until now you would be well sick.

Yes it was set up in 2004 if my memory serves correct and they WERE on course with their predictions back then but the MPC got nervous and cut interest rates in August (?) 2005 and in turn the housing market boomed yet again due to people's faith being restored with low interest rates. IF the MPC hadn't cut the interest rates and had risen them like they should had done, we would now be well into a long awaited correction/stagnation/crash.. whatever you want to call it.

kingkano

izzybusy23 wrote: »

Yes it was set up in 2004 if my memory serves correct and they WERE on course with their predictions back then but the MPC got nervous and cut interest rates in August (?) 2005 and in turn the housing market boomed yet again due to people's faith being restored with low interest rates. IF the MPC hadn't cut the interest rates and had risen them like they should had done, we would now be well into a long awaited correction/stagnation/crash.. whatever you want to call it.

HPC was born on 26th October 2003.

BTman

The earlier the better IMO.
The bigger the bubble, the louder it pops...

poppy10_2

izzybusy23 wrote: »

Yes it was set up in 2004 if my memory serves correct and they WERE on course with their predictions back then but the MPC got nervous and cut interest rates in August (?) 2005 and in turn the housing market boomed yet again due to people's faith being restored with low interest rates. IF the MPC hadn't cut the interest rates and had risen them like they should had done, we would now be well into a long awaited correction/stagnation/crash.. whatever you want to call it.

In 2004 things were looking pretty bleak for the property market - month-on-month falls in prices were being seen in many areas outside London. Interest rates had risen from 3.5% to 4.75% in less than a year.

Even VIs such as Nationwide and RICS were predicting house prices would be static over the coming year, and Halifax and Hometrack were predicting falls of up to 7%:

http://news.bbc.co.uk/1/hi/business/4072901.stm

Unfortunately, instead of continuing to increase interest rates as expected, the BoE cut them and ramped property prices up again. :T

free4440273

poppy10 wrote: »

In 2004 things were looking pretty bleak for the property market - month-on-month falls in prices were being seen in many areas outside London. Interest rates had risen from 3.5% to 4.75% in less than a year.

Even VIs such as Nationwide and RICS were predicting house prices would be static over the coming year, and Halifax and Hometrack were predicting falls of up to 7%:

http://news.bbc.co.uk/1/hi/business/4072901.stm

Unfortunately, instead of continuing to increase interest rates as expected, the BoE cut them and ramped property prices up again. :T

i remember it well. i was about to invest quite a large sum into a three year bond in october 2004. I was monitoring interest rates, looking for the best rate, and lo and behold BofE cut rates by .25 in august/september, thereby affecting the nationwide rate. call it sod's law but it meant minus £100 in further interest. never did quite understand why they reduced rates. but as i have said before here, i find the BofE quite inept as an institution. i'm not actually sure they know what they are doing.

Gorgeous_George

The bottom line is that HPI is born out of low interest rates. NOTHING affects house prices more than IRs. FTBer are fooled into paying whatever they can borrow for a starter home. This sets the market for all property.

A sustained period of higher IRs WILL lead to lower house prices and possibly a HPC. To get a levelling off, rates would have to fall to 5% or lower, and quickly. I think that this is unlikely therefore I expect prices to be lower in 5 years' time. I could be wrong but I would be prepared to wager £250 that I am right.



GG