London property prices to fall 30%....

shortchanged_2

wotsthat wrote: »

I don't really see how something which has been a constant for years can lead to YoY rises each and every year.

Well I'd imagine very low interest rates with some level of wage growth is a prime combination for house price growth. But sooner or later interest rates will have to rise at some point.

MobileSaver

Garethgrew wrote: »

I'm sure the banks will understand "please can we sit tight in our negative equity portfolio while we wait for prices to go back up?"

lisyloo wrote: »

Gareth - you certainly can if you can continue to pay the mortgage.

Exactly. So long as someone keeps paying the mortgage the banks will completely "understand" (or in truth couldn't care less) regardless of whether the property is worth £30k more or £30k less than someone paid for it.

Gareth seems to have been taken in by the HPC rhetoric that there will be a massive forced sell-off as soon as prices start to fall...

Conrad

This is so reminiscent of HPC around 2004, the same arguments.


Then as now my view is you need significant event to trigger a crash in London property, such as the credit crunch. In the absence of that I cant see prices falling.

wotsthat

Graham_Devon wrote: »

Don't you?

............. Really?

I'd like to see the mathematical formula that shows how a constant (low interest rates) causes another factor (house prices) to increase in an exponential manner.

Graham_Devon wrote: »

Look at low rates alongside every other demand side stimulus and it would seem to me to be relatively easy to figure out. Mortgage rates continued to get cheaper and cheaper for example over the years.

The big reductions in mortgage rates happened years ago. Any changes of the last few years are insignificant. I've gone from 2.5% since the GFC to 2.29% now. It's pennies - in Feb 2001 I went from 7.74% to 4.55%.

How much has your mortgage got cheaper by YoY?

Graham_Devon

wotsthat wrote: »

I'd like to see the mathematical formula that shows how a constant (low interest rates) causes another factor (house prices) to increase in an exponential manner.

Well it's quite simple.

A new price ceiling is created due to the lower interest rates.

That ceiling isn't hit within the first month that interest rates fall, the market isn't that liquid.

Buyers themselves also need confidence. They don't have that when emergency rates are implemented. That confidence comes much later and builds (as we have seen) as every quarter passes. As prices rise, confidence builds (from a lower base when emergency rates were bought in) and that in itself builds further confidence.

Should there be no change to rates, this will continue until the new price ceiling lower rates have bought is hit. Some (like myself) would suggest this has now been hit excluding London. London is a completely different ballgame.

Make of the above what you will (as I know you will). But in all honesty, it's pretty straightforward to figure out and the market does not react instantly to every fiscal change.

wotsthat

shortchanged wrote: »

Well I'd imagine very low interest rates with some level of wage growth is a prime combination for house price growth. But sooner or later interest rates will have to rise at some point.

I'm not sure how sensitive the London market is to interest rates - don't they operate on the lowest LTV's in the country?

If all the people who arrived in London in the last few years cleared off I think that might just have a bigger effect than BoE rates going from 0.5% to 0.75%. Why try and blame everything on a constant when there are obvious correlations to explore first?

gadgetmind

wotsthat wrote: »

I don't really see how something which has been a constant for years can lead to YoY rises each and every year.

Tell you what, let's see whether we get YoY drops when interest rates rise, and that'll tell us whether they are linked or not.

wotsthat

Graham_Devon wrote: »

Well it's quite simple.

A new price ceiling is created due to the lower interest rates.

That ceiling isn't hit within the first month that interest rates fall, the market isn't that liquid.

Buyers themselves also need confidence. They don't have that when emergency rates are implemented. That confidence comes much later and builds (as we have seen) as every quarter passes. As prices rise, confidence builds (from a lower base when emergency rates were bought in) and that in itself builds further confidence.

Should there be no change to rates, this will continue until the new price ceiling lower rates have bought is hit. Some (like myself) would suggest this has now been hit excluding London. London is a completely different ballgame.

Make of the above what you will (as I know you will). But in all honesty, it's pretty straightforward to figure out and the market does not react instantly to every fiscal change.

Mortgage rates have been, within a rounding error, unchanged for 7 years. You can't really be saying the market is so inefficient that the BoE changes of early 2009 still haven't yet been fully reflected in house prices?

gadgetmind

It takes time for memories to fade and the old "prices only ever go up" mentally to get locked into place.

wotsthat

gadgetmind wrote: »

Tell you what, let's see whether we get YoY drops when interest rates rise, and that'll tell us whether they are linked or not.

They are linked - that's not the question.

If the average mortgage rate rises to, say, 6% in December then we might expect YoY falls in 2016, maybe 2017 but can we expect this interest rate to be causing YoY falls in 2018, 2019, 2020, 2021 & 2022 as well?