South East more confident of house price rises than ever recorded

padington

http://www.cityam.com/229209/south-east-and-london-these-regions-feel-most-confident-about-house-price-growth-according-to-knight-frank-and-markit-economics

Jason74

Hmm, and last time that happened, we had a huge economic crash within a year or so. I'm not suggesting that the same thing will happen now, just pointing out that these kind of bullish pronouncements can have a habit of proving to be somewhat wide of the mark.

For an opposing view, it's worth considering this

http://www.thisismoney.co.uk/money/markets/article-3327437/Nationwide-s-boss-Graham-Beale-warns-house-prices-London-slam-reverse-describing-market-unsustainable.html

Personally this seems more likely to me, but then I thought something similar last year and was proved wrong so who knows.

mystic_trev

Jason74 wrote: »

Hmm, and last time that happened, we had a huge economic crash within a year or so. I'm not suggesting that the same thing will happen now, just pointing out that these kind of bullish pronouncements can have a habit of proving to be somewhat wide of the mark.

For an opposing view, it's worth considering this

http://www.thisismoney.co.uk/money/markets/article-3327437/Nationwide-s-boss-Graham-Beale-warns-house-prices-London-slam-reverse-describing-market-unsustainable.html

Personally this seems more likely to me, but then I thought something similar last year and was proved wrong so who knows.

It's clearly unsustainable, but that doesn't mean prices have peaked.

Where I am (prime SE) Three years ago you could buy a three bed semi with garage for £250k A two bed terrace costs more than that now!

the_flying_pig

"ever recorded" - the index started in 2009.

still...

Jason74

I think that's kind of what I was getting at Trev. The kind of rates of increase we have seen in recent years in London simply can't go on forever. There will come a point where the affordability ceiling is hit, and there will simply be nowhere else to go price wise.

Of course, predicting when that point will be is something of a mugs game. I thought that we were probably there last summer, but have been proved very wrong on that score. I can't help thinking that we can't be too far off a top, but I certainly wouldn't want to be betting on being right on that score.

ukcarper

Jason74 wrote: »

Hmm, and last time that happened, we had a huge economic crash within a year or so. I'm not suggesting that the same thing will happen now, just pointing out that these kind of bullish pronouncements can have a habit of proving to be somewhat wide of the mark.

For an opposing view, it's worth considering this

http://www.thisismoney.co.uk/money/markets/article-3327437/Nationwide-s-boss-Graham-Beale-warns-house-prices-London-slam-reverse-describing-market-unsustainable.html

Personally this seems more likely to me, but then I thought something similar last year and was proved wrong so who knows.

Not sure how they got the headline from his quote.

Jason74

ukcarper wrote: »

Not sure how they got the headline from his quote.

True, it was talking more about prices being close to a top than "slamming into reverse", but that's journalists for you. But even what was said creates a somewhat different view to the Knight Frank document.

ukcarper

Jason74 wrote: »

True, it was talking more about prices being close to a top than "slamming into reverse", but that's journalists for you. But even what was said creates a somewhat different view to the Knight Frank document.

I think it's very difficult to predict like you I did not think prices in the South East would rise as much as they have over the last couple of years. My daughter is looking to move now and the properties she has looked at lately have offers on at close to or above asking price and there is a lack of good properties.

HAMISH_MCTAVISH

Jason74 wrote: »

There will come a point where the affordability ceiling is hit, and there will simply be nowhere else to go price wise. .

I agree.

But I also think we're many years away from that.

Prices must rise until sufficient numbers of people are priced out so as to effectively ration the limited supply of housing.

But the average Loan to Income ratio today for FTB's is only 3.45 with capital repayment and interest payments taking up just 18.4% of income. For home movers it's just 3.15% and 18.1% of income.

Borrowing remains far lower than it was 7 years ago, we're still only issuing around half the mortgages each year than we were before the credit-crunch, and regulation has placed significant restrictions on the number of higher LTI mortgages that can be issued by banks.

Jason74

HAMISH_MCTAVISH wrote: »

I agree.

But I also think we're many years away from that.

Prices must rise until sufficient numbers of people are priced out so as to effectively ration the limited supply of housing.

But the average Loan to Income ratio today for FTB's is only 3.45 with capital repayment and interest payments taking up just 18.4% of income. For home movers it's just 3.15% and 18.1% of income.

Borrowing remains far lower than it was 7 years ago, we're still only issuing around half the mortgages each year than we were before the credit-crunch, and regulation has placed significant restrictions on the number of higher LTI mortgages that can be issued by banks.

On a nationwide basis I would agree with you, but I think London is a different story altogether, and I think it was telling that the Nationwide CEO described that market "outside London" as "sensible and sustainable" while commenting on the unsustainability of the picture in London. The price to income ratios in the capital are absolutely eye watering, and I think there has to be a question as to how much further that can go.

Like I say, I'm not saying that its going to end tomorrow, but I do think that just as London started rising earlier than the rest of the country, it will hit it's ceiling sooner too. . . . .and that time will (in the greater scheme) come sooner rather than later.

michaels

I closed out my long position at the end of last year as I saw the election leading to uncertainty making the market go dead at the start of the year and I expected a Lab minority govt leading to further stasis. So I go tthe first bit OK, things did get very quiet in the spring and for example London took a breather but I was wrong about the election and so wrong about what has happened since. Currently I can't see the supply and demand equation leading to anything other than further rises though I suspect the BoE will try to control funding further via whatever means it has given it can't pull the interest rate lever.