The UK housing market is an example of junkie style economics

Generali

https://notayesmanseconomics.wordpress.com/2015/11/30/the-uk-housing-market-is-an-example-of-junkie-style-economics/

Interesting piece I thought. Not brilliantly written but it makes a good case.

I'm interested to know the thoughts of others on this.

antrobus

Generali wrote: »

https://notayesmanseconomics.wordpress.com/2015/11/30/the-uk-housing-market-is-an-example-of-junkie-style-economics/

Interesting piece I thought. Not brilliantly written but it makes a good case.

I'm interested to know the thoughts of others on this.

The author does not appear to like the plethora of help to buy schemes.

But I'm not sure where the 'junkie style economics' comes in. For one thing, as far as I'm aware no one subsidies the consumption of junkies - you don't need to - and for another thing junk prices have been falling and yet the market is still there and booming.

chucknorris

Generali wrote: »

https://notayesmanseconomics.wordpress.com/2015/11/30/the-uk-housing-market-is-an-example-of-junkie-style-economics/

Interesting piece I thought. Not brilliantly written but it makes a good case.

I'm interested to know the thoughts of others on this.

I'm fighting the urge to become too bearish about house prices, what I forgot to point out in my previous response the other day was that I am very fortunate to have almost £600k borrowed at an average of base rate + 0.5%, that is obviously very profitable, and that is the reason that I am fighting my instincts at the moment. So it isn't so much house prices, it's rental profit keeping me in (the market) at the moment. Once interest rates go up (it seems a long time coming) there isn't a logical reason to not at least partially sell.

westernpromise

chucknorris wrote: »

I'm fighting the urge to become too bearish about house prices, what I forgot to point out in my previous response the other day was that I am very fortunate to have almost £600k borrowed at an average of base rate + 0.5%, that is obviously very profitable, and that is the reason that I am fighting my instincts at the moment. So it isn't so much house prices, it's rental profit keeping me in (the market) at the moment. Once interest rates go up (it seems a long time coming) there isn't a logical reason to not at least partially sell.

I'm in the same position in a smaller way; I paid £245k in '99 for a flat that I let out in '04 and that currently rents for about £30k a year. The annual mortgage interest is thus slightly more than a month's rent. Net this provides me with about £1k a month extra income, and its price has probably inflated by half a million since I moved out.

I'd still be in income surplus if they took all the tax relief away and added NICs to the rent; in fact if that happened I might even, net, be better off because that would drive a lot of rental supply out of the market and would push rents up to compensate. A house price decline likewise would tend to support or boost rents.

BTL is no longer a Buy, but if you're in it on this sort of basis it's a Hold.

I'm bearish on interest rates because I see no inflationary pressures that require them to be raised. All this anti-BTL, MMR stuff is about trying to contain HPI without raising base rates and inflicting collateral economic damage.

The big imponderable is some system shock that stuffs a lot of economies. A revolution in KSA; a Brexit vote - that sort of thing.

Absent those it seems to me we're in a deflationary era and probably not even half way through the 0.5% base rates era.

Generali

chucknorris wrote: »

I'm fighting the urge to become too bearish about house prices, what I forgot to point out in my previous response the other day was that I am very fortunate to have almost £600k borrowed at an average of base rate + 0.5%, that is obviously very profitable, and that is the reason that I am fighting my instincts at the moment. So it isn't so much house prices, it's rental profit keeping me in (the market) at the moment. Once interest rates go up (it seems a long time coming) there isn't a logical reason to not at least partially sell.

It rarely seems to pay off to be bearish on London but if it was a share I'd be shorting the bejesus out of it.

kabayiri

The time to worry is when Londoners seeking their next fix start to look at that new apartment block in <insert Northern Hell Hole name here>.

I can just hear the conversation over breakfast now.

"Look Darling. That apartment is a veritable bargain, and the whole block has a comprehensive security system."

(Of course it does. It's stuck in the middle of Salford ! )

purch

The stronger GBP will have only added to the paper profits of Foreign investors, so it is becoming more and more a Forex play.

purch

kabayiri wrote: »

"Look Darling. That apartment is a veritable bargain, and the whole block has a comprehensive security system."

I'm not sure what the Baron of Roulanish has to do with it :eek:

cells

The UK housing market is fine, in 70% of England house prices are affordable or even cheap vs local full time wages

Its only London that is very expensive. And there are good reasons for it. The main one is that London twenty years ago was undervalued costing only about 3.5 x full time wage. That means half of London cost less than that. That was basically give away prices. Even if you had free land today it would cost you more than 3.5 x (~£133k) to have the a new property built

but of course at todays prices of ~13 x income it is high but this also masks the fact that it ranges from 101 x income in kensington to to 6.8 x in daginham and the fact that there must be more earners per household in London

Graham_Devon

cells wrote: »

The UK housing market is fine,

I didn't even get passed this part of your sentence and gave up.

cells

Graham_Devon wrote: »

I didn't even get passed this part of your sentence and gave up.

its called confirmation bias, eyes ignore what the brain does not wish to see