Is property in a bubble?

AG47

If you
look at the official definitions of a bubble and think of the
property market for each one.
1. popular mania? YES
Property prices are on everyone lips, in the news and everyone
loves to talk about them.
2. excessive debt? Oh YES!
Very excessive debt compared to the long term norm of about
3.5x income.
3. greater fool theory? Most definitely.
People do not mind excessive debt, if they think there will be a
greater fool who will value their property even high in the future.
4. high volumes at variance with intrinsic values? Yes by every
metric you look at. Especially London.

economic

what utter nonsense

cells

Property in the UK is not one uniform asset.

Inner London looks expensive but the NE, NW, EM, WM, Wales all look and are cheap

economic

inner london looks fairly priced

AG47

5. misallocation of resources? Help To Buy? Taxpayer money on
a last ditch attempt to keep property prices sky high for a little
longer.
6. spend more because they "feel" richer?
Rising property prices, use house as ATM? IT should say
BORROW more because they feel richer.
Buying a house? Watch out for desperate governments.
Desperate governments tax things that can’t move very highly.
A few years ago, when house prices in the likes of Spain,
France and Portugal were beginning to look remarkably cheap, I
said that while it all looked very tempting indeed,anyone wanting
to buy into the property market should proceed with some
caution.
Why? Taxes. Desperate governments tax things that can’t move.
Things such as houses. No surprise then that President
Hollande’s government yesterday had a go at “wealthy property
owners”.
This isn’t the first time – a few years ago France raised the
capital gains tax on the sale of second homes.

AG47

economic wrote: »

inner london looks fairly priced

Hahahahaha

Generali

economic wrote: »

inner london looks fairly priced

So inner London property has been underpriced for decades until finally finding its true value at teatime last Thursday.

It seems unlikely TBH.

I buy into cells's argument about property being cheap in much of the rest of the UK. Property is not cheap in London however you slice and dice the argument.

mayonnaise

AG47 wrote: »

2. excessive debt? Oh YES!
Very excessive debt compared to the long term norm of about
3.5x income.
3. greater fool theory? Most definitely.
People do not mind excessive debt

Yeah definitely.

AG47 wrote: »

Can I apply for a loan after 1 year anniversary of dro?

Cornucopia

Generali wrote: »

So inner London property has been underpriced for decades until finally finding its true value at teatime last Thursday.

Price is not static. What was fair value 20 years ago at £X may also be fair value today at £Y.

In fact, it will always tend to be that way given general inflation within the economy.

cells

Generali wrote: »

So inner London property has been underpriced for decades until finally finding its true value at teatime last Thursday.

It seems unlikely TBH.

I buy into cells's argument about property being cheap in much of the rest of the UK. Property is not cheap in London however you slice and dice the argument.

London and especially inner London was under priced for two decades.

I do not think London property is overpriced, it is highly priced but that does not mean overpriced. If prices go up 1/3rd more in real terms in the next two years then I would say its overpriced/overshot.

The problem London faces is that it can not easily grow as the greenfield/brownfield sites are/have been used up and 'regeneration' is expensive. If there are a block of 100 flats and you want to buy them out and knock them down to rebuild 200 flats in its place that does not come cheap. You need to buy out the 100 owners and compensate them more than the value of their homes and then some for the stress/hassel

So before you start building your 200 flats you have already had to hand out >£60 million to buy and knock down 100 flats. So your cost is already >£300k a flat before you even start building. Add in the cost/risk of finance and the cost of labour and the cost of materials and its not hard to see why London prices are expensive.

There is also some silliness in the councils. They seem to only look foward 10-20 years when they should be looking foward 50+ years. What the point in knocking down 100 flats and rebuilding 200 in its place when we know London needs to grow for the next 50 years. They should be knocking down 100 and rebuilding 500 in its place. But the short-sightedness stops that happening as it would be out of character for the local areas and parking would be a problem. Thats all well and nice but all it does is mean expensive homes for decades as shortly in the future you are going to have to knock another 100 down and rebuild 200. Had you rebuilt 500 in the first go that would mean less costly knocking down.


anyway there are very good reasons why London is expensive and I dont see any realistic way of making it cheap. The only chance is for 'forced' population migration out of inner London of the non working and low waged in council/social properties. If 500,000 social households in London (there are 850,000) were moved over a period of 20 years that would be equivalent to building 25,000 new homes a yr. New is very costly the other is not.

westernpromise

cells wrote: »

So before you start building your 200 flats you have already had to hand out >£60 million to buy and knock down 100 flats. So your cost is already >£300k a flat before you even start building. Add in the cost/risk of finance and the cost of labour and the cost of materials and its not hard to see why London prices are expensive.

Add in, too, the affordable homes you're required to provide in every new development - which you have to sell below cost. This simply goes onto the price of all the others, which in many cases then never get built.

Along with traffic planning, housing must be the only area of public policy where every single government intervention ever has made the situation worse for everybody.