Is property in a bubble?

westernpromise

Slapmatt's posts show very clearly that there will always be people who in even the most benign circumstances imaginable are still too afraid to buy property.

slapmatt

GreatApe wrote: »

Long term unemployment is extremely low. Of you want a job there is a job in the UK economy for you. Personally I am amazed at how low unemployment is its only about 1% while the proportion of dysfunctional persons has to be closer to 10-20% of the population. That means even alcoholics drug users and gambling addicts are and do hold down jobs.

Isn't the unemployment rate a measure of the people looking for work, not the number of people not working? Therefore alcoholics, drug addicts etc who are receiving benefits other than Jobseekers Allowance, are not considered as unemployed for the purpose of the statistics?

GreatApe

Perhaps the largest group in the unemployment figures are full time students looking for part time work. Because they can only work certain hours of certain days of certain weeks they are difficult to employ and hence have Hugh unemployment levels. Personally I would strip out all full time students as they are not what most people imagine as unemployed.

If we did that the already low headline figure would fall further

slapmatt

GreatApe wrote: »

Perhaps the largest group in the unemployment figures are full time students looking for part time work. Because they can only work certain hours of certain days of certain weeks they are difficult to employ and hence have Hugh unemployment levels. Personally I would strip out all full time students as they are not what most people imagine as unemployed.

If we did that the already low headline figure would fall further

Are you sure students are included? I am almost certain that full time students are classed as economically inactive for the purpose of the figures?

GreatApe

slapmatt wrote: »

Are you sure students are included? I am almost certain that full time students are classed as economically inactive for the purpose of the figures?

Yes I am sure. If they are looking for work even part time work they are in the headline unemployment figure. I was surprised too.

Malthusian

slapmatt wrote: »

There are two key differences in my opinion. Firstly, job security. It is not unreasonable for people to change jobs every 3 to 5 years nowadays often not through choice, whereas even twenty years ago that was less common. What do people have in place today to mitigate the impact of being out of work? When I look at people's mortgage proposals on the other forum no one is talking about critical illness or income protection cover.

Critical illness and income protection have nothing to do with job security.

The job for life went extinct years ago and if people were really as inept as you imagine at providing for periods of unemployment, they would be going bankrupt left right and centre. Most people manage, one way or another.

Most well-off professionals have income protection (it is often provided by the employer, which means that many people haven't thought about income protection because they don't need to) and people who don't earn enough to get income protection are less likely to need it.

Let us suppose that I have £20,000 in my bank account which I could use as a deposit to buy a house, but I don't because I have no income protection and I'm worried about the possibility of a long-term debilitating illness which stops me from working. What happens if I do get that long-term debilitating illness and I can never work ever again?

Well, first I will have to spend down my £20,000 in savings to pay the rent. Then I run out of money. Then I fall on the tender mercy of the state, and have to claim incapacity benefit and move into a grotty government flat, where I will spend the rest of my days - if I don't recover.

Now let's imagine what happens if I buy a house with my £20,000 as a deposit, and then get the same debilitating illness. The £20,000 is now tied up in my house, so I immediately run out of money to pay the mortgage. Mortgage companies don't like repossession, so there will first be a grace period while they try to renegotiate the loan.

When it becomes clear that I'll never be able to pay again, they repossess the house. After the loan is paid off I should have my £20,000 in equity back in cash, plus any additional equity I've acquired through loan repayments and rise in house prices, minus costs. So now I revert to the same position as if I'd never bought the house - I have to move into rented accomodation and spend my £20,000 (possibly less, but more likely more), and then when I run out of money I fall onto the tender mercy of the state.

So how exactly has buying a house put me in a worse position here? Thanks to buying the house I get a period of grace while the mortgage lender turfs me out, plus I have the potential to increase the £20,000 I had in the bank through mortgage capital repayment and rise in house prices, which means I'll last longer before running out of money. Of course it's possible that the costs of buying and repossessing a house and/or a fall in the value might leave me with less than £20,000, but I'd have to be very unlucky.

If you get a long term debilitating illness, can't work and have no protection in place, then it's not going to be a lot of fun, regardless of whether you've bought a house or not. However, I fail to see how it makes the problem worse if you've bought a house.

Electrum

cells wrote: »

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

The entire property market is overvalued based on excessive debt.

what interest rates go back up to normal, then property prices will comes down to normal

GreatApe

Electrum wrote: »

The entire property market is overvalued based on excessive debt.

what interest rates go back up to normal, then property prices will comes down to normal

I have been hearing the same thing for over 10 years now

How much longer do I need to wait for house prices to fall to two ha penny?

westernpromise

I was reading that nonsense 22 years ago.

In the time Crashy's been short waiting for a crash he could have paid off a mortgage.

Crashy_Time

GreatApe wrote: »

I have been hearing the same thing for over 10 years now

How much longer do I need to wait for house prices to fall to two ha penny?[/QUOTE]


Won`t happen in your lifetime, barring a nuclear war, on the other hand it won`t be long until quite a few recent buyers regret their decision IMO.


http://www.financialreporter.co.uk/mortgages/march-mortgage-lending-dips-as-approvals-plummet-21-uk-finance.html