Is property in a bubble?

Cornucopia

Garethgrew wrote: »

Look at a refugee camp, lots more demand than supply, but what does it matter if nobody has any funds available.

"Demand" in an economic sense is not merely the desire to have something, but also involves being a "credible potential customer", which includes having the capability to complete a transaction.

The point about the market is that where supply is limited, and there is an excess of demand (true, qualified demand) then prices will rise. Part of the price rise mechanism is an in-built capability within the market for elasticity of price (which occurs in the absence of elasticity of supply). In the case of the London property market, extra funding is being (and has historically been) drawn in - this can happen through new routes to funding, change in lifestyles, the arrival of new money or with "innovation" in how housing is used such that a higher price is able to be paid by virtue of being defrayed among a larger number of inhabitants.

The basic experience of "I couldn't afford that house, but someone did", is the practical up-shot of all of this.

padington

Garethgrew wrote: »

Just because lots of poor people are arriving on our shores doesn't mean property prices can keep going up.

It doesn't matter how many people want to live in a property, all that matters is who can afford the asking prices/rents.

Look at a refugee camp, lots more demand than supply, but what does it matter if nobody has any funds available.

It's not just poor people, more billionaires in London than any other city by a long shot. One in six people in the world want to live in London.

Our softpower may never have been stronger and is growing.

Conrad

Cornucopia wrote: »

The basic experience of "I couldn't afford that house, but someone did", is the practical up-shot of all of this.

People find a way to buy. This point is often over-looked.


I've had a number of enquiries this week along the lines of parents doing a B2L in their name, but really this is their adult kids property, only they cant get the required mortgage themselves.


Then you get a lot of people with a 'temporary pay rise', just to win the mortgage - in reality this is not illegal and has gone on ever since I can remember.


The real go-getters now are very determined Poles and alike. Nothing gets in the way of them getting a home of their own. Having left their nation, for them its a trivial challenge to buy a home - there's always a way. Bearish Brits truly underestimate this capacity


And before anyone says they must be mad and bad, always note the vast majority of people do not get repossessed - most people cope fine

Jonbvn

padington wrote: »

One in six people in the world want to live in London.

And if their wishes come true, it will quickly become one of the worst places in the world to live and work.;)

padington

Jonbvn wrote: »

And if their wishes come true, it will quickly become one of the worst places in the world to live and work.;)

Its the capital of Europe if not the world with really low unemployment so is doing pretty well because of immigration if you haven't noticed.

Electrum

AG47 wrote: »

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.

AG47 wrote: »

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.

Where do these official definitions of a bubble come from?

Yes all these apply to property. by these definitions there is no doubt property is a bubble.

chucknorris

padington wrote: »

It's not just poor people, more billionaires in London than any other city by a long shot. One in six people in the world want to live in London.

Our softpower may never have been stronger and is growing.

We just re-let a flat in Battersea last month, one of the prospective tenants (but we didn't go with him) had over £2m in his current account (he was a Chinese student, so it was probably his parents money).

sann420

London property definitely boggles my mind. Unless you got on the gravy train a few years ago I see a person earning above avg(around 50k) struggling to buy a 1 bedder in a London dive.

cells

sann420 wrote: »

London property definitely boggles my mind. Unless you got on the gravy train a few years ago I see a person earning above avg(around 50k) struggling to buy a 1 bedder in a London dive.

Nearly a quarter of all homes in London are social. In many inner London areas like hackney Islington and tower hamlets its nearly half of all homes. So a good portion of Londoners are paying very little to rent their council flats/homes.

For most of the rest its not just income but inheritances and gifts. My estimate is that in the UK some £200 billion annually is left as inheritances or gifted. Again as a guess one third of that will be to families in London or will move to London. So when you just look at income and ignore I herticnes and gifts it looks expe dive but when you figure that Londoners get maybe the best part of £70 billion annually in inheritances prices aren't that astronomically

And finally only about 3-4% of homes transact each year. That means only 3-4% of Londoners paid this years piece. 3-4% paid last years price. 3-4% paid the year before. Etc etc. Which means the vast majority some 80% of Londoners paid prices half of today or even less.

lisyloo

sann420 wrote: »

London property definitely boggles my mind. Unless you got on the gravy train a few years ago I see a person earning above avg(around 50k) struggling to buy a 1 bedder in a London dive.

If you're talking about central London then yes.
Much cheaper places are available further out like for example Croydon.