How low will property go?

p1212

Conrad wrote: »

So back in about 2011 some of us here were suggesting it was not a bad time to buy property, but as ever the doomers wanted to hang on and on just in case the absolute bottom might lie ahead.

They of course missed the opportune investment opportunity and what's the betting they hang on and on this time instead of buying into the current lull....

This is brief and slight lull, in a few months we'll have a much more active property market

No one really thought that after 2008 Osborne + Carney would inflate the property bubble and make a "recovery" based on debt and rising house prices. The expected behaviour was keeping credit conditions tight and house prices on the same level and supporting real economy + preparing for interest rate rises.

Instead of this they went for promoting debt and an instant "recovery", so gave green lights to property speculation and to anyone who was willing to take on obscene amounts of debt. They've abolished stamp duty, created FLS, HTB and more debt.

The GDP curve basically follows the amount of mortgages handed out curve with a few months latency. Just look up the data and plot it then you will see. This is a recovery on an asset price bubble.

At the moment a lot of people are trying to get rich on property, also a lot of longer term immigrants, who has nothing to lose, they try to make a quick buck from btl and if it fails, they can always walk away and just go back to their country or to somewhere else.

That's what pushes up prices, they take no real risks. If the banks are willing to lend 5 million on a 1 bed flat, they will take it and will push up prices to that level. Even if they fail, no bank can pursue them on another continent.

The ones who has bought in 2011 and selling these days did quite well, due to the reasons above, but the ones who stay long in property and using the capital gains as a deposit for a new one, so constantly having a 75-80% debt on average on all their properties will have a pretty rough ride in the next decade, as the public view slowly changes and people start to see high prices as a bad thing.

cells

p1212 wrote: »

No one really thought that after 2008 Osborne + Carney would inflate the property bubble and make a "recovery" based on debt and rising house prices. The expected behaviour was keeping credit conditions tight and house prices on the same level and supporting real economy + preparing for interest rate rises.

Instead of this they went for promoting debt and an instant "recovery", so gave green lights to property speculation and to anyone who was willing to take on obscene amounts of debt. They've abolished stamp duty, created FLS, HTB and more debt.

The GDP curve basically follows the amount of mortgages handed out curve with a few months latency. Just look up the data and plot it then you will see. This is a recovery on an asset price bubble.

At the moment a lot of people are trying to get rich on property, also a lot of longer term immigrants, who has nothing to lose, they try to make a quick buck from btl and if it fails, they can always walk away and just go back to their country or to somewhere else.

That's what pushes up prices, they take no real risks. If the banks are willing to lend 5 million on a 1 bed flat, they will take it and will push up prices to that level. Even if they fail, no bank can pursue them on another continent.

The ones who has bought in 2011 and selling these days did quite well, due to the reasons above, but the ones who stay long in property and using the capital gains as a deposit for a new one, so constantly having a 75-80% debt on average on all their properties will have a pretty rough ride in the next decade, as the public view slowly changes and people start to see high prices as a bad thing.

but house prices are not up over the last 10 years in much of the country they are about the same.

banks require at least a 25% deposit. Where is the immigrant going to get the £50,000 + fees to buy a £200k BTL? Also banks require you to own your own home first so they need to be homeowners before they can find this £50k to buy the BTL. And what makes you think they will be happy to walk away from £50k plus their main home? They wont they will keep paying the mortgage on both properties.

Both owners and BTL have very low default rates in the UK. And I would wager the defaults that do exist are down to other factors (eg ill heath, mental breakdown, difficult divorce) rather than not being able to meet the monthly mortgage


The simple truth is that there was no housing bubble in the UK.
It appears that way when people look back at 1995 prices and conclude today is expensive. The reality is that 1995 was too cheap

p1212

cells wrote: »

but house prices are not up over the last 10 years in much of the country they are about the same.

banks require at least a 25% deposit. Where is the immigrant going to get the £50,000 + fees to buy a £200k BTL? Also banks require you to own your own home first so they need to be homeowners before they can find this £50k to buy the BTL. And what makes you think they will be happy to walk away from £50k plus their main home? They wont they will keep paying the mortgage on both properties.

Both owners and BTL have very low default rates in the UK. And I would wager the defaults that do exist are down to other factors (eg ill heath, mental breakdown, difficult divorce) rather than not being able to meet the monthly mortgage


The simple truth is that there was no housing bubble in the UK.
It appears that way when people look back at 1995 prices and conclude today is expensive. The reality is that 1995 was too cheap

I am talking about London and SE and the bigger citites, like Manchester of course.

House price to earnings ratio has been historically around 4.5 for the last 60 years even in London, apart from the last ten-fifteen years, now it is above 10. Nominal prices increased 200%.

Also in the same period the average mortgage value shooted up with around 150%, wages went up only something like 40%.

Now I don't really believe these changes would be totally unrelated and it seems to me that most of the increase comes from the amount of mortgage given out, not from the wage increase.

You don't have to call it bubble, but it is definitely different from anything else before.

carslet

Crashy_Time wrote: »

Well the one in the green hat is you, and the one in the middle with the yellow toilet unblocking kit is CrashNorris King of Clowns :rotfl:

This is an old picture the one in the green hat is Jonathan Davies.

Before he went off and bought a house of course

ukcarper

p1212 wrote: »

I am talking about London and SE and the bigger citites, like Manchester of course.

House price to earnings ratio has been historically around 4.5 for the last 60 years even in London, apart from the last ten-fifteen years, now it is above 10. Nominal prices increased 200%.

Also in the same period the average mortgage value shooted up with around 150%, wages went up only something like 40%.

Now I don't really believe these changes would be totally unrelated and it seems to me that most of the increase comes from the amount of mortgage given out, not from the wage increase.

You don't have to call it bubble, but it is definitely different from anything else before.

According to nationwide long term average is about 4.3 and is now about 6x the historical figures have always been based on Full Time Male.

p1212

ukcarper wrote: »

According to nationwide long term average is about 4.3 and is now about 6x the historical figures have always been based on Full Time Male.

According to Nationwide it is 10x in London and its been around 4x-5x for a very long time.

Most of the speculative money obviously goes to London and to the bigger cities, the fact that in other areas the prices hasn't gone up since 2008 is the proof itself that it is only speculative money, there is no real growth.

System

Well said p1212. I believe London has hit the ceiling of affordability for both locals and speculative investors.

lisyloo

I believe London has hit the ceiling of affordability for both locals and speculative investors.

Published HPI figures are going up and property is getting cheaper for anyone whose income isn't in £s as the £ goes down, so I'm not so sure about the latter.

System

The relationship between HP and IR.

High HPs - low IRs

Low HPs - high IRs

Imagine today's HPs at a BR of 5%. HPs would still be stuck at 2009/2010 levels.

System

Would you want to invest in a manipulated housing market controlled by central bankers?