Housing market continues to slow....

deemy2004

Near the end of the boom it always is different this time.

This is what was said in the late 80's, in late 1999 Its different this time.

But it NEVER is....

It NEVER is different..... That is the lesson from history....

All the way from Tulips to the current housing boom. ALL markets where they lost touch with reality and started saying its different this time... WENT BUST !

The UK Housing market is primed and ready to go bust... all the ingredients are a plenty.... Its not a new age its the same old history repeating itself. A year or two from now when we are well in the throws of a housing bear market, then the reasons why its falling will be CLEAR CUT and all the reasons why it should not fall with be LOST iN TIME !

GDP growth is slowing and it is this that has a multiplier effect on aspects of the economy such as house prices.. We have had above trend growth for a solid 10 years, now as we drift lower to below trend growth the multiplier effect will work the other way.

Another possible influence on the housing market is IF the stock market continues to strengthen ... investors will be eyeing the stock market delivering 20%+ growth per annum compared to their loss making property portfolios...

meanmachine_2

Yeah, I think the stock market is the key here. Now that it seems to be comfortably back above 5000 (famous last words?), the general feeling is that shares are underbought and housing is terribly over sold.

Most casual investors will be told now by advisers to shift their finances back into this area, away from bricks and mortar.

If I had the chance of making 10% on an investment in shares or the same in property, I know which one i'd go for, only because of the hassles associated with being a landlord.

Even if people take the sensible approach and spread their risks, that still means a significant move away from property.

cronshd

2 years ago, I made the prediction that in 3 years time, house prices would be 25% lower. (On that basis, I sold a flat which I had owned and let for 10 years).

Now I'm not so sure - although there is an outside chance this could still be the case.

In fact I think that calling the shots on house prices at a macro-UK level disguises masive regional and localised differences - and that a much greater micro-level analysis of prices will be to the fore over the next 5 years.

meanmachine_2

cronshd wrote:

2 years ago, I made the prediction that in 3 years time, house prices would be 25% lower. (On that basis, I sold a flat which I had owned and let for 10 years).

Now I'm not so sure - although there is an outside chance this could still be the case.

In fact I think that calling the shots on house prices at a macro-UK level disguises masive regional and localised differences - and that a much greater micro-level analysis of prices will be to the fore over the next 5 years.

If your flat was in London you probably sold at the peak. If not, then you've probably lost a bit.

If the economy holds up then we will see stagnation - which helps no one. But if people are looking for significant falls (like me), then there might be a long wait.

Who knows. At this moment none of us do - that includes the bank of England, the US treasury and 100% of economists.

By September the pattern might be set. If monthly price changes are within a range of +0.5% to -0.5% that signifies this fabled soft landing. If falls are higher, then it could be a hard landing.

But an entire generation frozen out of home ownership will kill this country stone dead.

EDIT: Oh, one good thing about stagnation though - the death of the BTL brigade. And allelujah to that.

Kenny4315

Here are my views on house prices in the UK :

House prices in the UK are currently between 20 and 30% overpriced. One of the main factors has been the crash in the stock market and the resultant surge in buy-to-let buyers, forcing up the price and demand for houses. The main issue with this sector of the market is there is simply no income gain at the sort of prices these days. I live in York, here a two bedroomed terrace goes currently for around £130k, the rent for one of these places is now around £500 less expenses (insurance, repairs, agents fees/advertising, mortgage interest payment, etc) once these are taken out the property is running at a net loss and there is then a reliance on capital appreciation in a volatile market. The end result at present for anyone buying-to-let, and anyone who has bought recently will be that the property is loss making in all but a few very low cost areas. Putting it simply these guys will sooner or later have to release a vast quantity of non-profit making houses back into the market. Sure the professionals who have been at it for many years will still be there but the landlord wanabees who have got on the bandwagon in the last 2 or 3 years will be in big trouble.

Another point which illustrates a long term crash is on the cards is the income to house price ratio, if anyone saw the article in the guardian the other day it showed a graph, and the previous 3 crashes occured when multiples of around 5 were reached, currently the graph shows a level of over 6.

Yet more evidence is the cost of moving is now very substantial, 3% above £250k and 4% above £500k in stamp duty plus solicitors fees, house selling costs, surveys, removal fees, etc, these are substantial sums of money. On a £250k house we are talk in the region of £16k, on a £500k house we are talking in the region of £27k, these sums of money are yearly net salary figures just simply to move. Don't forget the higher the salarythe more the tax although we talk about multiples of salary the gross amounts are discussed, once the government gets 40% of the cash over the threshold that make a big impact to the buying power of the individual. I'd like to see what the multiples of net salary would be.

Another point is self-certification is a new product that basically allows anyone to borrow just about any amount even without prrof of income, by simlpy declaring a figure that matches the amount of borrowing required. I know this to be the case as I was fairly recently offered such a product, even though I am taking a career break/semi-retired, incidently I have not taken up the offer.

The previous use of leverage to assist in building up gains from property will now work against those who have over-stretched themselves. While in the stock market sure if you invest say £10,000 and the market goes up by 10% you only make £1,000, while in the same house market putting 10% down on a £100k house nets you a gain of £10k (assuming mortgaeg costs are covered by rental income). The opposite is true in a falling market, if the market falls 10% the stocks lose £1k while the house losses £10k, leaving those with housing assets very much exposed to risk in a falling or even static market. It much harder to shift houses in a falling market quickly than shares also, and alot more expensive.

In short it is impossible for house prices to go up well over 100% and in some cases more, in 5 years, without some sort of correction at some point. When this comes there will be no hiding place, and for some it will mean financial disaster. I envisage a period of stagnation, followed by some minor drops and then mass panic as people wake up and smell the roses, and realise they have paid over £300k for a house that cost £120k 5 years ago.

deemy2004

It truly is amazing this facination that people have with mortgages... i.e. debt slavery, literally until death.

With each your the level of debt and thus slavery grows....

But it is seen as the norm... Taking a look at the debfreeboard gives an idea of the problems that lie in wait !

John_M_Business

deemy2004 wrote:

It truly is amazing this facination that people have with mortgages... i.e. debt slavery, literally until death.

With each your the level of debt and thus slavery grows....

But it is seen as the norm... Taking a look at the debfreeboard gives an idea of the problems that lie in wait !

It is truly amazing this fascination people have with renting... i.e. tipping substatial sums of money down the drain.

With each month, the loss increases and the lack of savings or a future home grows...

But this is seen as the norm... take a look at the House Buying, Selling & Property Prices board for the problems that lie in wait.

Sput2001

It truly is amazing this facination that people have with mortgages... i.e. debt slavery, literally until death.

With each your the level of debt and thus slavery grows....

But it is seen as the norm... Taking a look at the debfreeboard gives an idea of the problems that lie in wait !

If this is what having a mortgage is doing to you, then you've made a bad decision. If you're looking for somewhere to live on a reasonably long-term basis and you've got a regular income, then chances are, in the long run, you're better of buying than renting. "Debt slavery, literally until death" - errr... I don't think so. I'm 37 years old and by the time I'm 52 I'll be living in a house I own outright. I won't be paying any more mortgage and I sure as hell won't be chucking loads of money (that I'll never see again) at a landlord. I'll also have an asset that I can pass on to my kids or grandkids as and when the time comes.

meanmachine_2

In a stagnant or falling market the only people "throwing money down the drain" (what a deliberately emotive term) are the homeowners who bought in 2003/4/5. Everyone can see that.

Renting is paying money for a service. Just like anything else. If people are buying houses to hand on to their kids when they're dead, that's pretty daft imo. And with the government committed to this low inflation economy, mortgages really are starting to hang round people's necks well into old age.

In a rising market, sure buying makes sense. I wasn't in a position to think about buying until recently and, to my horror, find that speculation has created the mother of all bubbles. Only the blind or desperate would buy now.

Even the property bulls on here would agree with me that it's sensible at the moment to wait, and save.

Woby_Tide

deemy2004 wrote:

It truly is amazing this facination that people have with mortgages... i.e. debt slavery, literally until death.

With each your the level of debt and thus slavery grows....

But it is seen as the norm... Taking a look at the debfreeboard gives an idea of the problems that lie in wait !

If your parents hadn't taken the plunge you'd be sharing their rented house instead.;)