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Debate House Prices
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House prices to SURGE beyond peak thanks to Help to Buy
Comments
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IzzyFreedman wrote: »
Can anyone answer my question as to.............
Hang on the daily snail said "Overall, the CEBR’s report said house prices will reach an average of £227,000 next year compared to £222,000 now, and continue to rise after that."
Where did 222K come from? I thought average house prices were in the 160K mark?
Depends which index you are referring to:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »And it will happen again.
The correction of 2007/2008 was greater both nominally and as a percentage than the correction of the 90's.
We then saw a slight recovery before nominal stagnation for the last 3 years.
Some on here have remarked that during that stagnation, there has continued to be a "real term" correction.
Can you not conceive that potentially we are at the start of the next cycle?
Still a little too early from my perspective to confidently predict sustainable HPI from her on in, but certainly there are some signs until of course the next bubble occurs.
I think longer term, yes we are on the way to property being undervalued but that was not a cycle in just a few years, these cycles take decades. We are just after the cycle changed direction, and now on the way to property becoming undervalued. But it could take years with all this government manipulation.0 -
IzzyFreedman wrote: »Yes well that's another matter, some may decide to buy when it suits them. This is a different thing about if property is over or undervalued.
So you are one of those who thinks the long term cycle will no longer repeat?
Cycles will repeat indefinately... it's just that I think we're at a different point in the cycle than you do - which is why I put my money where my mouth is by buying.0 -
Mortgage rates may however go up more.
Mortgage lenders lend to make money.
If the housing maket proves to be more stable / we see sustained HPI, the mortgage lenders will see decreased risk on the money loaned and the mortgage product market will become more competative.
Mortgage rates usually go up (other than linked to the BR) if they want to reduce the money lent.
If the loans are less risky, they want to be more competative.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Depends which index you are referring to
Thanks that answers my question.
Which index is the most referred to over the long term?
What was the peak by the most referred to index in 2007? I know average house prices got to over 200K at the very top but that was not the average for the year. Some of those show well over 200K at peak?
I expect the bottom of the cycle will still be over 200K when property is undervalued because the pound sterling still has a long way to fall. Price means nothing value is everything.
I can see sometime over the next decade just say for the sake of argument around 2016-18 interest rates have to go back up because of out of control inflation from all the money printing. Then cost of living is going up by huge amounts and people can not pay their mortgages now monthly payments are almost as much as their pay cheques.
The global crisis has made unemployment at even higher levels and wages have fallen even more in real terms.
The supply of houses and flats has been boosted by the government interference propping up builders, and now there are more supply than demand. But prices are falling because the amount of repossessions not selling at auction are more than there are buyers with funds available to buy them.0 -
IzzyFreedman wrote: »I think longer term, yes we are on the way to property being undervalued but that was not a cycle in just a few years, these cycles take decades. We are just after the cycle changed direction, and now on the way to property becoming undervalued. But it could take years with all this government manipulation.
Why do you think they are on the way to becoming undervalued?
Most indices are showing nominal stagnation.
Indeed, looking at LR / Halifax / Nationwide, they are effectively similar to 2004 / 2005 nominal prices.
Could they not already be considered undervalued?
When you look at the HBOS Affordability stats, the mortgage repayments as a percentage of income is currently at 28.1% with a 30 year low of 23.6% an average of 36.3% and a high of 65.5%
http://www.lloydsbankinggroup.com/media/excel/2013/AffordabilityQ42012.xls:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Mortgage lenders lend to make money.
If the housing maket proves to be more stable / we see sustained HPI, the mortgage lenders will see decreased risk on the money loaned and the mortgage product market will become more competative.
Mortgage rates usually go up (other than linked to the BR) if they want to reduce the money lent.
If the loans are less risky, they want to be more competative.
Just to add to this, a bank is required to keep a certain percentage of capital on hand depending on how much they've lent out and at what LTV.
As far as I'm aware, a 90% mortgage requires 6 times more capital than a 60% LTV mortgage on the part of the bank.
Should property prices start rising, the LTV's will reduce and, with that, the banks capital requirements will reduce.
This means that, if prices rise to the extent that the banks 90% LTV mortgages become 60% LTV mortgages and capital requirements stay the same, the bank could decide to avoid the risk of further 90% LTV mortgages by giving out five more 60% LTV mortgages (for every one currently on their books) instead.
If prices rise, not all banks will take this route but I can assure you that some will.
Now you might say that 40% deposits are hard to come by - and I agree. But if someone were to get into the market before the rises assumed above, they wouldn't need to save that through salary - increases in equity would do the job.
As a result of the above, people getting into the market before any impending rises could benefit from a double whammy of house price rises and increased competition at lower LTV's in the mortgage market.0 -
IveSeenTheLight wrote: »Why do you think they are on the way to becoming undervalued?
Most indices are showing nominal stagnation.
Indeed, looking at LR / Halifax / Nationwide, they are effectively similar to 2004 / 2005 nominal prices.
Could they not already be considered undervalued?
When you look at the HBOS Affordability stats, the mortgage repayments as a percentage of income is currently at 28.1% with a 30 year low of 23.6% an average of 36.3% and a high of 65.5%
http://www.lloydsbankinggroup.com/media/excel/2013/AffordabilityQ42012.xls
stagnation in nominal terms means falling in real terms.
How could anyone think property is now undervalued? If that was the case there would be no need for all the government props? FTBers would be able to buy no problem.
Property is still around 20% overvalued but will correct just give it time.0 -
IzzyFreedman wrote: »Which index is the most referred to over the long term?
What was the peak by the most referred to index in 2007? I know average house prices got to over 200K at the very top but that was not the average for the year. Some of those show well over 200K at peak?
My preference is Land Registry (for England and Wales), however this never topped £200k.
According to LR, the peak was in Nov 2007 at £182,141
Currently it is £163,215 (-10.39% from peak)IzzyFreedman wrote: »I expect the bottom of the cycle will still be over 200K when property is undervalued because the pound sterling still has a long way to fall. Price means nothing value is everything.
Hmmmm, so you expect prices to rise nominally before the "real term" bottom is reached.
I see where this is going.
Personally, I don't see what relevance the peak of 2007 has to do with buyers in 2013 or indeed anytime going forward.
Why not compare with June 1996 for a longer term analysis?IzzyFreedman wrote: »I can see sometime over the next decade just say for the sake of argument around 2016-18 interest rates have to go back up because of out of control inflation from all the money printing.
Maybe this is what they want, to inflate the debt away.
That said, inflation has not seemed to be so out of control so farIzzyFreedman wrote: »Then cost of living is going up by huge amounts and people can not pay their mortgages now monthly payments are almost as much as their pay cheques.
Hardly.....
I've linked a stat showing that mortgage repayments as a percentage of take home is currently lower than the 30 year averageIzzyFreedman wrote: »The global crisis has made unemployment at even higher levels and wages have fallen even more in real terms.
As I understand it, Employment has risen, as has unemployment since the peak.
Wages have fallen in real terms, but that is not as a result of house prices.
Anyone budgetting their household will prioritise on the essentials which shelter would be pretty high in my opinion.IzzyFreedman wrote: »The supply of houses and flats has been boosted by the government interference propping up builders, and now there are more supply than demand.
Hmmm, I don;t think so.
Can you please proove this maybe with a link?IzzyFreedman wrote: »But prices are falling because the amount of repossessions not selling at auction are more than there are buyers with funds available to buy them.
Prices are not falling, they have stagnated the last 3 years.
YOY they are slightly up.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IzzyFreedman wrote: »
Property is still around 20% overvalued but will correct just give it time.
In real terms in your opinion (just to clarify)
Nominally they will increase just less than inflation (in your opinion):wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0
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