Terminator X

iTrader: (7)

Petem95.

Simple economics dictates that supply vs demand works (I'll refer back to my A Level text books later ). The demand for houses is massive, they aren't building enough of them so it's a low chance that they'll ever catch up in order that demand = supply = steady house prices. Demand will shore up prices if it gets rocky IMHO.

It doesn't bother me in the slightest anyhoo as I've had a house since 1996 when they were probably rock bottom so I've benifited from price increases to date. My old 3 bed house in the SE cost £76k back then & there is zero chance that prices will drop back to that. I'm sure that even you will agree with me on that score

TX.

PS

You can still get a 10yr fixed rate of just over 6%. At the very least this tells you that rates will bobble around this level without going sky high.

330uk

How have you benefited if your house price has risen. You will only have made money if you sold it. You are not richer or poorer for that matter.

Also why do people assume there is such a massive demand for houses. New work force ? all the Polish/Lithuanian workers live 10 to a house round here. The local population has not increased massively.

There is only a strong demand because everybody thinks house prices rising, property way to get rich, just very desireble to have a house due to media hype etc. If the prices start dropping, interest rates up then it wont be so 'cool' to jump on property ladder. Its not the kind of demand where families sleeping on streets wanting houses..plenty of houses to go round.

The property market gonna crash like a mo fo.. in my humble opionion

Terminator X

iTrader: (7)

Ah the old chestnut ...

Bought for say £75k, say sold for £210k = £135k "profit" less say £10k as cost to move house. The £125k is profit, what you decide to do with it is up to you eg get in some call girls & don't leave the (rented ) house for a week or buy another house ...

TX.

marky1

Correct, LIBOR is currently 6.90%, traditionally its been about 15 basis points above base rate. (BOE) (i.e. 5.75 + 0.15) It's making it very expensive for banks to borrow and the cost will no doubt be passed on. The only thing is it looks like a short term squeeze in LIBOR because if you look further out than 3 month money there is no large premium. If it settles down in the next few weeks should be okay, but I guess in theory it could take longer.

Bakerman

Crash - unlikely. Prices remaining as is or a little lower maybe depending on whether the seller really needs to sell or just wants to sell. Good property always sells regardless of the market. Couldn't care less really, nice house, like where I live so who cares what the value is. There are plenty of people in debt (cc/unsecured loans etc) but just check out the average motor nowadays to see how the economy is doing - meaning there are plenty of people out there not in debt. I have a large mortgage with no other debts, if people were naive/stupid enough to borrow to much then so be it, they were stupid and now should pay the consequence.

Deep Singh

Though I'm a lover of bricks n mortar your calculations are a little flawed. From your profit you must subtract interest payments (unless you paid cash) and take into account inflation to realise your true profit

Henrik

iTrader: (5)

You're misunderstanding the term 'demand' in this instance. If most people can't borrow enough to pay e.g. 200k for a house, there will be less demand for that house at 200k price. It doesn't matter that they *want* to buy the house if they can't get the money to do so - their 'want' does not increase demand at 200k if they can not buy it at that price.


I don't understand what the average motor has got anything to do with it... I'd wager that most new cars are bought on finance -> less money to pay for a mortgage -> banks will lend less -> see demand above

Henrik

iTrader: (5)

and if you did pay cash, don't forget opportunity cost (i.e. how much your money could have made somewhere else (e.g. savings account)).

Terminator X

iTrader: (7)

Inflation hits every investement so you may as well discount it. Fair call on the interest payments. From memory it was circa £300 p/m (say £4k per year) over 8 years = £32k. Still made a good profit in theory of course ...

TX.

Terminator X

iTrader: (7)

I understand it all right fella, A Level economics remember

You're assuming most people can't afford the £200k house ... I never mentioned that. I still maintain demand will continue as it's only the "toerags" that are currently struggling & being refused credit, allegedly. IMHO rates have peaked or will level off. My prediction is that rates will be lower in 12 months time, feel free to resurect this thread then

If my house is worth £400k & being based in the SE this is possible then not many people can afford it anyway. Interest rate rises will hardly effect demand here as it's low & always will be. The march up the property ladder leads to lower demand anyway yet £1M houses still sell. Go figure

TX.

GOLDMAN 555

We are all being conned byt the government on this one it happened more by accident than design.

After the dot-com crash central banks dramatically increased liquidity into the system the housing market should have crashed or moved down in 2003 however with such a large amount of cheap money around the market is artificially being pushed up. To sustain this rise over the past few years the government have also put the brakes on councils giving planning permission creating the supply problem which is also pushed prices up.

The UK is officially 87% untouched greenfield land with another 4% brownfield. It wouldn't be too hard to release another 9% land and practically double the housing in this country. This scenario would be a disaster for policymakers but great for us.

Just look at Gordon Brown's recent statement he is going to increase housing dramatically…………………………by 2020!!!!!!!!!!!!! how ridiculous is that statement. In 2020 no one will even know who Gordon Brown was.


Bottom line:
Our generation is funding our parent's generation. They are the only ones who will benefit from this as they will probably be checking out before the mess.


Our generation is the one left holding the baby I am afraid............

Two-bedroom flat in North London average price £320,000 how the hell is that price going to double in the next 10 years?

Petem95

Oh blimey, whats this? Stats for August show prices starting to slump already? No doubt the effects of the credit crunch (despite it starting towards the end of the month)

Home.co.uk: UK House Prices Slide On Sub-Prime Mess

UK house prices start to fall - Money Week

But hey inflation with surely fall now right?.. oh hang on oil prices just reached a new RECORD HIGH of over $80 today. Food prices also rocketing etc etc.. Abbey and Halfix upping mortgage rates, other banks to follow.

If you wanted a house price crash you couldnt really ask for a more perfect storm! It seems to have also come at once!

But hey prices only go up right?....

Luminous

iTrader: (3)

Its like a witch hunt in here. Every time there is a chance that prices may fall a whole bunch of people grab their torches, pitchforks and starting screaming

Relax, just like house prices will for a few months

jjones

isn't that the "yearly" cycle? slows down into autumn through winter and then picks up again in spring..

Scotsman.com Business - Latest News - House prices rise in August

Deep Singh

RCIS also report house prices falling, with only prime central London bucking the trend. Biggest falls were Midlands iirc.

Norhern Rock needs propping up.

We're dooooooooomed I tell ye, doooooooooomed!

Terminator X

iTrader: (7)

You're minted though aren't you DS? You'll be OK, it's us paupers that need to worry

TX.

fast bloke

Pete - you can't count asking prices - They are made up by estate agents. You've been reading the papers again. Did we get a definitive answer for the define a crash question?

Henrik

iTrader: (5)

indeed...

Ok, so assuming that there are 3 million families (there may be 10 million or 1 million, I just plucked 3 million out of the air as it doesn't make any difference to the argument) that would be lent 200k from a bank in England and were also interested in property such as the 200k house. Assume that 5% (or whatever percentage) of those 3 million families are (what you call) "toe rags".

If the toe-rags can not get finance for the 200k house any longer, then there are only 2850000 families left who are able to buy a house like the 200k house. This dampens demand - the demand is less when credit is harder to obtain.

I read a good analogy on the web somewhere (might have been housepricecrash): There are lots of 10 year old buys who would love to own a Ferrari. However, they can not get finance for the Ferrari, so they do not add to the actual demand of said Ferraris.


Only a few people can afford to buy a 400k house, yes. What do you think would happen if even *less* people were able to afford the house due to credit constraints? Would the demand for the house increase or decrease?


Interest rates may well be lower in the coming 12 months, but that does not automatically mean that it will be easier to obtain a larger mortgage. Banks may take a different view on the default risk, for example (if they think someone is probably going to default, they're unlikely to lend to the person). If they start being more cautious (which is quite likely after the sub prime debacle in the states) they will lend less (higher mortgage = higher risk for any one individual)

Leslie

Flash only needs to flog off the rest of our national gold reserves at a rock bottom price and then he can hold it together for a bit longer! Maybe so he can hold a snap election.

Les

Chris L

Indeed - if I was taking a similar slightly cynical view - I'd say Labour will do their best to hold everything together in the ran up to an election and then it will all go pearshaped.

Petem95

Asking prices across the UK have slumped 2.6% in August alone, and the credit crunch only got underway midway through the month!!

Prices in the South West down 4.1%

Property asking prices take £6,000 tumble | This is Money

Bloomberg.com: Worldwide

MrRee007

House Prices Move Down - 13/09/2007

Oh Dear!!!

Jamie

Why are you banned again ?

FlightMan

See the thread in Policy.

Can't understand it myself.

FlightMan

Quote:

In recent days, several executives have privately warned me that they think this financial crisis will not go away, having grown out of more than a decade of irresponsible lending. They fear dire consequences for the broader economy.

One senior director at a FTSE bank actually wagered that, at some point over the next three years, UK house prices will have fallen by 50% from the level they are at now.

Deep Singh

Its nice to see that a member of Scoobynet hangs out with executives of major corps and is a confidante of senior directors of FTSE100 banks.



Did you meet them at Scoobyfest

Brit_in_Japan

House prices are certainly softening somewhat, but I can't foresee a crash. A few reasons include demand and supply as T_X said (there is still net immigration into this country, an aging population, more single person households) plus there is still a strong buy-to-let market. With it being difficult to get on the housing ladder, more young people have to rent and rental prices are doing better than inflation right now, so demand is greater than supply. Many BTL landlords have a number of properties bought over a period of years and so can afford to re-mortgage to buy further properties, paid for by increasing rents.

There could be a drop in London, but perhaps more in the higher price brackets. The big institutions are catching a cold because of the sub-prime fallout and profits will be way down meaning smaller bonuses.

Public perception has a part to pay and that's the hardest thing to predict. If people believe there will be a drop in prices then that might turn into a self fulfilling prophecy.

john banks

Historically, asset price bubbles don't usually have a soft landing, fuelled as they are by speculation and loose credit. It seems that many of the previous bubbles have had a limited supply argument, and a change in paradigm, "It's different this time" before they pop.

bugeyeandy

I'm on a decent wage and would love to buy my own property but even with max lending i'd struggle to get anything useful close to where I work and live now. I'm not the only one, there are loads of us out here who won't borrow ridiculous amounts just to get into a one bedroom flat.
I still can't see where all the money comes from for all the £300k average joe houses???

FlightMan

You and me both.

Aquaintance of mine just bought a £350k property, made 60k on his last house. He's on 43k a year, his wife doesnt work. How in God's name can he afford a 290k morgtage?