House prices, the April 08 installment
#91
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IFAonline.co.uk
I suspect the number of these that come out of the woodwork will rapidly increase. Surprising that an industry the was misselling endowments moves onto misselling the mortgages too?
I suspect the number of these that come out of the woodwork will rapidly increase. Surprising that an industry the was misselling endowments moves onto misselling the mortgages too?
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Excellent article on house prices here - says it exactly like it is!
Dont Kid Yourself The Housing Slump Really Is On Its Way (from Sunday Herald)
Dont Kid Yourself The Housing Slump Really Is On Its Way (from Sunday Herald)
HOW OFTEN must I say it? Falling house prices are a good thing, not a bad thing. It was property madness that got us into this financial mess in the first place, and the credit crisis will not be resolved, will not begin to be resolved, until house prices start to become more rational. That means house prices must come down.
Average UK house prices of over eight times average earnings are unsustainable, morally and financially. Most home owners, sitting on large paper gains, know and accept this; many have the decency to be embarrassed about it. The government knows it too but can't face up to what it means. Ministers prattle about the need for "affordable housing" and then introduce more measures designed to keep prices from falling, ie becoming affordable.
It was last week's announcement by the Halifax that UK house prices had fallen by 2.5% in March that led to the latest housing panic. The editorials cried out for dramatic cuts in interest rates "to prevent a housing meltdown". The prime minister insisted, like some real-estate Canute, that the fall was "containable". Alistair Darling then threw a token £1500 at first-time buyers (which sounded suspiciously like the SNP's £2000 bung-that-never-was) and set up a mortgage review under the former boss of HBOS.
Brown then leant on the governor of the Bank of England to cut interest rates by announcing, falsely, that "Because we've got low inflation we can cut interest rates." Mervyn King dutifully obliged, cutting base rates to 5% in what was described as a "desperate bid to halt the slide", even though the slide has hardly started and the cut will have no impact on mortgage rates, which continue to go up.
Brilliant! When central bankers start setting interest rates to placate politicians, you know that we really are doomed. It was low interest rates that inflated the housing bubble, so let's have another dose! One last puff of air in the £3 trillion balloon.
To repeat: a housing "collapse" is necessary and unavoidable if the economy is to be restored to anything like equilibrium. You cannot have a stable financial system while property prices are so high that people on average earnings and higher cannot afford to enter the market.
...
The only problem was that this was the most reckless economic mismanagement in modern history. The housing bubble, and the consumer boom based on it, was a deliberate act of policy, as former Bank governor Eddie George admitted to a Commons committee in March last year.
...
But they have created an economy in our own image. Our greedy and grasping materialism is what allowed the financial services sector to destroy the stable society of low house prices, secure pensions, social welfare and public housing that the post-war generation built. It came apart in the 1980s with council house sales, the biggest bribe in modern history and the moment our collective obsession with property began. Now, after a tripling of house prices, Britain is the most indebted country in the developed world.
The property market has made a fool of anyone who has tried to run a business. Why slave for years to build a firm when, just by sitting in a house in London, or even parts of Edinburgh, you could turn into a millionaire?
Property madness has made fools of anyone who has ever saved for their old age. Why bother when all the tax advantages go to houses, which are free of tax? The government encouraged us to pour more and more money we didn't have into houses because they stupidly believed that high house prices equalled prosperity.
Gordon Brown likes to pretend that the credit crunch begins and ends in the US. It isn't, and it won't. House prices have risen far higher here relative to earnings than they ever did in America and have a lot further to fall - 30%, according to the International Monetary Fund. The only compensation is that it is likely to destroy Gordon Brown's place in history.
Average UK house prices of over eight times average earnings are unsustainable, morally and financially. Most home owners, sitting on large paper gains, know and accept this; many have the decency to be embarrassed about it. The government knows it too but can't face up to what it means. Ministers prattle about the need for "affordable housing" and then introduce more measures designed to keep prices from falling, ie becoming affordable.
It was last week's announcement by the Halifax that UK house prices had fallen by 2.5% in March that led to the latest housing panic. The editorials cried out for dramatic cuts in interest rates "to prevent a housing meltdown". The prime minister insisted, like some real-estate Canute, that the fall was "containable". Alistair Darling then threw a token £1500 at first-time buyers (which sounded suspiciously like the SNP's £2000 bung-that-never-was) and set up a mortgage review under the former boss of HBOS.
Brown then leant on the governor of the Bank of England to cut interest rates by announcing, falsely, that "Because we've got low inflation we can cut interest rates." Mervyn King dutifully obliged, cutting base rates to 5% in what was described as a "desperate bid to halt the slide", even though the slide has hardly started and the cut will have no impact on mortgage rates, which continue to go up.
Brilliant! When central bankers start setting interest rates to placate politicians, you know that we really are doomed. It was low interest rates that inflated the housing bubble, so let's have another dose! One last puff of air in the £3 trillion balloon.
To repeat: a housing "collapse" is necessary and unavoidable if the economy is to be restored to anything like equilibrium. You cannot have a stable financial system while property prices are so high that people on average earnings and higher cannot afford to enter the market.
...
The only problem was that this was the most reckless economic mismanagement in modern history. The housing bubble, and the consumer boom based on it, was a deliberate act of policy, as former Bank governor Eddie George admitted to a Commons committee in March last year.
...
But they have created an economy in our own image. Our greedy and grasping materialism is what allowed the financial services sector to destroy the stable society of low house prices, secure pensions, social welfare and public housing that the post-war generation built. It came apart in the 1980s with council house sales, the biggest bribe in modern history and the moment our collective obsession with property began. Now, after a tripling of house prices, Britain is the most indebted country in the developed world.
The property market has made a fool of anyone who has tried to run a business. Why slave for years to build a firm when, just by sitting in a house in London, or even parts of Edinburgh, you could turn into a millionaire?
Property madness has made fools of anyone who has ever saved for their old age. Why bother when all the tax advantages go to houses, which are free of tax? The government encouraged us to pour more and more money we didn't have into houses because they stupidly believed that high house prices equalled prosperity.
Gordon Brown likes to pretend that the credit crunch begins and ends in the US. It isn't, and it won't. House prices have risen far higher here relative to earnings than they ever did in America and have a lot further to fall - 30%, according to the International Monetary Fund. The only compensation is that it is likely to destroy Gordon Brown's place in history.
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Perhaps I should rephrase it.
When we bougt our 1930's 3 bed semi I thought what the hell is this thing doing valued at quarter of a million quid?
But,like every other sucker in the UK we had no choice then but to pay the price.
Luckily we had our intangible 'profit' from the sale of our last house so £50k that we never really had was used.Realistically if we now 'lose' that £50,000 I don't care.We are staying where we are for a few years and we have no debt to service except the mortgage.
If our house comes down in value by 25% then it doesn't matter to us.
It will to the people who thought they could use that 'profit',spent their cushion and will over the coming months go into negative equity.
And yes,it will be a problem even if people aren't moving house if they need to remortgage.The deals aren't there anymore.ESPECIALLY for those who spent their equity
When we bougt our 1930's 3 bed semi I thought what the hell is this thing doing valued at quarter of a million quid?
But,like every other sucker in the UK we had no choice then but to pay the price.
Luckily we had our intangible 'profit' from the sale of our last house so £50k that we never really had was used.Realistically if we now 'lose' that £50,000 I don't care.We are staying where we are for a few years and we have no debt to service except the mortgage.
If our house comes down in value by 25% then it doesn't matter to us.
It will to the people who thought they could use that 'profit',spent their cushion and will over the coming months go into negative equity.
And yes,it will be a problem even if people aren't moving house if they need to remortgage.The deals aren't there anymore.ESPECIALLY for those who spent their equity
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If our house comes down in value by 25% then it doesn't matter to us.
It will to the people who thought they could use that 'profit',spent their cushion and will over the coming months go into negative equity.
And yes,it will be a problem even if people aren't moving house if they need to remortgage.The deals aren't there anymore.ESPECIALLY for those who spent their equity
It will to the people who thought they could use that 'profit',spent their cushion and will over the coming months go into negative equity.
And yes,it will be a problem even if people aren't moving house if they need to remortgage.The deals aren't there anymore.ESPECIALLY for those who spent their equity
Indeed. If you have no plans to move, then any crash/slowdown sshould mean absolutely bugger all to you. And unless you bought in the last 12 months, and will need to remortgage in the next 2 years, there is probably nothing to worry about there either.
Let's be clear, the year on year rate still shows your house as being worth more than you paid for it if you bought it last April. It is only th emonth on month rate that is dropping, and it will need to continue dropping for a few months before it will actually be worth less.
To put it in perspective - People are talking about a anywhere between 10-30%.
The crash in the early 90's was 4% year on year reduction (on the average house price). Followed a couple of years of zero growth.
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Some might think I am a fool but I was worried about rates.
Think this is borne out by the current stance of all the lenders and have watched rates creep up from 4% to nearly double that in a short period of time
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If you can get a 25 year one (assuming you need that long) with regular no redemption windows at around 5% I would snap it up - That's historically speaking a low rate
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We all know the Governments 2.3% (or whatever it is) is false.
Petrol, up more than 2.3%
Gas, up more than 2.3%
Electricity, up more than 2.3%
Council tax, up more than 2.3%
Some food products, up more than 2.3%
House prices, up more than 2.3%
In fact virtually everything that could but inflation up has been deleted from the calculations.
How many of us will get more than 2.3% pay rises this year?
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Small Island, big population, tight planning rules, all want somewhere to live..........I can't see prices dropping too far especially if you are in a nice area with good transport links, employment etc
There are so many potential ftb's waiting in the wings currently priced out, that as soon as prices at the bottom end drop to a just about affordable level, they will all pile back in and support the whole thing anyway.
There are so many potential ftb's waiting in the wings currently priced out, that as soon as prices at the bottom end drop to a just about affordable level, they will all pile back in and support the whole thing anyway.
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There have been smaller islands with bigger populations, and they've had big crashes too.
Why would a FTB want to catch a falling knife? Why will the banks lend enough to them on a depreciating asset?
It is credit that has created the demand, and lack of credit that has taken it away.
Why would a FTB want to catch a falling knife? Why will the banks lend enough to them on a depreciating asset?
It is credit that has created the demand, and lack of credit that has taken it away.
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I won't be buying back in whilst the prices are dropping until the rental for a similiar property is greater than the interest on the purchase price + buildings insurance + repairs.
Present rent £800 per month, present interest would be £2000 per month at base rate + 1%. I've not included the insurance and repairs either...
Present rent £800 per month, present interest would be £2000 per month at base rate + 1%. I've not included the insurance and repairs either...
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I'm currently working on a job at work, for a 3 block appartment development.
1 Bed appartments soo tiny, it's unbelievable. Aimed at FTB with the tag "Affordable homes". They are small, hence the price........
Starting at £180,000. For a ******* tiny 1 bed appartment in Gateshead.
How many FTB can afford £180,000?
This is why we need a correction in the house prices.
1 Bed appartments soo tiny, it's unbelievable. Aimed at FTB with the tag "Affordable homes". They are small, hence the price........
Starting at £180,000. For a ******* tiny 1 bed appartment in Gateshead.
How many FTB can afford £180,000?
This is why we need a correction in the house prices.
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I won't be buying back in whilst the prices are dropping until the rental for a similiar property is greater than the interest on the purchase price + buildings insurance + repairs.
Present rent £800 per month, present interest would be £2000 per month at base rate + 1%. I've not included the insurance and repairs either...
Present rent £800 per month, present interest would be £2000 per month at base rate + 1%. I've not included the insurance and repairs either...
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In this part of the market you are going to get one too.
Did anyone watch 'Flat Broke' on ITV earlier?
Skint buy to leters desperately trying to auction their 'investments' bought for 130K not even attracting any bids @ 70K - This was Leeds (the 'up and coming' city) lol Rental income of 495 per month - mortgage repayments = 1200 per month.
FWIW John Banks is one of very few people on here who I think is worth listening to. All IMO of course.
Did anyone watch 'Flat Broke' on ITV earlier?
Skint buy to leters desperately trying to auction their 'investments' bought for 130K not even attracting any bids @ 70K - This was Leeds (the 'up and coming' city) lol Rental income of 495 per month - mortgage repayments = 1200 per month.
FWIW John Banks is one of very few people on here who I think is worth listening to. All IMO of course.
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Boost II, will those FTBs buy when prices are still dropping? Even without any borrowing I wouldn't buy a depreciating asset. With debt I'd be even more careful. It's far too early yet to be talking about buying again IMHO, sentiment will turn horrible and when no-one wants to buy will be the time to do so.
The single bedroom rental is rather different to the 3/4 bedroom houses most people want to occupy once they're established in their careers/have kids etc. In former times a middle manager could afford such a house in the South of England on only his income. I thought living standards were supposed to be improving? Rampant house price inflation is a way of making the young into the debt slaves of the old and is ruining the fabric of our society. Now people pay a huge multiple of their salary for a 1 or 2 bed flat. That is not progress! The sensible people are not buying into this joke and won't do until it suits them, which will take time.
The single bedroom rental is rather different to the 3/4 bedroom houses most people want to occupy once they're established in their careers/have kids etc. In former times a middle manager could afford such a house in the South of England on only his income. I thought living standards were supposed to be improving? Rampant house price inflation is a way of making the young into the debt slaves of the old and is ruining the fabric of our society. Now people pay a huge multiple of their salary for a 1 or 2 bed flat. That is not progress! The sensible people are not buying into this joke and won't do until it suits them, which will take time.
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On Radio4 this morning, they were tlaking about the possibility of the BoE buying the less than secure debt that the banks can't sell at the moment in the current climate.
In other words they are thinking about using our money to buy up debt that the banks lent in the first place to people they shouldn't have, and then desperately want to unload it now that it has become a bit dodgy.
I am not surprised - Everyone in the financial world is desperate for the house market to stay up, not least the Government, the banks, the Estate agents - Anyone connected with selling houses. And they will do anything, it seems, to keep the price up.
If the BoE do this is, it will be absolute madness.
In other words they are thinking about using our money to buy up debt that the banks lent in the first place to people they shouldn't have, and then desperately want to unload it now that it has become a bit dodgy.
I am not surprised - Everyone in the financial world is desperate for the house market to stay up, not least the Government, the banks, the Estate agents - Anyone connected with selling houses. And they will do anything, it seems, to keep the price up.
If the BoE do this is, it will be absolute madness.
#116
Why was nothing done about Stamp Duty which is extortionate and the bands are all wrong.
Why on this earth did they persevere with HIPS? Something else that brassed off all those involved in the housing market.Buyers,sellers,lawyers,estate agents.
What is wrong with these fools in power?
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Must be down to regional variation - people rent a single bedroom out in Stevenage for £425 a month and that isn't a prime town by any stretch of the imagination. There still plenty of work down here in Herts, I know quite a few ftb's with 10% deposit saved up, they are just waiting for the price of the cheapest places to become affordable then they'll buy. The market is very slow but that works both ways - people wanting to buy don't have much choice of properties for sale and the good stock still commands top dollar.
Before we moved here we rented for 4 months and the choice wasn't exactly overwhelming.
Swindon is growing rapidly as a commuter town to London, Reading and Bristol
I don't see prices falling too much here as Swindon was very cheap in comparison to Bristol/Reading and other local towns. to give you an idea our house was 300k more in Reading, 30 mins on the train!!