GOLDMAN 555

Went into an estate agent today to look at a house in the estate agent said top financial analysts are predicting a 150% growth in house prices by 2010....

This made me laugh. So the entry-level house price in the southeast is £250,000 if you get a standard mortgage for that money-first time buyer. You would have to pay the bank around £1500 interest per month at today's interest rates. Now if interest rates go up to 8 or 9% in the next 25 years which is more than likely to happen you will be paying nearly £3000 just in interestThat is not paying off the principle it is just the interest to the bank?

So if house prices went up by 150% the entry-level house would be £650,000 and the interest payment alone would be over £3000 per month at today's interest rates and if the interest rate goes up


I'm starting to think there is a conspiracy in this country to keep house prices high the UK is only 20% populated i.e. there is 80% of the country which is green land it is hardly Monaco or Hong Kong where there is no land left. Yet everyone seems to make out that land has run out.... god is not making any more land etc.

So for a start what sort of crackhead is going to pay a bank £17,000 a year in interest just to stay in a two bed terrace in some chav ridden area why doesn't the UK government or the conspirators give up some more land so we can all live in decent houses for a relatively normal price?

Secondly I just can't understand why house prices are staying so high and keeping going

Petem95

Yes of course the government want prices to stay high, so that people feel richer and consumer spending levels stay high as people withdraw money from their homes to buy new cars and clothes etc.

They've not clamped down on BTL, theyve allowed immgration levels to explode to increase demand on housing, and their inflation calculation is designed to give an extremely low figure so that interest rates are kept low.

It should be clear to most people that whats happening at the moment isnt sustainable, and what will kill it will be when ever increasing numbers start going bankrupt and having homes repossed, then the banks tighten up on lending - and if nobody can borrow the money to buy the overpriced house, then the price will have to come down.... but this is likely to have a downwards-spiral effect as more prices fall and more people struggle to repay debts, banks will tighten lending further, forcing down house prices more and so on.

However Im sure fast_bloke will be along in a sec to say that its rubbish and house prices will just boom FOREVER!!

SlimJ_2005

House prices will keep going up so long as mortgage lenders keep lending more and more money to buyers. I have to say it made me laugh when I heard one of the lenders allowing mortgages upto £200000, absolutely rediculous, but they are not stupid and know people will take them up on the offer in order to take silly amounts of money off them! And hey, the more the house prices go up, the more mr Brown gets in his kitty from stamp duty, council tax, and inheritance tax!

With more and more bankruptcies happening, how much longer can this go on for? People are borrowing more than they can afford to pay back, bloody stupid!

What will it take to stop the house prices rising to ever more rediculous levels? The bubble is sure to burst soon IMO.

fatherpierre

You won't have J M Keynes turning in his grave with your grasp on economics

Start with the supply/demand model, and then post.............

Not enough housing + low unemployment + high earnings = high house prices. Factor low % inflation and low interest rates into that and, hey presto, high house prices. Add the country's mass population increase and this adds to it, strangely enough.

Estate agents have nothing to do with house prices - the money that is around to pay the mortgages determines that.

Petem95

Yes theres not enough housing, and Labour are doing their best to keep demand high by keeping immigration levels at near-record highs, however all the other aspects you mention are questionable.

Unemployment is low-ish, but has been raising every month for something like 19months now, and just look at the numbers now on incapacity instead of dole to make the numbers look better... so unemployment is higher than it looks, and increasing.

High earnings? Well one reason why Labour have been so keen to let the immigrant pour in is it keeps down wage inflation. Construction workers will know all to well that Polish workers will do the same for a lot less, so earnings are not that high, and have risen at far slower rates than house prices.

Inflation? Have you seen how the government calculate their "2.5%" figure? Do you think the real figure is 2.5% with fuel up loads, gas up something like 300% in 3years, electrcity up well over 150%, council tax up etc etc - many economists recon the real figure is nearer 8%, so no inflation isnt low.

Interest rates? Will be up to 5% next week, and likely to be 6% by the end next year.

Factor in debt problems - £1.2trillion of consumer debt, repossessions up 76% since last year, bankruptsies up 50% (or something).

Result? Banks wont keep on lending huge amounts if they arent getting it back, so less is lent out - people CANT pay current prices for houses (high demand or not), so prices have to fall.

GOLDMAN 555

the point iam trying to make is that the supply and demand model is being manipulated. When you look at something like Google Earth You will seeThat most of the UK isn't built on and the government/councils are happy keeping it that way. When you look at Hong Kong there is no more land to build on This is not the case with the UK..........far from it.

I think it's you that needs to look at your economics.............

What are the biggest deductions to wages:

Mortgage payments
Car payments
Utility bills
Fuel bills

None of these are included In the inflation figures that you claim are so low.

You are just spouting the same false information as the government and that estate agent

GOLDMAN 555

If the government gave planning permission 10% of the agricultural fields in this country You would be able to build literally millions of houses and there wouldn't be any supply and demand problem. And it wouldnt damage the environment one iota. Who gives a toss about fields with grass that are deliberately being left un farmed any way.

kingofturds

iTrader: (1)

Uk consumers are 1.3 trillion in debt .Give it 5 years and gordon browns economy will come crashing down

B9GLY

Havn't people been saying house prices will go down for the last 18months??????????????? yet it still hasnt happened! i dont think it will.

B9GLY

there are also thousends of empty houses around the country, just wasting away! I was reading about plans to resolve this!

hades

Simple answer, don't buy houses. Previous generations didn't own their own houses often, they rented - apart from the very rich. It's not down to the government to make things so everyone can buy their own home, much as I agree that Brown's management of the economy is not good.

And why is a £200,000 mortgage "rediculous"? It's only ridiculous if the borrower isn't earning enough to cover the payments. I know of people taking out £250k mortgages, but with a combined income of over £70k, so what's the problem?

hades

Mortgage payments don't technically inflate. Something borrowed at 5% costs the same as it did 1,000 years ago. Interest rates fluctuate, but they're massively lower than they were 20 years ago, so by your argument, have we had a long period of negative inflaction?

I'm not disputing your underlying point that there are a whole bunch of things excluded from the figures so the govenment tell us what a great job they're doing when they clearly aren't.

ru'

The housing market is about to crash big time - I've just bought my first place, so as soon as I pick up the keys (tomorrow) it's sod's law the market will completely collapse...

Mad as cheese

The house price increases are unsustainable. Even if they do not increase any further, wages cannot catch up. The parents who have been keeping the market going, by lending their kids deposits or guarantoring the mortgage, will eventually run out and first time buyers will decrease dramatically. Then, house prices will start to fall, and not a moment too soon.

House prices have doubled in 5 years and trebled in 10. Anyone who thinks this is beneficial to the economy long term has taken leave of their senses.

I look forward to picking up a dirt cheap repossessed house from some smug tosspot who has over-extended themselves in the vain belief that house prices where going to continue going through the roof ad infinitum.

Mitchy260

Was there not a big housing crash in the 80's (Im only 23 so wouldnt know)

If so why cant this happen again?

At the moment if you are not already on the property ladder, i think it is ludicrous trying to get onto it!

Where i live you can rent a 3 bedroom property for £600pcm. However the exact same property in mortgage terms would cost you £1000pcm

warrenm2

House prices are a factor of supply and demand. People want to have a house in the UK, population has risen from 56 million about 15 years ago to 60 million today, almost totally through immigration. Therefore there is demand for more houses. Planning restrictions mean there is not enough land released to meet that demand, therefore what land there is rises in value. Social factors such is the increasing trend to single people living alone rather than with their families also increases demand. The only reduction in demand will happen when prices rise high enough to force people to live at home or not immigrate. At that point prices will stabilise. Another factor that will influence the "money velocity" through the housing economy will be the cost involved ie taxes such as stamp duty, home buyers packs etc

As a historical note, the early nineties price crash was in fact caused by an increase in taxation, Lawson published that he was abolishing dual persons tax allowance for house buying (a tax break) six months in the future. Guess what happened? People went on a buying spree for six months then at the cutoff date stopped buying. There was no pent up demand in the market as it had all been expended in that frenzy (pushing up prices), and combined with the increased cost (taxation) discouraging first time buyers the market reacted in a sensible way and pushed prices down. The people who had however mortgaged to the hilt to get in quick before the tax break expired then found themselves in negative equity. So you can blame the Government for that one

Hence to the question "will there be a crash?" - no, if the Government keeps out of it, yes if they stick their noses in to "make things fairer" or "to protect the environment" or whatever the latest excuse is to f*** things up

hades

There was a "big crash" in the late 80s or early 90s or somewhere aroudn there From my recollection (numbers are rough/illustrative rather than accurate!), my parents bought a place in around 1985 for around 70k. At the start of the crash (3 years later? maybe 6! I don't remember that well!), it was worth perhaps 170k. It then "crashed" to perhaps £125k over a couple of years. By mid-late 90s, it was back up higher than it had been before the crash. Now, it's worth perhaps £300k.

A few areas in London etc where prices had been getting completely ridiculous (I seem to recall a large walk in cupboard going for something like £300k ) did come down with a lot more of a bang.

Your point about rent versus mortgage costs is why I don't see why people seem to think houses must be bought. 90%+ of our grandparents would have rented. Everyone being determined to buy is demand, which keeps prices high.

I also believe that house prices are as high as they are as we are reaching the end of the first generation of home owners. Compare how many houses are inherited this year to how many were inherited 30-40 years ago. This is where the money comes from that is required to sustain house prices at their current levels, not from first time buyers.

Petem95

Look at Japan - loads of people and hardly any land. Everywhere is built on, and homes are very small and often house lots of people - however house prices have been falling for over 10years since an almightly crash that apparently couldnt happen because of "supply and demand"

The fact is when banks stop lending because everyones going bankrupt and taking IVA's then you doesnt matter how much the demand is, if you CANT borrow the money, you cant pay the price. That will be the killer, and we are seeing the start of things now - just keep an eye on the news for debt levels, numbers going bankrupt etc etc..

Once it all starts rolling, it'll be a downward spiral effect as all the investors rush for the exit.

KiwiGTI

There is no such thing as a one-way market. Smarter men than any of us on here know that (Warren Buffet for instance) There will be another crash in the future, the question is when.

warrenm2

What are you talking about one-way market?

I dare say there will be crashes in the future and I bet they're caused by misjudged Government interference, as have the others

warrenm2

Yes I agree that affordability is a factor. I kind of covered that in my comment "reduction in demand will happen when prices rise high enough to force people to live at home or not immigrate". I should have made clear that an excessive price can be acheived by the price going up or spending power falling - such as your example of reduced mortgage lending. Thanks for pointing that out

lozgti

I love peoples talk of % this,factor that,interest this,economist that.

People do NOT earn the sort of money people need to buy property at the prices its at now.It is common sense that should tell you most people are in the merdre,trying to cling on to the coat tails of this ever rising market.

It's bankruptcies galore at the moment and repossession actions have gone up 5 x.Those that keep defending the situation I would guess have a bit to lose if it does come back to normality

GOLDMAN 555

Understand your point however the percentage of your wages allocated to the mortgage...... or more to my point the interest payment alone has gone up dramatically.

Interest rates are still historically low and if you put the interest rate up to 10% which will happen in the next 25 years your interest payment is going to be bigger than your wages forget all the other costs.

All the people hoping for a crash should also think twice. Unless you have the cash in the bank and economic downturn will affect all of us it's not like a stock market crash. Where only the stockbrokers get hammered. A house market crash also takes years.

orbix

Don't they say that houses prices double every 7 years?

Trout

iTrader: (1)

God you lot have short memories - either that or you are all in short pants

I remember the conservatives gambling £10,000,000,000 of tax payers money in a single day betting against Euro convergence (and losing to Soros who personally took £1,000,000,000 out of the market that day).

Anyway the long and short of that point was interest rates hitting 17%.

And you think houses are not affordable at present

Also a £200,000 mortgage is pretty commonplace - special underwriting doesn't come in now until you get near £500,000 except for Nationwide.

Supply is short not because of government conspiracy as much as you would like to think - it is because I, and people like me, don't want estates of Scooby owning chavs springing up next to or in my back garden!

In terms of population density - England is one of the most densely populated normal sized countries in the world.

And....relax

Rannoch

davegtt

Im sure everyone already knows my thoughts on this subject but its interesting reading what others have to say, even if it looks like the same thread that we had 6 months ago, and the one from 12 months ago. Oh and the one from 18 months ago

Leslie

Borrowing on this sort of scale just cannot be sustained successfully in my eyes. Flash is also boroowing hand over fist from the IMF who have warned him once about it already. I detect another "Crisis, what crisis" in the wind.

Les

KiwiGTI

I think human greed has a lot to do with it. Of course it's demand and supply but whatever happened to being happy with what you've got and enjoying life and your family. Many people don't treat houses as 'homes' anymore they are just investment vehicles, and then this current despicable trend of buy-to-lets where people think they are property magnates.