Will Our Housing market Suffer a US Style Collapse?

#2
I hope so. Maybe I could afford to buy then. House prices round here are bloody crazy. £200K for a studio flat last time I bothered to check.
 
#3
Sven said:
The IMF thinks so, and this seems to be borne out by Lenders who have withdrawn 40% of their mortgage deals.
I desperately want to agree with him, but he is Sven and he is a LibDem... so I can't.

But I can correct his grammar...

No question mark? Where did you go to skule?

Litotes
 

mysteron

LE
Book Reviewer
#4
Serious answer. I am just selling my house now and have a buyer. Great. I am then going to sit and wait for 2 - 3 months tops. I think a slump but not a crash will happen.
 
#5
Sven,
Before you posted did you bother to read the articles that you linked to? Assuming that you haven't, all they are saying is that they will be looking more closely to higher risk lenders ie people with shite credit history, or have I got the wrong end of the stick and houses will be going for 5 grand this time next year.............

I have copied and pasted (I know I know) paragraphs from your articles that you claim show the end of house prices as we know it:

The IMF also says that the UK and other western European housing markets are in a better state than that in the US, because they have generally avoided the sub-prime mortgage industry.

But, it adds, a lack of supply could continue to hold up UK prices.

Lenders are now a bit more cautious about lending large sums of money to people, particularly those with suspect credit histories, if there is any chance that the value of their houses might fall at any time in the next few years.

"Some are withdrawing their higher risk products, for example those over 100% loan-to-value or their more specialist deals such as self-cert.

PS I have a buy to let mortgage with Northern Rock, am I worried? No, I have made enough money per house value over the last 18 months and put down a descent lump sum. To be honest, if your after a 100% loan on a house then maybe saving some money might be an idea

Cheers

DISCOS
 
#6
mysteron said:
Serious answer. I am just selling my house now and have a buyer. Great. I am then going to sit and wait for 2 - 3 months tops. I think a slump but not a crash will happen.
The slump is already underway. Nurture your buyer, grab the money and run! Then stay out until prices are affordable again.

If you don't think that is possible, look at Japan and Germany over the last 15 years. Why them and not us?

Litotes
 
#7
DISCOS said:
Sven,
Before you posted did you bother to read the articles that you linked to? Assuming that you haven't, all they are saying is that they will be looking more closely to higher risk lenders ie people with shite credit history, or have I got the wrong end of the stick and houses will be going for 5 grand this time next year.............

I have copied and pasted (I know I know) paragraphs from your articles that you claim show the end of house prices as we know it:

The IMF also says that the UK and other western European housing markets are in a better state than that in the US, because they have generally avoided the sub-prime mortgage industry.

But, it adds, a lack of supply could continue to hold up UK prices.

Lenders are now a bit more cautious about lending large sums of money to people, particularly those with suspect credit histories, if there is any chance that the value of their houses might fall at any time in the next few years.

"Some are withdrawing their higher risk products, for example those over 100% loan-to-value or their more specialist deals such as self-cert.

PS I have a buy to let mortgage with Northern Rock, am I worried? No, I have made enough money per house value over the last 18 months and put down a descent lump sum. To be honest, if your after a 100% loan on a house then maybe saving some money might be an idea

Cheers

DISCOS
40% of current mortgage deals have bean withdrawn - a few more than a few don't You think

The second paragraph of the first article. (at this rate I'll have posted the whole of the article soon)

The IMF says there is evidence to suggest that the UK and a number of other European nations are also vulnerable to a price correction.
 
#8
BBC news 24 looks to be about to broadcast a story about this in a moment.
The headline stated "UK house prices may fall sharply".

Aaah! Maybe not it may have just been a "roundup" comment.
 
#9
By saying that a 'few more than a few dont you think' you seem to be implying that I said 'a few' but unable to find that in my post.
The majority of withdrawn mortgages are from Northern Rock due to the media hype. When Northern Rock first went to loan more coffers it was stated that Barcleys had been to the Bank of England twice in the last year for the same reason yet the hype hadn't been latched on to by the media, the problem with Northern Rock originated from the high risk lending in the USA that they had invested in, made worse by the media spin which led to uninformed people with savings with Northern Rock panic withdrawing their money, from memory I believe that 1 Billion was withdrawn in the first week after the media ran the story.
I do believe that the house prices will have to slow down in the UK, but the crash that you are predicting will not happen.
Cheers

DISCOS
 
#10
This is a fairly complex issue.

In my opinion, in the long term house prices in the UK will remain high. This is because there is a systemic lack of housing stock in the country, which basically means that there are more people who want to buy a house than there are houses available.

Over the past few years, we have seen various demographic changes in the UK. People are living longer, there has been net immigration, an increasing percentage of single occupany properties, and an increasing number of people with multiple properties, either for the weekend or buy to let. All of this means that there are more people looking for places to live, and you do have to live somewhere.

On the other hand, interest rates have been going up. This makes your mortgage and other debts more expensive acts a push in the other direction.

I suspect that the current falls we are seeing is a mixture of people who are borderline buy/not-buy chosing not to buy and those who have got second homes taking advantage of the current high prices to get their
cash out.

If I were to get my crystal ball out, I would predict that prices will come down maybe 5-10% over the next 6 months, and then start increasing again in the spring.

The withdrawl of mortgages is primarily due to the lack of liquidity in the debt markets, rather than an anticipated reduction in house prices.

Anyway, that's my view ;)

PB
 
#11
Mark Twain once said "Buy land now, they're not making it any more"

This statement is all to true for us in the UK. Market economy is driven by the concept of supply and demand. In many of the more desirable areas of the UK, land is at a premium.

Whilst people want to live in these areas, and there continues to be a lack of homes, then prices will remain high and continue to rise.

However, cities such as Manchester are now seeing a drop in prices as supply has outstripped demand.

Over in the US on the other hand, they have the complete opposite. They have land coming out of their ears, and properties are fairly cheap in comparison with here. The main problem there is there economy and fairly poor wages which is having an adverse effect on the property market.


Just my 2pence worth.

Cheers
 
#12
There has been far to much money lent over a very long period to people who do not have the earning power to repay that amount. Once these people start to get hit with an increase in interest rates it could easily lead to a slump in house prices
 
#13
The big problem is that people find it really difficult to be dispassionate about asset prices. I had a screaming argument with my pal over NASDAQ stock prices in 1999 - I tried to talk about price to earnings ratios, projected earnings growth.............all he was interested in was the fact that prices had gone up. Renters are desperate for prices to crash, owners are desperate for prices to soar. Joke is, most of the owners want a bigger house so rising prices don't actually suit them - the rungs of the "ladder" are getting further apart if prices rise.

I rent but my folks tell me I'm going to come into a big house when they shuffle off this mortal coil, so I hope I can be reasonably dispassionate. Seems to me that prices are built entirely on the expectation of further price rises. Nobody would buy at today's prices if they were certain that prices would not rise. A house is a machine for living in. It delivers what economists call utility - ie pleasure, it keeps the rain off, the heat in and gives you somewhere to keep your CDs. That is why people wish to occupy them. Owning is a licence to occupy until you die - you can't take it with you. Renting is a licence to occupy until the lease runs out. Shares are worth their future earnings. Houses are worth their future rent.

But of course, as Keynes said, the market can stay irrational longer than you can stay solvent. Prices can go up, and up, and up.....You can't predict crowd behaviour and it's best not to stand in their way. I might buy some shares in builders, former building societies and property companies if prices get much lower - there is a lot more value in these assets than there is in house prices, because the price of these assets seems already to imply quite a serious slump in house prices. The discount on British Land shares (ie the difference between the value of the company and the supposed value of the properties it owns) is high, which has been a good indicator in the past of a commercial property crash.
 
#15
Litotes said:
If you don't think that is possible, look at Japan and Germany over the last 15 years. Why them and not us?

Litotes
Different set of economic conditions, Germany was hit massively by reunification and Japan seems to be afraid of getting back into to gear. They were also hit by greed! a lot of money that was invested into the markets by private investors was released equity from their homes once the market crashed the first time it set of a chain reaction in the residential property market. And now the general public in Japan are very cautious about investing in anything other than cash and in some cases even in cash.
 
#16
Sven:

I'm too busy right now to deal with your stupidity... I'll come back later...

In the meantime contemplate the fact that the IMF is just another political organization, much like the UN, that has it's axes to grind... and you're very naive if you believe any differently.
 

Biped

LE
Book Reviewer
#17
House prices!

It is in the interests of the gobment to see house prices as high as possible because of the lucrative income from Stamp and Death duties payable.

It is in the interests of the Banks to see as high a house price as possible because of the huge amount of money they make on interest - potentially 1.5 times the selling price of the house over the life of the mortgage.

It is in the interests of the estate agents to see as high a price on the house as possible because of the fat commissions they make on the sale of the house.

It is in the interests of the owner of a property to see as high a price on the house as possible because a: they are greedy bast@rds and b: because they have to make all the money back that they are paying to the banks, the estate agents and the gobment.

There is a great deal of pressure to shove the housing market prices as high as possible, and the onyl downwards pressure is from first time buyers who can't afford it.

When the whole makret gets too pricey and ridiculous, then the banks lend more and more and more, whilst the Bank of England tries as hard as it can to keep interest rates down during the life of that particular gobment to keep the chickens from coming home to roost.

Well, the chickens have been out for a long, long time now, and they are desperate to come home. Come home they will.

The writing has been on the wall for a long time, and was in thick black marker pen when the mortgage lenders started issuing mortgages up to 7 times the annual income of the buyer, and lending to anyone, whether suitable candidates for mortgages or not. Totally unsustainable and is about to come crashing down.

Greed and stupidity rules.
 
#18
The UK housing market is probably the most complex domestic housing market in the world with a ladder system that has developed beyond that of the US where people tend to buy a starter home followed by a family home. The Germans/Swiss on the other hand tend to buy once (if at all as many remain renting all their life) and stick with it.

The UK may suffer certain regional and sector realignments however I do not see this as an across the board 40% fall as touted by the BBC this morning. Do remember that the golden rule of journalism is “never let the facts spoil a good story.”

Factors that will help maintain the prices at a high level include.

Shortage of property, demand outstrips supply across rental and purchase property in many areas.

Increased student populations put pressure on most sectors with increased demand for rental properties driving the buy to let market.

Ditto for young East European migrant workers. The IMF is basing its predictions on the official government figures of 250-400 thousand east Europeans in the UK. The reality os that the Polish Embassy estimate the UK Polish migrant population to be around the 1 million mark. The official figures and conclusions drawn from them are possibly very wrong.

Over the next 5 years the pressure to establish stable families amongst UK based Poles etc will keep demand high at the bottom of the market (under £200K)

Anyway, if house prices crash then don’t sell, sit tight and they will rise again, they always have and they always will.
 
#19
Biped said:
It is in the interests of the owner of a property to see as high a price on the house as possible because a: they are greedy bast@rds and b: because they have to make all the money back that they are paying to the banks, the estate agents and the gobment.
I own/am paying a mortgage and have no wish whatsoever to house prices go up. In the future I hope to move to a better area, if they go up, my moving will cost me more. Ideally they will go down, therefore it will be cheaper for me to do the above.
a. I dont think I am greedy, I just want somewhere for my family to live.
b. How do I make all the money back that I borrowed?
If I sell I have to live somewhere and I do not want to burn money renting.
 

ugly

LE
Moderator
#20
I would prefer that they remain stable as although in a fixed rate (low %) mortgage I am reasonably safe when it comes for us to make the choice about retiring somewhere or leaving early I will need as much equity to buy as much house with as little mortgage as possible wherever I end up next.
If that means that I have no mortgage for my retirement house/cottage in the woods so my kids will have to wait to inherit so be it. I would rather that than see them blow their inheritance whilst I am still alive. I shall probably leave my house (or whatever) to my kids to live in until they get married and move on/need the dosh as thats why I have lied and stolen all my working life to achieve!
The way I am going that may be a lot sooner than planned so sod the Govt! Sod the revenue and sod those that sadly cant afford a house themselves. Do what I had to do and rent until the market is ready for you!
 

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