Will Our Housing market Suffer a US Style Collapse?

Discussion in 'Current Affairs, News and Analysis' started by Sven, Oct 17, 2007.

Welcome to the Army Rumour Service, ARRSE

The UK's largest and busiest UNofficial military website.

The heart of the site is the forum area, including:

  1. The IMF thinks so, and this seems to be borne out by Lenders who have withdrawn 40% of their mortgage deals.
  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. 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?

  4. mysteron

    mysteron LE Book Reviewer

    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


  6. 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?

  7. 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)

  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.

  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 ;)

  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.

  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.
  14. BiscuitsAB

    BiscuitsAB LE Moderator

    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.