Van

The main reason I bought about a year ago was rising rent. We were going to have to go from £1100 a month to £1700 a month for a similar house - and, at the same time, our capital was earning feck all interest.

 

In 2003 I was absolutely, utterly convinced we were in for a repeat of the autumn of 1988 - with a severe house price crash about to happen as interest rates returned to normal after their 9/11 emergency lows. (Emergency then was bank base rate of 3.5% - lowest for 50 years - if you had told me then that 5 years later bank base rate would be 0.5% I would have bet my last penny that it wouldn't. Strange times indeed.

 

Now, 8 years after I STRed - I am much more humble. A house price crash is surely not on the cards - but, what is, I have no idea. And I'm pretty sure no-one else does either. So might as will think short term. We bought a house that might, or might not, go up, or down, in price - and we are £1100 a month better off by not paying rent - and no fecker of a landlord can kick us out now.

Agree with you here. I am now 85% sure that we have seen the nominal lows in this HPC. Lending rates and rents are even supportive of slightly higher prices in the next 12-24 months imo - at least in the sub 250k market. If I was an investor I would be looking to buy a properties yielding 7% in this market - they're not common, but they do exist.

Of course, this doesn't mean that we'll have another great bull market. Prices will just adjust to earnings slowly over the next 5 years or longer, but even by this measure they are not as overpriced as many think (only about 10%).

It will be savers to continue to suffer the most.

It's a personal choice and a very hard one at that.

 

I am in a similar position. STRd in 2009, 2 kids under 3.

 

Paying nearly £4k a month in rent and staring down the barrel of a 10% uplift. Buying would be cheaper and with fixed rates so low, even factoring in a 20% HPC, buying seems irresistible.

 

Really hard times for an uber bear like me.

 

I empathise with your position but cannot give you an answer...

Just curious, but what/where exactly are you renting for 4k/month?

That's a heck of a lot of money for accomodation for a family of 4, even in some of the plushest parts of London.

The bulls are currently having a very decent go at trying to reclaim the 200dma but this offers a low risk/reward trade to the short side. Looking very much like a right shoulder could be forming. The opening rally has already been faded.

I have reshorted SPX; stop at 1282 just above the current 200dma. There is plenty of downside if the market decides it wants to take another lurch down.

I have to say that seems a real 'clutching at straws' way of looking at things.

 

From the point of view of someone who bought in, say, 2004 and who sells now at the same price they paid for it - where is the 60% crash? Because I bet that person can't see a crash.

60% crash in view of cost of buying vs cost of renting?

The cost of buying should always be viewed against the cost of renting imo. If rents double then houses are suddenly cheap again.

Not surprised at all by this - as I have commented several times, loans are cheaper than they were at the start of the summer, and this is having a direct feedthrough to bottom line prices.

Practically speaking, with the continuing squeeze on rents, and the cheaper cost of loans, anyone who can scrape together a 10% deposit can put themselves in a position where buying is cheaper than renting. 15% and you are laughing.

When people say house prices are down by 25% to 30% in real terms ... the house I sold in 2003 would, I am pretty sure, easily fetch the same money. I sold for 400k and, to be honest, if it appeared on the market now I'd be astonished if it went on the market for less than 450k - and would sell at somewhere between 400 and 450. Edit: I'm pretty sure that at no point between 2003 and now would it have sold for more than £425k - maybe in late 2006.

 

Speaking for myself, I am not earning any more now that I was then. Mortgages are cheaper - if you can get one. I can't see how this equates to a 25% fall in real terms.

 

I know of a 3 bed semi in West London that has sold in the last 6 months for £465k - the bloke who bought it paid £310k in 2002. Admittedly he has fitted a new kitchen and bathroom but, even so, no sign of a 'real' fall - certainly in London, the South East and South West. Don't know about the rest of the country.

There is a big North/South divide. Prices in the south have held up very well, while in the North they are down by a big amount. It's not a universally even fall, and some places a few places are even fetching more than peak 2007 prices. London is actually up YoY.

check page 4:

http://www.communities.gov.uk/documents/statistics/pdf/2005178.pdf

I have been following the mortgage market pretty closely all year.

Rates have definitely fallen for both fixed and variable rates. Most importantly they have fallen the most for low deposit mortgages - You can get the same rate on 85% & 90% that 12 months ago you would get only on on 75-80% LTV deals.

In practical terms that's makes quite a big difference at the sharp end of the market, whereas before you might need 50k in cash to make buying cheaper, now you would only need k25k.

Cameron or his ilk telling me or not does not make one ounce of difference how I would plan for the future. He and his chums have not got my interest in their heart.#

 

 

You claim -'David Cameron is not stupid enough to tell us how bad the situation is ... in that we, surely, already know'.

 

 

I think you do/do not know how bad it really is. Cameron definitely does not. Up until 2008 I was as clueless as most. The 2008 bailouts gave me a chance to reassess my position. We were perilously close to disaster. I was making shed loads of money then and even now. Then I ued to buy a new Beemer every couple of years and waste my hard earned money. Today I prefer to buy PM. 2008 IS GOING TO HHAPPEN AGAIN- only BIGGER and MESSIER.

 

I wish you the very best for your future.

When one first becomes interested in financial markets, it opens your eyes and suddenly you learn that the financial world as we know it is on the brink of collapse. Then as the years pass, experience will show you that the world is always on the brink of disaster and lurches from one crisis to the next. It's nothing new.

By all means, buy your PMs, but don't expect the world to stop turning just because you've figured a thing or two out about weaknesses in the system.

There can be nothing new in Wall Street.

I always assumed everyone knew it was wage inflation that had this effect?

 

I suppose some might look at property as a hedge in high inflationary times, just as they look at other commodities?

 

Wage inflation currently at 2.8% average in the UK at present.

 

10 year fix rate mortgage at 4% results in a >30% discount over the ten years, even with these paltry wage increases.

 

That would cover a rather large fall in house prices, would it not?

You need BOTH nominal and real wages to rise to guarantee house prices to rise, at least in the long term. Generally of course this is what has happened, with noticeable exception periods (eg right now). Nominal rises alone cannot sustain increasing house prices if they are not keeping up with inflation and real wages are falling, and even rising real wages alone cannot sustain increase house prices if it comes about as a result of price deflation (Japan?).

This is getting silly.

 

Even I am getting more bearish at the moment.

 

I think the continuing deterioration in world money markets might just tip the whole thing into a new global depression, if the politicians don't pull their fingers out soon.

It has sod all to do with the politicians. Interest rates have fallen and the market has priced in ZIRP for at least another 2 years, and this should be enough to sustain current prices and maybe even see a 5-10% rise imo. Mortgage rates are a lot lower now for 85-90% LTV deals than they were a year ago. Eg, you can get 3.99% for an 85% LTV from many lenders, which is around a full 1% cheaper than you could get a year ago, so the relative cost of buying has fallen significantly vs renting.

I don't buy the whole financial armageddon scenario - although if that did happen we'll have a lot more to worry about that just overpriced houses. You've been spending too much time listening to the goldbugs.

Rightmove +2.8% LOL.

Couldn't have anything to do with even LOWER mortgage rates, could it?

Report: http://www.rightmove.co.uk/news/files/2011/10/october-2011.pdf

One should take a pinch of salt when working out rental yields. Lots of properties are rented because they have been unrealistically priced.

Great example was my last rental flat - on the market July 2010 @ £340k. We were paying £1128/month, so the asking price was 300 times the monthly rental.

Fast forward 16 months later, and it is still on the market. Price has been down, down, up and back down, and currently sits at £315k.

Point is that a lot of places are on for kite-flying prices because the landlord can afford to sit on them and collect the monthly rent. Lots of prospective buyers will only buy a real bargain - you can say the same for lots of prospective sellers.

Here is the flat: http://www.zoopla.co.uk/for-sale/details/11685931?search_identifier=0ed623b0901ddb41b43052ff6d5c293d

I think Merryn SW bought a house as a home for her family. She said at the time, that it might not be a great financial decision but it was right for her family to make a home. Property is so over priced in UK, and money is drying up. I cant see prices being sustained at this level for long. The expected inflation from the QE2 will just make houses even more unaffordable as money is needed for food, fuel and utility bills.

I think for prices to fall meaningfully, we have to see a fall in rental values too so that buying becomes more expensive. Rents have run up and prices have moderated enough that is now cheaper to rent that it is to buy in most parts of the country.

You can argue and theorize that eventually incomes will be so squeezed that rents must fall, but the hard evidence is that it is not- quite the opposite. The UK may be going through a lot of problems, but by European standards it is still an attractive place to come to live and work, so more people are still coming here which is keeping housing demand high. You can argue and theorize that HB reforms and more housebuilding will eventually lead to lower prices, but again the *hard* evidence is that it is having naff all effect.

Of course the other thing that would cause buying to become more expensive than renting is a rise in interest rates - devastatingly so (imo). But it is clear that ZIRP *will* be maintained for as long as required, which is looking like many years ahead now. The price for this is that savers will be robbed, and that inflation will be higher so we'll all slowly get poorer, but lower oil and commodity prices suggest that inflation will moderate by this time next year (and I stand by this statement - let's see what inflation is in 12 months' time).

blah blah blah blah blah....

Money is currently very cheap, if you have money. Not so if you dont.

 

This is another reason for the good houses in good areas staying highly priced, while the rest are struggling.

Very true.

With 5yr fixed mortgage rate mortgages from 3.5% and 10yr deals from 4.2% this is considerably below rental yields, so if you can get access to these rates then owning is cheaper than buying.

Of course the catch is that you need 20-25% equity/deposit to access these rates and the opportunity cost of what else could you do with that money if you could release it.

People have to do their own sums and figure out if renting or buying is cheaper, and then weigh up the pros and cons of owning vs renting. If you can honestly conclude that buying is both cheaper and has a tangible net benefit over renting then I would not criticize anyone for choosing to buy right now even if they expect further price falls. As we know the market has a habit of not fulfilling general expectations.

What if many of those London jobs melt away, at the same time new supply hits the market?

 

This could create disaster, a self-inflicted one.

I don't think you can think in those terms - i.e. a problem that doesn't exist at the moment (oversupply) that might come about because we are trying to fix the opposite problem (undersupply). The country needs to deal with the problems it has at hand, which at the moment is the prohibitive cost of housing. This is not the US; we are not bulldozing houses to prop up the market. I would say cheap housing and lower living costs are a necessity for a country that is at peace with itself.

The governments needs to massively ramp up its housebuilding programme. The cost of housing is too high (both renting and buying) compared to other countries. Planning restrictions need to be lifted - if that means changing laws and building on greenbelt land then so be it. I used to be of the opinion that there was no real shortage of housing as rents were not rising, but now that rents are ever increasing I've changed this view - the UK desperately needs more houses to be built. There is a very real shortage of housing, as our housing stock is not keeping pace with our population growth. The UK economy is in the doldrums, yet the free market is not allowed to operate to build houses where there is an obvious demand for them. Why not lift the restrictions, let the market do its work - reallocation of resources to will provide an economic boost and lower the cost price of housing, which will be good for everyone in the long run.

 

Despite our supposed affluence, most young people cannot afford to live comfortably by themselves - instead, house sharing has become the norm. Yet in other countries this is not the case, and people can afford to live comfortably by themselves on much more modest incomes. As long as we allow the current situation to persist then the social unrest will continue to grow.

Looks like I am not the only one who thinks this:

http://www.independe...lt-2364448.html

"the PM is to announce the release of thousands of hectares of disused public sector, mainly brownfield, land to build 100,000 new homes, creating 200,000 new jobs by 2015"

Francis Maude puts it succintly:

"I think this idea that creating a presumption in favour of sustainable development is somehow a massive erosion of the ability to conserve, is bollocks, frankly."

F*** the Nimbys!

The Halifax measure of ASHE price/earnings is getting towards its mean level:

Mean since 1983: 4.04

Peak: 5.8 to 1

Current (Aug 2011): 4.38 to 1

1 Standard deviation is +/- 0.78.

Some random observations-

- Recent earnings growth has been subdued as we know; 2.2% in the last 12 month, 1.4% in the 12 months before that, and just 0.3% in the months before that.

- Consider that a 3% rise in earning coupled with another 5% off house prices down to avg £154k will return us to the mean. I can see that happening in the next 12-18 months.

- There was a golden-period of cheap houses between 1995-1999 where the p/e averaged just around 3.13

- You could argue that two housing bubbles in this data period have pushed the mean up to higher than it should be, but this is 29 years' worth of data, which is longer than a standard mortgage term and as long as many peoples' expected working lives.

London update

 

Top end houses/flats are setting new highs and at volume. The flood of work on my plate and the prices being achieved is breath taking. Are we at the start of a crack up boom as the money just keeps on flooding into residential property.

Interesting, and I think not entirely surprising, given that we have pretty much had a green-flag for ZIRP for several years to come, and recent stock market turmoil just reinforces people's willingness to put money into property instead of stocks, even without the expectation of capital appreciation.

The green belt is an outdated and idealistic luxury that as a country we can no longer afford.

The governments needs to massively ramp up its housebuilding programme. The cost of housing is too high (both renting and buying) compared to other countries. Planning restrictions need to be lifted - if that means changing laws and building on greenbelt land then so be it. I used to be of the opinion that there was no real shortage of housing as rents were not rising, but now that rents are ever increasing I've changed this view - the UK desperately needs more houses to be built. There is a very real shortage of housing, as our housing stock is not keeping pace with our population growth. The UK economy is in the doldrums, yet the free market is not allowed to operate to build houses where there is an obvious demand for them. Why not lift the restrictions, let the market do its work - reallocation of resources to will provide an economic boost and lower the cost price of housing, which will be good for everyone in the long run.

Despite our supposed affluence, most young people cannot afford to live comfortably by themselves - instead, house sharing has become the norm. Yet in other countries this is not the case, and people can afford to live comfortably by themselves on much more modest incomes. As long as we allow the current situation to persist then the social unrest will continue to grow.

Rents are still rising strongly:

http://www.bbc.co.uk/news/business-14934316

"London had seen the biggest rent rises in England and Wales in the last year, rising by 6.6%, followed by a 6% rise in the West Midlands and a 4.3% increase in the North East of England."

Of course you can argue vested-interest reporting and all that and how rents might fall in the future, but just about all the evidence points to rents rising strongly at the present which is a key component that will underpin house prices currently.

duplicate

Gold bubble confirmed.

How do I know?

Mentioned on BBC's Torchwood episode 8: "Stock in depression, buy gold!"

And if QE3 targets long dated bonds, as is widely expected, the fixed long term mortgage rates will be falling further too.

 

Low rates look like they are here to stay for quite a long time.

 

Osborne: 'Low Interest Rate Is Key To Economy'

The way its looking now, I'm pretty confident that when I come to remortgaging in Sept 2013 I'll be able to get a better deal than I'm on now (not withstanding that if keep on track with my overpayment schedule I'll be looking at < 60% LTV anyway).